Realogy, American Axle, BWX and Hillenbrand price; SiriusXM lags; Macy’s volatile

By Paul A. Harris and Abigail W. Adams

Portland, Me., June 9 – The high-yield primary market remained active on Tuesday as four issuers – each one pricing a single junk-rated, dollar-denominated tranche – raised a combined $1.75 billion.

In each case investors watched pricing grind tighter and tighter while the deals were in the market, sources said.

Realogy Group LLC and Realogy Co-Issuer Corp. priced $550 million, American Axle & Manufacturing, Inc. priced $400 million, BWX Technologies Inc. priced $400 million and Hillenbrand, Inc. priced $400 million.

While the active forward calendar was empty at the close of Tuesday’s session, investors are eyeing PG&E Corp.’s expected offering of junk bonds to finance its exit from bankruptcy.

Meanwhile, the secondary space had one of its softest days in recent weeks on Tuesday with the cash bond market down about ¼ point after a steady grind tighter.

Sellers were outnumbering buyers on Tuesday bucking the recent trend of buying pressure that was propping up the market, a source said.

New issues continued to dominate trading activity. While the deals to break during Tuesday’s session were strong out of the gate, the deals to price on Monday were weak.

SiriusXM’s newly priced 4 1/8% senior notes due 2030 (Ba3/BB) were lagging their issue price in high-volume activity.

While International Game Technology plc’s 5¼% senior notes due 2029 (Ba3/BB) were at times below par, they closed the day largely flat.

Meanwhile, Macy's Inc.’s 8 3/8% senior notes due 2025 (Ba1/BB-/BB+) had renewed attention on Tuesday with the notes volatile on the heels of headline news and preliminary earnings.

Tuesday’s session

Realogy priced an upsized $550 million issue of five-year senior secured second-lien notes (B3) at par to yield 7 5/8%.

The issue size increased from $400 million.

The yield printed at the tight end of revised yield talk in the 7¾% area. Earlier talk was 8% to 8¼%. Initial guidance was in the high 8% area.

The deal was heard to be playing to $1 billion of orders on Tuesday morning, a trader said.

The notes were trading at 102½ bid and appeared to be headed higher on Tuesday afternoon, shortly after the deal terms circulated the market, according to another trader.

American Axle & Manufacturing priced a $400 million issue of eight-year senior (B2/B-) at par to yield 6 7/8% in a Tuesday drive-by.

The yield printed at the tight end of yield talk in the 7% area, and inside of the 7% to 7¼% initial talk.

BWX Technologies priced a $400 million issue of eight-year senior notes (Ba3/BB) at par to yield 4 1/8% in a drive-by.

The yield printed at the tight end of yield talk in the 4¼% area. Initial guidance was in the mid 4% area.

And Hillenbrand priced an upsized $400 million issue of five-year senior notes (Ba1/BB+/BB+) at par to yield 5¾%.

The issue size increased from $300 million.

The yield printed on top of yield talk which had been revised from earlier talk in the 6% area. Initial talk was in the low-to-mid 6% area.

The bonds shot to 103 bid, 104 offered, according to a New York bond trader who added that clients complained about low allocations.

Varsity Brands

Meanwhile Varsity Brands plans to privately place $100 million of Hercules Achievement, Inc. and Varsity Brands Holding Co., Inc. floating-rate senior secured notes due Dec. 22, 2024.

The notes, which are co-terminus with the term loan, are talked with an 825 to 850 basis points spread to Libor at 96. There is a 1% Libor floor.

Commitments are due at noon ET Friday.

PG&E eyed

The markets remain poised for PG&E to show up with a chunk of debt related to its Chapter 11 exit financing, sources say.

The market is looking for possibly $11 billion across term loan and junk bond tranches under the helm of J.P. Morgan Securities LLC. High-grade bonds are to be led by BofA Securities Inc., sources say.

There are six or seven leads willing to take orders on the to-be-determined amount of high-yield notes, according to a trader who added that some are merely steering clients to JP Morgan.

Right now, investors are looking for 6% to 7% on a 10-year junk bond deal, the trader added.

SiriusXM lags

SiriusXM’s 4 1/8% senior notes due 2030 were lagging their issue price in high-volume activity on Tuesday.

The notes traded as low as 99¼ during Tuesday’s session.

However, they traded off their lows and were changing hands in the 99¾ to par context heading into the close, a source said.

The notes were among the most actively traded during Tuesday’s session with more than $93 million in reported volume.

The tight pricing and a down day for the market were contributing to the poor performance of the notes, sources said.

SiriusXM priced an upsized $1.5 billion issue of the 4 1/8% notes at par in a Monday drive-by.

The issue size increased from $1 billion.

The yield printed at the tight end of yield talk in the 4¼% area. Initial talk was 4¼% to 4½%.

International Game flat

International Game Technology’s 5¼% senior notes due 2020 also had a lackluster reception in the secondary space on Tuesday.

While the notes were, at times, trading below their issue price they gained strength to close the day largely flat, a source said.

The notes traded in a range of 99¾ to par 3/8 on Tuesday with the final prints in the par ¼ to par ½ context.

International Game Technology priced an upsized $750 million issue of the 5¼% notes at par on Monday.

The issue size increased from $500 million.

The yield printed tighter than talk in the 5½% area. Initial talk was in the high 5% area.

Macy’s volatile

Macy’s 8 3/8% senior notes due 2025 were volatile on Tuesday on the heels of headline news and preliminary earnings.

The 8 3/8% notes traded to a high of 105 and a low of 102 7/8, a source said.

The notes were changing hands in the 103¾ to 104 context heading into the market close.

They were ¼ to ½ point weaker from Monday, a source said.

Macy’s reported preliminary first quarter earnings, which beat expectations.

The department store reported revenue of $3 billion and EBITDA of negative $689 million which was a narrower loss then the negative $795 million that was expected, according to a market source.

The preliminary earnings announcement and news that it had reopened 450 stores boosted the company’s capital structure.

However, the rally faded into losses on news that the company’s second-quarter gross margin will be worse than the first and a return to normal for earnings will not occur until late in 2021 or 2022, a source said.

$327 million Monday inflows

The dedicated high-yield bond funds had $327 million of net inflows on Monday, the most recent session for which data was available at press time, according to a market source.

Actively managed high-yield funds had $435 million of inflows on the day.

However high-yield ETFs were negative on the day, sustaining $108 million of outflows on Monday, the source said.

The combined funds are tracking a very hefty $4.2 billion of net inflows for the week that will conclude with Wednesday's close, and will include Tuesday's and Wednesday's yet-to-be reported fund flows totals, according to the market source.

Indexes soft

Indexes were weak on Tuesday.

The KDP High Yield Daily index shaved off 17 bps to close Tuesday at 66.95 with the yield now 5.89%. The index was up 32 bps on Monday.

The ICE BofAML US High Yield index shaved off 34.6 bps with the year-to-date return now negative 2.644%.

The CDX High Yield 30 index closed Tuesday at 101.64.

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