At Home, Magpul on deck; Goodyear active in junk trading; Paysafe improves; OneMain weakens

By Paul A. Harris and Abigail W. Adams

Portland, Me., June 18 – The domestic high-yield primary market remained dormant on Friday.

However, sources expect to see a monster amount of new issuance in the coming week, which is the last full week of the second quarter.

Two deals are currently on the forward calendar – an $800 million dual-tranche LBO deal from Ambience Merger Sub, Inc. backing the buyout of At Home Group, Inc. and a $300 million offering from Magpul Industries Corp.

Meanwhile, the secondary space was slightly softer on Friday although the market remained near its record tights.

Ten-year inflation breakevens are at 2.28%, the lowest level in three months, according to a BofA Global Research Report, giving pause to concern about the interest rate risk that previously drove down lower-coupon, longer-duration junk bonds.

Credit spreads were at 312 bps with the possibility of a further tightening to a 2-handle, the first time that has happened since 2007, according to the BofA report.

Large bids-wanted-in-competition lists have circulated the market throughout the week amid another multibillion-dollar outflow from high-yield mutual and exchange-traded funds.

However, the outflows were largely driven by subdued returns as opposed to weakness in the market.

Despite the large bids-wanted-in-competition, trading activity in the secondary space remained light on Friday, especially with the primary market turning off the spigot over the past two sessions.

While activity in the name slowed down, OneMain Finance Corp.’s 3½% senior notes due 2027 (expected ratings Ba3/BB-//Kroll: BB+) were weaker on Friday.

Paysafe Holdings US Corp.’s recently priced 4% senior secured notes due 2029 (B1/B+) improved in active trading; however, they remained well below par.

With activity in recent issues cooling, there was a pickup in activity in some outstanding issues.

Goodyear Tire & Rubber Co.’s 5% senior notes due 2029 (B2/BB-/BB-) were active although with little movement in price.

Friday’s primary

As with the Thursday session, the high-yield primary put up a goose egg on Friday, as the new issue market continues to await its first post-FOMC dollar-denominated issue.

That will change in the week ahead, which could be the biggest week since Memorial Day, sources said on Friday.

It might not scream out of the gates, as the past week did. Monday, June 14 saw nine deals announced, as prospective issuers scurried to get in ahead of any possible market-altering moves the Fed might make.

However, the middle part of the coming week is apt to be busy, a trader said.

The first week of the calendar summer is set to get under way with a modest active calendar.

On Friday the market heard that Ambience Merger Sub plans to run a roadshow during the week ahead for an $800 million two-part deal backing the buyout of At Home Group (existing corporate credit ratings B2/B) by Hellman & Friedman.

It features a $300 million tranche of seven-year senior secured notes with initial guidance of 5¼% to 5½% and a $500 million tranche of eight-year senior unsecured notes which come with initial guidance that has them pricing 200 basis points behind the secured notes.

Elsewhere, Magpul Industries is expected to price $300 million of seven-year senior secured second-lien notes (B1) in the week ahead.

The Texas-based manufacturer of ammunition magazines for firearms is in the market seeking to refinance debt and fund a dividend to shareholders including private equity sponsor Albion River.

Early guidance has it coming at 5½%.

The deal comes via sole bookrunner B. Riley, which has generated some chatter because that dealer name is not exactly a familiar one in the junk new issue market.

There is some speculation that mainstream dealers were not falling all over one another to get in the Magpul deal, given that the issuer's business carries a sizable load of political baggage, a trader said on Friday.

OneMain weaker

OneMain’s 3½% senior notes due 2027 were weaker on Friday with the notes dropping below par.

The 3½% notes were changing hands in the 99 5/8 to 99 7/8 context on Friday. However, volume in the name was light.

OneMain’s 3½% notes have been active over the past two sessions although the notes remained wrapped around their issue price.

The Evansville, Ind.-based financial services holding company priced $750 million of the 3½% notes at par on Wednesday.

Paysafe improves

Paysafe’s 4% senior secured notes due 2029 (B1/B+) improved on Friday although they remained well below par.

The 4% notes, which sank to a 97-handle soon after pricing, were changing hands in the 97 7/8 to 98 3/8 context heading into the market close.

There was about $14 million of the bonds on the tape.

Paysafe’s 4% notes have struggled since breaking for trade on June 10.

The notes immediately dropped below par and have steadily traded lower since.

The notes traded to a low of 97 on Wednesday as the market digested the latest announcement from the Federal Reserve.

However, the notes have since bounced off their lows.

Goodyear active

Goodyear’s 5% senior notes due 2029 were active on Friday although with little movement in price.

The notes remained on a 103-handle.

They were changing hands in the 103¼ to 103½ context throughout the session.

There was more than $14 million in reported volume, making it one of the most actively traded names in the secondary space.

Goodyear priced an $850 million tranche of the 5% notes at par in May.

Thursday inflows

The dedicated high-yield bond funds saw $320 million of net daily inflows on Thursday, the most recent session for which data was available at press, according to a market source.

High-yield ETFs saw $230 million of inflows on the day.

Actively managed high-yield funds saw $90 million of inflows on Thursday, the source said.

News of Thursday's daily flows trails a report that the combined funds sustained $2.23 billion of outflows in the week to the Wednesday, June 16 close, according to the Refinitiv Lipper Fund Flow Report Newsline.

It was the largest weekly outflow since mid-March, and it was entirely driven by the ETFs, in the run-up to last Wednesday's FOMC meeting, the market source said.

The high-yield ETFs actually sustained outflows of $2.24 billion for the week to June 16, in excess of the $2.23 billion net outflows of the combined funds.

Boring deeper into the fund flows, the brunt of those ETF outflows was borne by the intermediate duration high-yield ETFs, a bond trader said on Friday.

Short-duration ETFs actually saw inflows during the past week, which implies that people want to be invested, however they are keen to mitigate duration risk, the trader remarked.

Indexes

Indexes were again soft on Friday.

The KDP High Yield Daily index dropped 8 points to close Friday at 69.92 with the yield now 3.81%.

The index was down 7 points on Thursday, 1 point on Wednesday, 3 points on Tuesday and 5 points on Monday.

The index posted a cumulative loss of 24 points on the week.

The CDX High Yield 30 index was down 26 bps to close Friday at 109.63.

The index dropped 3 bps on Thursday, 21 bps on Wednesday, 3 bps on Tuesday and 9 bps on Monday.

The index posted a cumulative loss of 62 bps on the week.

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