CommScope, Clear Channel price; Altice adds on; Getty on deck; funds add $3.86 billion

By Paul A. Harris and Abigail W. Adams

Portland, Me., Feb. 7 – For the first time in 2019, the high-yield primary market’s daily issuance topped the $5 billion mark.

Three issuers brought a combined five tranches to raise a total of $6.24 billion on Thursday, making December’s deep freeze a distant memory.

CommScope Inc. priced an upsized $3.75 billion in three tranches.

Clear Channel Outdoor Holdings, Inc. priced an upsized $2.235 billion of five-year senior subordinated notes (Caa1/CCC+/CCC+).

And Altice USA returned with a $250 million tap of its recently priced 6½% senior notes due 2029.

One deal joined the forward calendar with Getty Images Inc. on the road with a $400 million offering of eight-year senior notes.

While generally a soft day for the secondary market, the deals to price during Thursday’s session were well above their issue prices after breaking for trade.

Other issues did not fare so well. KB Home’s recently priced 6 7/8% senior notes due 2027 (B1/BB-) continued to sink further below their issue price.

Adient Global Holdings Ltd.’s 4 7/8% senior notes due 2026 saw a significant drop on Thursday after the automotive parts manufacturer released first-quarter earnings.

While the overall market was down, First Quantum Minerals Ltd.’s junk bonds posted gains after the mining company secured a refinancing deal and called its 2021 notes.

Meanwhile, high-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall liquidity trends in the junk market – saw a record-setting inflow of $3.859 billion for the week ended Wednesday, according to fund-flow statistics generated by AMG Data Services Inc.

CommScope upsized

December's deep freeze – a month of zero issuance for the first time in the history of the modern market – is nothing but a pale memory, an investor mused late Thursday.

The junk market is now red hot, sources say.

One look at Thursday's deal from CommScope bears out this color.

CommScope Inc. upsized its three-part offering of notes by $750 million, and ratcheted down price talk.

The upsized $3.75 billion deal priced as follows:

· An upsized $1.25 billion tranche of five-year senior secured notes (Ba1/BB) priced at par to yield 5½%. The tranche was upsized from $1 billion. The yield printed in the middle of yield talk in the 5½% area, which had been revised tighter from 5½% to 5¾%; initial talk was in the 6% area.

· An upsized $1.5 billion tranche of seven-year senior secured notes (Ba1/BB) priced at par to yield 6%. The tranche was upsized from $1 billion. The yield printed in the middle of yield talk in the 6% area, which had been revised tighter from 6% to 6¼%; initial talk was in the 6½% area.

· A $1 billion tranche of eight-year senior unsecured notes (B1/B+) priced at par to yield 8¼%. The yield printed in the middle of yield talk in the 8¼% area, which had been revised tighter from the 8½% area; initial talk was in the high 8% area.

The $2.75 billion in the two secured tranches played to $5.4 billion of demand, an investor said.

There were $1.9 billion of orders in the book for the $1 billion of unsecured paper, the source added.

Allocations being tight, accounts seeking sizable allocations were heard to be calling in favors with their respective salespersons, the investor remarked.

J.P. Morgan Securities LLC was left bookrunner for the secured tranches.

BofA Merrill Lynch was left bookrunner for the unsecured tranche.

Proceeds will be used to help fund the acquisition of Arris International plc.

Along with the upsizing of the bonds, the concurrent term loan was downsized to $3.2 billion from $3.87 billion.

Each tranche was seen sharply above its issue price after breaking for trade.

The 5½% tranche was quoted at par 3/8 bid, par 5/8 offered.

The 6% tranche was quoted at par 3/8 bid, par 5/8 offered. The 8¼% tranche was quoted at 101¼ bid, 102 offered.

Big book for Clear Channel

Clear Channel Outdoor Holdings also got an execution which saw the deal upsized and priced at the tight end of talk.

