Primary roars into action; six issuers price $6.25 billion in seven tranches; secondary gains continue

By Abigail W. Adams

Portland, Me., Nov. 9 – The domestic high-yield primary market roared into action on Monday with six issuers pricing a cumulative $6.25 billion in seven tranches and the forward calendar growing.

The deals played to heavy demand during bookbuilding with the majority of offerings upsizing and several coming on a 3-handle.

Allison Transmission Inc., Axalta Coating Systems LLC, Ford Motor Credit Co. LLC, Stericycle Inc. and Sunoco LP all cleared the primary market on Monday.

Veritas US Inc. and Veritas Bermuda Ltd. also priced an upsized $750 million add-on to their 7½% senior secured notes due Sept. 1, 2025 (B2/B).

Monday also saw a modest buildup in the forward calendar with Tervita Corp. in the market with a $500 million offering of five-year senior secured second-lien notes and Interface Inc. starting a roadshow for a $300 million offering of eight-year senior notes.

While new paper was in focus, the secondary space continued to rip higher on the heels of President-elect Joseph R. Biden’s decisive victory and positive early data from Pfizer’s Covid-19 vaccine.

With renewed faith in the reopening of the economy, American Airlines Group, Inc.’s 11¾% senior notes due 2025 skyrocketed with the once struggling notes up 6 points, sources said.

Allison lags

Allison Transmission priced $1 billion senior notes due Jan. 30, 2031 (Ba3//BB) at par to yield of 3¾% in a Monday drive-by, according to a market source.

Pricing came at the tight end of talk for a yield of 3¾% to 4%. Initial guidance was in the low 4% area.

While the notes played to solid demand during bookbuilding, they were lagging their issue price after breaking for trade.

The notes were marked at 99 5/8 bid, 99 7/8 offered heading into Monday’s close.

The tight pricing left them nowhere to go, a source said.

Axalta upsizes

Axalta Coating Systems priced an upsized $700 million, from $600 million, issue of 3 3/8% eight-year senior notes (B1/BB-) at par to yield 3.373%, according to a market source.

Pricing came at the tight end of talk for a yield in the 3½% area. Initial guidance was for a yield in the mid to high 3% area.

Ford’s megadeal

Ford Motor Credit priced a $1.5 billion tranche of five-year senior bullet notes (Ba2/BB+/BB+) at par to yield 3 3/8% and a $1 billion tranche of 10-year senior bullet notes (Ba2/BB+/BB+) at par to yield 4% in a Monday drive-by, sources said.

Pricing of the five-year notes came at the tight end of talk for a yield of 3 3/8% to 3½%. Initial price talk was in the 3¾% area.

Pricing of the 10-year notes came at the tight end of talk for a yield of 4% to 4 1/8%. Initial price talk had the notes coming with a yield in the 4 3/8% area.

Ford’s 3 3/8% notes fell flat in the aftermarket with the notes largely wrapped around par after breaking for trade, a source said.

Sunoco upsizes

Sunoco priced an upsized $800 million, from $500 million, issue of 8.5-year senior notes (expected B1/BB-) at par to yield 4½%, according to a market source.

Pricing came at the tight end of talk for a yield of 4½% to 4¾%. Initial guidance was for a yield in the high 4% to 5% area.

Stericycle accelerates timing

Stericycle Inc. priced an upsized $500 million, from $400 million, offering of eight-year senior notes (BB-/BB) at par to yield 3 7/8%, according to a market source.

Pricing came tighter than talk for a yield of 4% to 4¼%.

Initial price talk was in the low to mid-4% area.

Timing of the deal was accelerated with the deal initially slated to price on Tuesday.

Veritas adds-on

Veritas priced an upsized $750 million, from $500 million, add-on to their 7½% senior secured notes due Sept. 1, 2025 (B2/B) at 102 to yield 6.994% on Monday, according to a market source.

Pricing came toward the wide end of talk for a reoffer price of 102 to 102.5.

Early whisper had the notes coming with a reoffer price in the 101.5 area.

American Airlines skyrockets

American Airlines 11¾% senior notes due 2025 skyrocketed in active trading with the already hot high-yield market further bolstered by positive news about a vaccine.

The 11¾% notes jumped more than 6 points to a 105-handle, a source said.

They were changing hands at 105¾ heading into the market close.

There was more than $45 million of the bonds on the tape.

Indexes rocket higher

Indexes continued to rocket higher on Monday after all posted large cumulative gains the previous week.

The KDP High Yield Daily index jumped 69 points to close Monday at 67.86 with the yield now 4.87%.

The index saw a cumulative gain of 111 bps on the week last week.

The ICE BofAML US High Yield index blew past the 3% year-to-date return threshold on Monday after brushing up against negative returns just two weeks ago.

The index jumped 122.3 bps with the year-to-date returns now 3.515%.

The index posted a cumulative gain of 212.4 bps on the week last week.

The CDX High Yield 30 index jumped 141 bps to close Monday at 107.45.

The index posted a cumulative gain of 254 bps on the week last week.

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