Triple-hook deals in Friday junk primary; Jazz, Imperial Dade at a premium; goeasy gains

By Paul A. Harris and Abigail W. Adams

Portland, Me., April 23 – The domestic high-yield primary market closed the week with an active session with five issuers pricing a cumulative $2.22 billion in single tranches.

Encino Acquisition Partners Holdings, LLC, Ahead DB Holdings, LLC and Wheel Pros, Inc., were among the issuers to clear the market on Friday.

Meanwhile, it was another quiet day in the secondary space although the tone was improved as equities rebounded from the sell-off sparked by President Biden’s proposed increase in the capital gains tax.

New paper continued to rule the tape with recent deals continuing to perform well in the aftermarket.

Jazz Pharmaceuticals plc’s 4 3/8% senior secured notes due 2029 (Ba2/BB-/BB+) maintained the large premium reached after breaking for trade with the notes continuing to trade on a 102-handle.

BCPE Empire Holdings, Inc./Imperial Dade’s 7 5/8% senior notes due 2027 (Caa2/CCC) were also trading at a large premium to their discounted issue price.

goeasy Ltd.’s 4 3/8% senior notes due 2026 (Ba3/BB-) were putting in a strong performance in the aftermarket with the notes gaining momentum as the session progressed.

Friday’s primary

A busy Friday session in the new issue market saw a handful of issuers price an overall $2.22 billion in five junk-rated, dollar-denominated tranches.

There were no drive-bys. All five of Friday's issuers had been in the market for at least two days.

Friday's highest-rated deal was a mid-single B offer from Encino Acquisition Partners, which priced a $700 million issue of 8½% seven-year senior notes (B3/B/B) at par.

Two of Friday's issuers, Ahead DB Holdings and Wheel Pros, came with triple-hooks offers, deals rated Caa1 or lower by Moody's Investors Service and CCC+ or lower by S&P Global Ratings, on both sides of the split.

The Wheel Pros deal turned out to be the session's marquee trade, sources said.

The Denver-based tire and wheel distributor priced a $365 million issue of 6½% eight-year senior notes (Caa2/CCC) at par.

A book stuffed with orders amounting to as much as six-times to seven-times the size of the offer enabled dealers to ratchet pricing tighter, a trader said.

The yield printed at the tight end of revised yield talk in the 6 5/8% area. Prior to revision the talk was 6¾% to 7% (see related stories in this issue).

Investors drew a comparison between the new Wheel Pros paper and the Truck Hero Inc. 6¼% senior notes due 2029, trading Friday at 104 bid, and thus yielding around 5¼%, and liked the Wheel Pros deal which was four points cheaper and 100 basis points wider than Truck Hero, the trader added.

The week ahead gets underway to a thin forward calendar.

Look for the pace of the primary market to possibly ease a bit, sources said on Friday.

The last week of April could see $10 billion or less, a trader said, noting that ahead of the weekend the market was hearing that JPMorgan would have three or four deals in the week ahead, while Citigroup is expected to have two and Deutsche Bank one.

Jazz on a 102-handle

Jazz Pharmaceutical’s 4 3/8% senior secured notes due 2029 remained strong in active trading on Friday.

While the 4 3/8% notes were coming in from the heights reached after breaking for trade, they remained on a 102-handle.

The 4 3/8% notes were changing hands in the 102 to 102 3/8 context in the late afternoon, according to a market source.

They were marked at 102¼ bid, 102¾ offered shortly after breaking for trade.

Jazz Pharmaceuticals priced a downsized $1.5 billion, from $2.7 billion, issue of the 4 3/8% notes on Thursday.

The yield printed tighter than talk for a yield in the 4 5/8% area.

While proceeds were shifted to the concurrent term loan, the secured notes were heavily oversubscribed and heard to be playing to $7 billion of orders.

BCPE at a premium

While new paper from BCPE Empire, which does business as Imperial Dade, was also coming in from the heights reached after breaking for trade, they continued to trade with a large premium to their discounted issue price.

The 7 5/8% senior notes due 2027 were changing hands in the 101 to 101¼ context heading into the market close, according to a market source.

They were down about 3/8 point after closing out the previous session at 101 3/8 bid, 101 7/8 offered.

Imperial Dade priced a $660 million issue of 7 5/8% notes at 99.407 to yield 7¾% on Thursday.

The issue size increased from $655 million.

The yield printed at the tight end of the 7¾% to 8% yield talk.

goeasy gains momentum

While several deals that broke for trade on Thursday were coming in from their highs, goeasy’s 4 3/8% senior notes were gaining steam.

The 4 3/8% notes started Friday’s session on a par handle.

However, they traded up to 101 by the market close.

goeasy priced a $320 million issue of the 4 3/8% at par on Thursday.

Price talk was for a yield of 4¼% to 4½%.

Thursday fund flows

The net daily cash flows of the dedicated high-yield bond funds were essentially flat on Thursday, with high-yield ETFs seeing $376 million of inflows while actively managed funds sustained $370 million of outflows on the day, a market source said.

News of Thursday's daily flows trailed a Thursday report that the combined funds sustained $1.32 billion of net outflows in the week to the Wednesday, April 21 close, according to the Refinitiv Lipper Fund Flow Report Newsline.

Over the course of that week the high-yield ETFs had both large daily inflows and outflows, while the actively managed funds had steady outflows, the source added.

In the year to Thursday's close the dedicated high-yield bond funds have sustained $8.2 billion of net outflows, which compares to $44.9 billion of net inflows for the full year 2020, according to the market source.

Indexes mixed

Indexes were again mixed on Friday. However, all posted cumulative losses on the week.

The KDP High Yield Daily index added 2 points to close the day at 69.54 with the yield now 3.89%.

The index was up 5 points on Thursday, lost 8 points on Wednesday and 10 points on Tuesday after gaining 2 points on Monday.

The index posted a cumulative loss of 9 points on the week.

The ICE BofAML US High Yield index gained 9 bps with the year-to-date return now 1.81%.

The index was down 8 bps on Thursday, was up 0.6 bps on Wednesday, and was down 17.4 bps on Tuesday and 5.6 bps on Monday.

The index posted a cumulative loss of 21.4 bps on the week.

The CDX High Yield 30 index gained 23 bps to close Friday at 109.65.

The index shaved off 8 bps on Thursday, gained 10 bps on Wednesday and dropped 29 bps on Tuesday and 25 bps on Monday.

The index posted a cumulative loss of 31 bps on the week.

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