The San Antonio-based outdoor advertising company priced an upsized $2.235 billion amount of five-year senior subordinated notes (Caa1/CCC+/CCC+) at par to yield 9¼% on Thursday.

The issue size increased from $2.2 billion.

The deal ultimately played to $7 billion of orders, a trader said.

The yield printed at the tight end of the 9¼% to 9½% yield talk. Earlier guidance had been in the 9½% area. Initial talk was in the 10% area.

Deutsche Bank Securities Inc., Morgan Stanley & Co. LLC, Barclays, Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC and J.P. Morgan Securities LLC were the joint bookrunners for the debt refinancing deal.

The 9¼% notes dominated activity in the secondary space with more than $187 million of the bonds on the tape by the late afternoon, according to a market source.

The notes were quoted at 101¾ bid, 102¼ offered in the midafternoon and traded up to 102 3/8 shortly before the market close, sources said.

Altice USA returns

Two weeks after it priced a $1.5 billion issue of 10-year 6½% senior guaranteed notes, Altice USA returned with a $250 million tap of that issue.

The add-on cleared the market at a handsome premium to the late January trade.

Altice USA priced a $250 million tack-on to subsidiary CSC Holdings, LLC’s 6½% senior guaranteed notes due Feb. 1, 2029 (Ba3/BB-) at 101.75 to yield 6.218% in a quick-to-market Thursday trade.

The deal came rich to the 101 to 101.5 guidance, a trader said.

Credit Suisse was the left bookrunner for the bank debt refinancing deal.

While the notes were trading at a premium to their reoffer price, the add-on pushed the notes down from their previous levels, according to a market source.

The notes dropped ½ point.

They were quoted at 101¾ bid, 102¼ offered and were seen changing hands around 102¼, a market source said.

One more time!

Altice, which waited a respectable two weeks before returning to the high-yield drive-through window, became the second issuer thus far in 2019 to price a megadeal, then turn around and quickly come back for more.

TransDigm Inc., which priced $3.8 billion on Jan. 30, took no chances that the hot junk market might suddenly cool when it came with an additional $750 million after just two days(!).

The Cleveland-based aircraft components company priced a $3.8 billion issue of 6¼% senior secured notes due March 2026 (Ba3/B+) at par on Jan. 30.

On the first day of February, TransDigm priced a $200 million tap of those 6¼% notes at 101 to yield 6.07%.

Perhaps even more astonishing, on the same day, TransDigm also resurrected a tranche of 7½% senior subordinated notes due March 2027 (B3/B).

Just days earlier the senior sub tranche, then sized at $1 billion, failed to get traction on the roadshow, prompting TransDigm to scrap the subordinated tranche and shift the proceeds to the secured notes due 2026, sources said.

TransDigm's remarkable Feb. 1 return, after just two days, saw $550 million of those same subs back and pricing at par to yield 7½%, on top of price talk.

A market that in early January would brook little discussion of “subordinated notes,” or “triple-hooks,” deals with triple C ratings on one or both sides of the split, has lately broadened its horizons, an investor quipped late Thursday.

Getty markets $400 million

Thursday's heavy action in the new issue market all but cleared the dollar-denominated calendar, which contained just one deal at the session's close.

Getty Images is doing a roadshow for a $400 million offering of eight-year senior notes (CCC+) into the middle part of the Feb. 11 week.

Initial price talk has the deal coming to yield in the 10½% area.

JP Morgan is the lead.

The Seattle-based visual communications company plans to use the proceeds to refinance its balance sheet in connection with its acquisition by the Getty family from the Carlyle Group.

KB Home down again

KB Home’s 6 7/8% senior notes due 2027 continued their downward momentum on Thursday.

The notes dropped another 5/8 point in active trading.

They were quoted at 98¾ bid, 99¼ offered and were trading around 99¼ in the late afternoon, sources said.

More than $37 million bonds were on the tape during Thursday’s session.

The market, in general, was weak on Thursday, sources said.

