Junk prices $2.625 billion on Friday; Viasat comes in; Worldpay improves; Tenneco rises

By Paul A. Harris and Abigail W. Adams

Portland, Me., Sept. 22 – An unusually busy Friday session in the junk bond new issue market had four tranches from four issuers raising a combined total of $2.68 billion.

Meanwhile, it was relatively flat day in the secondary space with the market firm early in the session but giving back gains as the session progressed to end the day relatively unchanged.

Viasat Inc.’s 7½% senior notes due 2031 (Caa1/B/BB-) gave back some of the spectacular gains made on the break although they maintained a strong premium to their deeply discounted issue price.

GTCR W-2 Merger Sub LLC’s 7½% senior secured notes due 2031 (Ba3/BB/BBB-) backing the buyout of Worldpay firmed to return to the heights they achieved after breaking for trade.

Tenneco Inc.’s 8% senior secured notes due 2028 (B1/B) returned to focus on Friday with buyers lifting the notes more than 1 point although they remain under water.

Busy Friday

In the unusually busy primary market, three of Friday’s four deals came at discounts, the biggest being the 97.262 issue price for the Sunnova Energy Corp. $400 million issue of 11¾% senior green bullet notes due October 2028 (B1//B).

The smallest of the three discounts in question was the 98.75 issue price of the NCR Atleos Escrow Corp. 9½% senior secured notes due April 1, 2029 (B2/B+/BB-).

The NCR deal was also Friday’s biggest, and the only one to upsize.

The company priced the $1.35 billion issue (from $1.05 billion) to yield 9.798%, slightly wide to talk.

It was playing to a $1.8 billion order book at midmorning on Friday, a trader said.

Friday’s action extended the Sept. 18 week issuance total to $8.15 billion, $1.37 billion less than the previous week’s $9.52 billion, the biggest week thus far in 2023.

Friday’s total extends monthly issuance to $18.49 billion, making September – with five full market sessions remaining to play out – already the third biggest month of the year.

The biggest month of 2023, thus far, is May, at $21.85 billion.

Viasat comes in

Viasat’s 7½% senior secured notes due 2031 were coming in from the spectacular gains made on their break.

However, the notes continued to trade at a steep premium to their deeply discounted issue price.

The 7½% notes launched the day on a 69-handle and steadily declined as the session progressed, a source said.

They fell to a 67-handle and were trading in the 67 to 67¾ context by the session’s end.

There was $15 million in reported volume.

The notes exploded after breaking for trade to close the previous session wrapped around 69.

In this latest hung debt deal to clear the primary, Viasat priced a $733.4 million issue of the 7½% notes at 65 to yield 15.423% on Thursday.

The yield priced on top of yield talk but well wide of initial guidance in the 14% area.

Dealers were offloading the hung debt from Viasat’s acquisition of Inmarsat in 2022.

Worldpay recoups losses

Worldpay’s 7½% senior secured notes due 2031 recouped their losses from the previous session with the notes again trading up to the heights reached on the break.

The 7½% notes rose ½ point to close the day in the par ¾ to 101 context, a source said.

The notes jumped to that level after breaking for trade on Wednesday but fell alongside the broader market on Thursday.

In the latest leveraged buyout deal to clear the primary market, GTCR priced a $2.18 billion tranche of the 7½% notes at par on Wednesday in a deal supporting GTCR’s acquisition of a 55% stake in Worldpay.

Tenneco gains

Tenneco’s 8% senior secured notes due 2028 were bid up on Friday with the notes rising more than 1 point.

However, the hung debt deal remains a “disaster,” a source said, with the notes still well below their deeply discounted issue price.

The notes rose to an 82-handle for the first time since August.

They were changing hands in the 82 1/8 to 82 7/8 context heading into the market close, a source said.

The yield fell to 12 5/8%.

There was $19 million in reported volume.

In a deal to clear hung debt from Apollo’s buyout of Tenneco in 2022, Tenneco priced $1.9 billion of the 8% notes at 85 to yield 11.933%.

While cheap, the offering did not come cheap enough with the notes sinking in the aftermarket.

The 8% notes have traded on an 81-handle for much of September.

Fund flows

High-yield ETFs sustained large daily cash outflows of $586 million on Thursday, the most recent session for which data was available at press time, according to a market source.

Actively managed high-yield funds had a comparatively modest $18 million of inflows on the day.

News of Thursday’s daily flows followed a Thursday afternoon report that the combined funds had $416 million of net outflows in the week to the Wednesday, Sept. 20 close, according to fund-tracker Refinitiv Lipper.

It was the first weekly outflow from the dedicated junk bond funds in the past four weeks, according to the market source who spotted the year-to-date net cash flows of the junk funds at negative-$12.1 billion to Thursday’s close.

Indexes

The KDP High Yield Daily index added 4 basis points to close Friday at 49.81 with the yield 7.76%.

The index fell 32 bps on Thursday, added 3 bps on Wednesday and fell 13 bps on Tuesday and 5 bps on Monday.

The index posted a cumulative loss of 43 bps on the week.

The CDX High Yield 30 index shaved off 2 bps to close Friday at 102.05.

The index sank 51 bps on Thursday, 17 bps on Wednesday, 8 bps on Tuesday and 4 bps on Monday.

The index posted a cumulative loss of 82 bps on the week.

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