New junk paper arrives as add-ons; secondary soft; Iron Mountain in focus; Michaels under pressure

By Paul A. Harris and Abigail W. Adams

Portland, Me., Dec. 14 – An active Tuesday high-yield primary session priced a pair of add-on deals, with an overall face amount of $800 million.

Meanwhile, the secondary space was soft on Tuesday with the latest producer price index report fueling inflation fears in the run-up to the Federal Reserve’s highly anticipated Wednesday announcement.

The market was down about ¼ point in anticipation of a much more aggressive wind down of pandemic-era stimulus.

However, trading activity remained light with new and recent deals continuing to dominate the tape.

Iron Mountain Information Management Services, Inc.’s 5% senior notes due 2032 (Ba3/BB-) were in focus. However, the notes were hovering around their issue price in the high-volume activity.

Post Holdings, Inc.’s 5½% senior notes due 2029 (B2/B+) were trading at a premium to their reoffer price in active trading. However, the notes remained below their pre-add-on level.

Outside of recent deals, Michaels Cos., Inc.’s senior notes were under pressure on Tuesday following a disappointing earnings report.

Adding on

In Tuesday’s junk primary add-on business, one deal came as a drive-by.

FICO priced an upsized $550 million add-on (from $500 million) to the Fair Isaac Corp. 4% senior notes due June 15, 2028 (Ba2/BB+) at 99.75 to yield 4.044% in a quick-to-market Tuesday trade.

The issue price came at the rich end of the 99.25 to 99.75 price talk.

Reverse inquiry, perhaps amounting to as much as the original $500 million deal size, itself, played a significant part in FICO's Tuesday add-on placement, a bond trader said.

At close of books demand was heard to be $1.1 billion.

Meanwhile, in a deal that had been in the market overnight, Ancestry.com priced a $250 million add-on to the Arches Buyer Inc. 4¼% first-lien notes due June 1, 2028 (B1/B) at 98.51 – on top of price talk – to yield 4.518%.

Only one deal remains on the mid-December active calendar.

Skillz Inc., a San Francisco-based game competition platform, has been on the road with its debut high-yield deal, a $300 million offering of five-year first-lien secured notes (B-).

Initial guidance had the notes pricing at a discount to yield 11%, sources said.

Pricing is expected on Wednesday.

Apart from that one deal the 2021 primary market is looking more and more like a wrap, sources said on Tuesday.

A rumor that JPMorgan has at least one more deal to roll out before Christmastime was met with considerable skepticism roundabout the market, a trader told Prospect News.

Iron Mountain in focus

Iron Mountain’s 5% senior notes due 2032 were in focus on Tuesday although the notes largely fell flat in high-volume activity.

The notes traded in a range of 99 7/8 to par ½. However, they were marked at par bid, par ¼ offered heading into the market close.

There was $104 million in reported volume.

Iron Mountain priced an upsized $750 million, from $500 million, issue of the 5% notes at par in a Monday drive-by.

The issue size increased from $500 million.

The yield printed in the middle of yield talk in the 5% area.

While the deal was heard to have played to $4 billion in orders, many accounts placed limits at 5%.

Post at a premium

Post Holdings’ 5½% senior notes due 2029 were trading at a premium to their reoffer price on Tuesday, following Monday’s add-on.

The notes were changing hands in the 103¾ to 104 context during Tuesday’s session, a source said.

There was about $26 million in reported volume.

While above their reoffer price, the 5½% notes were still well below their level pre-add-on when they were changing hands around 105.

Post Holdings priced an upsized $500 million, from $350 million, add-on to its 5½% senior notes at 103.5 to yield 4.819% in a Monday drive-by.

The issue price came at the rich end of the 103 to 103.5 price talk.

Michaels under pressure

Michaels’ senior notes were under pressure in active trading on Tuesday following disappointing third-quarter earnings report.

The arts and crafts retailer’s 7 7/8% senior notes due 2029 sank about 3 points. They were changing hands in the 96¾ to 97¾ context heading into the market close.

There was $34 million in reported volume.

The 5¼% senior secured notes due 2028 were down about 1½ points. They were changing hands in a range of 98¾ to 99¾ on Tuesday.

There was $24 million in reported volume.

The retailer’s notes were under pressure after disappointing earnings which saw revenue fall by 9%, a source said.

Michaels priced an $850 million tranche of the 5¼% notes and a $1.3 billion tranche of the 7 7/8% notes at par in April in a leveraged buyout deal funding Apollo Global Management’s acquisition of the company.

Monday fund flows

The dedicated high-yield bond funds saw $132 million of net daily inflows on Monday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs saw $137 million of inflows on the day.

Actively managed high-yield funds were slightly negative on Monday, sustaining $5 million of outflows on the day, the source said.

The combined funds are tracking $550 million of net inflows for the week that will conclude with Wednesday's close, according to the market source.

Indexes

The KDP High Yield Daily index fell 12 points to close Tuesday at 65.42 with the yield now 4.13%.

The index was down 4 points on Monday.

The CDX High Yield 30 index fell 15 basis points to close Tuesday at 108.35.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.