However, the notes were under water soon after hitting the secondary space, which sources attributed to their tight pricing.

KB Home priced a $300 million tranche of the 6 7/8% notes at par in a Tuesday drive-by.

The yield printed at the tight end of yield talk in the 7% area and tighter than initial guidance in the 7¼% area.

Adient’s earnings

Adient’s 4 7/8% senior notes due 2026 dropped in high-volume activity on Thursday following the automotive parts manufacturer’s first quarter earnings.

The 4 7/8% notes dropped 3½ points to close the day at 71½, according to a market source.

More than $23 million of the bonds were on the tape by the late afternoon.

Adient missed on both the top and bottom lines in its earnings report.

Adient reported earnings per share of 31 cents versus analyst expectations of earnings per share of 48 cents.

Revenue was $4.16 billion which missed expectations for revenue of $4.2 billion.

Adjusted EBITDA was $176 million, a $90 million decrease year-over-year, and free cash flow was negative $272 million, according to a market source.

In addition to the earnings miss, Adient amended its credit agreement to loosen the restrictions on its first lien secured net leverage ratio, amongst other changes, according to an 8-K filing with the Securities and Exchange Commission.

While the company claimed the amendment would give it the flexibility to manage a turnaround, investors were skeptical, according to a market source.

First Quantum jumps

First Quantum’s junk bonds jumped on Thursday on news the company had secured a $2.7 billion refinancing package.

First Quantum’s 7¼% senior notes due 2022 jumped 2¼ points to par ¼ in high-volume activity, according to a market source.

More than $19 million of the bonds were on the tape by the late afternoon.

First Quantum’s 7% senior notes due Feb. 15, 2021 rose about 2½ points to 101.95. More than $35 million of the bonds had changed hands during Thursday’s session.

First Quantum announced a new $2.7 billion term loan on Thursday with proceeds to be used, in part, to call the 7% senior notes due 2021.

The 7% notes were trading slightly above their 101¾ call price, according to a market source.

The 7¼% notes were trading up due to increased buying pressure with many holders of the 7% notes moving to the next shortest duration bond offered from the mining company, a source said.

Big inflows

The newfound vigor of the buyside's appetite for deals farther out along the credit spectrum can be easily explained, an investor said.

There is presently a lot of cash coming into the high-yield funds.

On Monday, actively managed funds saw $1.7 billion of inflows on the day, the biggest daily inflow in 2½ years, the investor said.

In the week to Wednesday's close, the junk funds – ETFs and actively managed funds combined – saw $3.86 billion of net inflows, according to Lipper US Fund Flows.

That's the biggest weekly inflow since the week ended July 13, 2016, which saw $4.4 billion of inflows, a trader said.

The biggest weekly inflows to the junk funds on record came earlier that same year, in the week that ended March 2, 2016, which saw $5 billion of inflows, the source added.

Indexes down

Indexes were down on Thursday, which was one of the softest days for the market all week.

The KDP High Yield Daily index dropped 12 basis points to close Thursday at 69.63 bps with the yield now 6.22%.

The index was up 8 bps on Wednesday, 21 bps on Tuesday and 6 bps on Monday.

The index marked a cumulative gain of 60 bps on the week last week.

The ICE BofAML US High Yield index sank below the 5% threshold on Thursday after passing it only two days previously.

The index was down 38.3 bps on Thursday with the year-to-date return now 4.967%.

The index rose 10.4 bps on Wednesday, 41 bps on Tuesday and 11.7 bps on Monday after a cumulative gain of 81.4 bps on the week last week.

The index shot past 5% returns on Tuesday after surpassing 4% year-to-date returns on Jan. 30.

The CDX High Yield 30 index dropped 45 bps to close Thursday at 105.59. The index was down 27 bps on Wednesday after rising 19 bps on Tuesday and 22 bps on Monday.

The index saw a cumulative gain of 76 bps on the week last week.

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