Primary, secondary junk markets quiet; CQP hard to find; liquid issues trade

By Paul A. Harris and Abigail W. Adams

Portland, Me., May 28 – The new issue market was dormant heading into the holiday weekend with the coming week expected to also be quiet, sources said.

The new issue calendar was empty at Friday’s close with the summer doldrums appearing to take effect.

Meanwhile, the secondary space was equally quiet with few names on the tape and little movement in the names that did trade.

CQP Holdco LP/BIP-V Chinook Holdco LLC’s recently priced 5½% senior secured notes due June 2031 (expected ratings B2/B) were hard to find with sources struggling to find quotes for the notes, which priced as a true private placement.

The activity that did exist in the secondary space was relegated to large, liquid issues.

However, there was little movement in price in the notes that did trade with traders essentially just pushing the notes around, a source said.

Allied Universal’s 4 5/8% senior secured notes due 2028 (B2/B) and the 6% senior notes due 2029 (Caa1/CCC+) were among the most active issues in the secondary space with $10 million in reported volume heading into the early close.

The tranches were little changed with the unsecured notes continuing to outperform the secured notes.

Friday’s primary

The new issue market remained dormant ahead of the holiday weekend.

The primary market appeared to be in summer mode as the final week of May faded, and will possibly remain in summer mode in the week ahead, a trader said.

The active new issue calendar was empty at Friday's close.

One flicker of new issue news emanated from London, earlier in the day.

Barclays advised investors that it would host a conference call for a credit from the leisure sector on Tuesday at 10:30 a.m. ET.

A deal featuring fixed- and floating-rate tranches is expected to be in roadshow mode by means of one-on-one meetings between investors and management on Tuesday and Wednesday.

CQP hard to find

CQP’s 5½% senior notes due 2031 had several sources scratching their heads with quotes for the notes, which priced as a true private placement.

Traders took to chat rooms to ask if they had been allocated and to find out the note’s trading levels.

One source heard they were marked at 101 bid, 102 offered early in the session.

Another source also straining for color heard the dealer was out with a 101¾ supporting bid.

Another source heard they were at par ¾ bid, while still another source heard the notes were marked at 101 bid, 101¾ offered.

CQP priced a $1.4 billion issue of the 5½% notes at par on Thursday.

The yield printed at the wide end of the 5 3/8% to 5½% yield talk.

The issue size decreased from $1.5 billion, with $100 million of proceeds shifted to the term loan.

Earlier the deal size was increased to $1.5 billion from $1 billion, reflecting a $500 million shift of proceeds to the notes from the loan.

The notes priced as part of Blackstone Group Inc.'s sale of a portion of its stake in Cheniere Energy Partners, LP to Brookfield Infrastructure.

They came as a private placement.

However, the notes are subject to a deposit/withdrawal at custodian (DWAC) transaction in which investors will be required to wire funds into the Depository Trust Co., whereupon the bonds will be delivered and immediately tradable as Rule 144A securities.

The issue date for the bonds will be June 4.

Active

Allied Universal’s secured and unsecured tranches were among the most actively traded issues in the secondary space on Friday, although with little movement in price.

The 4 5/8% senior secured notes due 2028 (B2/B) remained wrapped around their issue price.

They were changing hands in the par to par ¼ context heading into the market close.

Ally’s 6% senior notes due 2029 remained on a 101-handle.

They were changing hands in the 101½ to 101 7/8 context heading into the market close.

Both tranches saw about $10 million in reported volume, making them one of the most active issues during Friday’s session.

The outperformance of the unsecured tranche continued to reflect investors’ appetite for yield.

The trading activity in the name was attributed to the liquidity of the large issue.

Allied Universal priced a $1.225 billion issue of the 4 5/8% secured notes and a $1.285 billion issue of the 6% unsecured notes at par in early May.

Thursday fund flows

High-yield ETFs saw $172 million of inflows on Thursday, according to a market source.

Actively managed funds sustained $76 million of outflows on the day, the 11th consecutive daily outflow sustained by the asset managers, but also the smallest among those outflows which had been averaging $440 million per day, the source said.

News of Thursday's daily flows followed a Thursday report that the combined high-yield funds sustained $1.37 billion of outflows in the week to the Wednesday, May 26 close, according to the Refinitiv Lipper Fund Flow Report Newsline.

The entire amount of that outflow, and more, came in the form of redemptions from the actively managed funds, as the high-yield ETFs actually saw $689 million of inflows on the week, the market source said.

In the past two weeks the actively managed funds sustained outflows totaling $4.4 billion, the largest since March 2020.

Year to date the combined high-yield funds have now had $11.9 billion of net outflows.

Indexes gain

Indexes continued to post nominal gains on Friday.

The KDP High Yield Daily index was up 3 points to close the day at 69.53 with the yield now 3.89%.

The index gained 6 points on Thursday, was flat on Wednesday and Tuesday and shaved off 1 point on Monday.

The index posted a gain of 8 points on the week.

The CDX High Yield 30 index gained 9 bps to close Friday at 109.69.

The index rose 15 bps on Thursday, was unchanged on Wednesday, fell 10 bps on Tuesday and rose 15 bps on Monday.

The index posted a cumulative gain of 29 bps on the week.

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