Junk sector brings another $2.3 billion to now $6.8 billion week; Vistra flat; B&G better

By Paul A. Harris and Abigail W. Adams

Portland, Me., Sept. 13 – High-yield syndicates in the Western Hemisphere released a torrent of new issue news on Wednesday.

Issuers priced four dollar-denominated tranches of junk-rated notes for an overall face amount of $2.3 billion.

That brought the week’s total issuance to $6.8 billion.

With two sessions remaining to play out ahead of Friday’s close the Sept. 11 week is already the biggest week since early February, and the third biggest week of the year.

Meanwhile, it was a relatively flat day in the secondary space with latest Consumer Price Index report providing little clarity about the Federal Reserve’s next rate move, a source said.

While the CPI report came largely in line with expectations, the core price index report reflected an increase of 0.3% versus the 0.2% expected, a worrying sign that future rate hikes may be in store.

The cash bond market was either side of unchanged with equities mixed and Treasuries largely flat following the report.

While the broader market remained uncertain about the macro future, new paper was in focus as a torrent of issuance continued.

Vistra Operations Co. LLC’s new 7¾% senior notes due 2031 (Ba2/BB/BB) became the latest issue to fall flat in the aftermarket with the tight pricing leaving the notes little room for upward movement.

B&G Foods, Inc.’s 8% senior secured notes due 2028 (B1/B+) were trading at a solid premium to their discounted issue price.

Diamond Offshore Drilling, Inc.’s 8½% second-lien senior secured notes due 2030 (B3/BB-) were the outperformers of recent deals with the notes the only ones to break above a par-handle.

Torrent of deals

Wednesday’s junk executions were a mixed bag.

One tranche came at the tight end of talk. Two came in the middle of talk. One came at the wide end.

Two of the four ended up being done as drive-bys, including one that came on an accelerated timeline.

The deal in question came from Citgo Petroleum Corp. which priced the session’s biggest deal, a $1.1 billion issue of senior secured notes due Jan. 15, 2029 (B3/B+) at par to yield 8 3/8%, in the middle of talk.

It was heard to have come into the market with a large amount of reverse inquiry, and had been expected to remain in the market until Thursday.

There was also news on a robust $5.4 billion active forward calendar, including roadshow announcements.

Conspicuous among them was a revival of the Viasat Inc. hung bridge deal related to the California satellite services company’s acquisition of Inmarsat, which closed in May 2023.

Viasat began a full roadshow on Wednesday for a $733.4 million offering of senior notes due May 30, 2031 (Caa1/B/BB-).

Initial guidance has the notes coming with a 7½% coupon at a deep discount to yield 14%.

The bridge became hung up on dealer balance sheets in late 2022 due to market conditions, sources say.

Vistra flat

Electric and power company Vistra’s new 7¾% senior notes due 2031 became the latest issue to fall flat in the aftermarket.

The notes continued to trade in the 99 7/8 to par 1/8 context on Wednesday, a level the notes have largely been stuck at since breaking for trade, a source said.

There was $67 million in reported volume.

The tight pricing of the notes left little room for a lift in the aftermarket.

Vistra priced an upsized $1.1 billion, from $1 billion, issue of the 7¾% notes at par in a Tuesday drive-by.

Pricing came in the middle of yield talk in the 7¾% area, which had tightened from initial guidance in the high-7% area.

B&G improves

While flat day over day, B&G Foods’ 8% senior secured notes due 2028 continued to trade at a solid premium to their 99.502 discounted issue price.

The 8% notes continued to trade in the 99 7/8 to par 1/8 context, a source said.

There was $33 million in reported volume.

While the notes priced tight to the B-index, they are secured from a solid credit in a recession-proof sector, a source said.

B&G Foods priced an upsized $550 million, from $500 million, issue of 8% notes at 99.502 to yield 8 1/8% in a Tuesday drive-by.

The yield printed at the tight end of yield talk in the 8¼% area.

Diamond outperforms

Diamond Offshore’s 8½% second-lien senior secured notes due 2030 were the outperformers of recent deals with the notes the only ones to break above a par-handle.

While unchanged day over day, the notes continued to trade in the par ½ to 101 context in heavy volume, according to a market source.

There was $97 million in reported volume.

The notes looked relatively cheap for their credit rating and the energy sector has been well bid with the recent bull run in oil prices.

Diamond Offshore Drilling priced an upsized $550 million, from $500 million, issue of the 8½% notes at par in a Tuesday drive-by.

The yield printed at the tight end of yield talk in the 8 5/8% area.

Fund flows

The dedicated high-yield bond funds sustained $48 million of net daily cash outflows on Tuesday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs had $32 million of outflows on the day.

Actively managed high-yield funds sustained $16 million of outflows on Tuesday, the source said.

As the market awaits a report on the weekly cash flows of the various asset classes, expected Thursday afternoon from Refinitiv Lipper, the combined high-yield funds are tracking $8 million of net outflows on the week to Wednesday’s close, according to the market source.

Indexes

The KDP High Yield Daily index inched up 2 basis points to close Wednesday at 50.27 with the yield 7.56%.

The index shaved off 5 bps on Tuesday and added 2 bps on Monday.

The ICE BofAML US High Yield index added 9.6 bps with the year-to-date return now 7.066%.

The index was off 4.6 bps on Tuesday and gained 13.1 bps on Monday.

The CDX High Yield 30 index rose 15 bps to close Wednesday at 102.82.

The index was down 16 bps on Tuesday after gaining 20 bps on Monday.

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