Junk market brings $2 billion from trio of issuers; Spirit Airlines crashes; Carrols jumps

By Paul A. Harris and Abigail W. Adams

Portland, Me., Jan. 16 – Dealers sprang into action on the heels of the holiday weekend, generating a hefty news volume in the high-yield primary market.

A trio of drive-by issuers, each bringing a single tranche of junk, priced a $2 billion face amount.

Meanwhile, the secondary space was soft on Tuesday with the cash bond market off ¼ point as Treasury yields rose following hawkish comments from Federal Reserve officials that tempered rate-cut expectations, a source said.

However, it was topical news that was moving the market on Tuesday with several issues undergoing outsized moves in heavy volume, both to the upside and downside.

Spirit Airlines Inc.’s 8% senior secured notes due 2025 (B2) suffered heavy losses after a federal judge blocked JetBlue Airways Corp.’s acquisition of the company, which took the market by surprise.

The notes returned to their November 2023 lows, giving back all gains made in December as the market turned optimistic about a positive outcome to the antitrust trial seeking to stop the merger.

While Spirit Airlines’ senior notes crashed and burned on the failed merger, Carrols Restaurant Group Inc.’s 5 7/8% senior notes due 2029 (Caa1/CCC) soared after Restaurant Brands International Inc. announced it would acquire the company in a $1 billion cash transaction.

DISH DBS Corp.’s senior notes continued to move lower in heavy volume as the company launched an exchange offer for four series of the notes.

Investors were not happy with the exchange offer, which came shortly after DISH’s highly controversial asset transfer, with litigation expected, sources said.

Primary

In the primary market, Acrisure, LLC and Acrisure Finance, Inc. priced a $925 million issue of five-year senior notes (Caa2/CCC+) at par to yield 8¼%, at the tight end of talk.

The deal was heard to be more than two-times oversubscribed, according to a trader who saw the new bonds change hands at par ¾ on Tuesday afternoon.

Tallgrass Energy Partners, LP and Tallgrass Energy Finance Corp. priced an upsized $800 million issue (from $700 million) of five-year senior notes (B1/BB-/BB-) at par to yield 7 3/8%, also at the tight end of talk.

Shortly before terms circulated the market the deal was playing to over $2 billion of demand, according to a trader who remarked that the deal appeared to go very well.

Burford Capital Global Finance LLC also upsized its deal, as it priced a $275 million add-on (from $200 million) to its 9¼% senior notes due July 1, 2031 (Ba2/BB-) at 103.625, rich to talk.

Meantime the forward calendar took aboard a couple of deals set to price this week.

Hub International Ltd. came with $3 billion of secured and unsecured notes: a $1.1 billion add-on to the Hub International 7¼% senior secured notes due June 15, 2030 (B2/B), in the market with initial price talk in the 102 to 102.5 area, and a $1.9 billion tranche of new eight-year senior notes, initial talk is 7½% to 7¾%.

Caliber Collision showed up with a $1.25 billion offering of Wand NewCo 3 Inc. eight-year senior secured notes, in a deal that began being telegraphed to the market over a week ago.

Initial price talk is in the low-8% area, a portfolio manager said.

Spirit Airlines crashes

Spirit Airlines’ 8% senior secured notes due 2025 crashed and burned on Tuesday after news hit the market midsession that a federal judge had blocked JetBlue’s acquisition of the company.

The 8% senior notes sank 15 to 16 points.

They were trading on a 59-handle in the late afternoon with the yield rocketing to 43¾%, a source said.

There was $44 million in reported volume.

The notes were trading at 75 heading into Tuesday’s session.

The notes were reapproaching their November 2023 low, a dive that was triggered by the launch of the Department of Justice’s antitrust trial attempting to block JetBlue’s acquisition of the company that sparked heavy selling in the capital structure.

However, the 8% notes recovered in December amid the market surge and renewed optimism about a positive outcome from the trial.

The blocked acquisition took many by surprise, a source said.

Carrols buyout

Carrols’ 5 7/8% senior notes due 2029 surged in heavy volume after Restaurant Brands announced its $1 billion acquisition of the company.

The 5 7/8% notes jumped 10 points.

They were trading in the 101½ to 102½ context heading into the market close, a source said.

There was $26 million in reported volume.

The notes were trading up to their anticipated takeout price, a source said.

The issue is callable at 102.938 in July.

Restaurant Brands’ acquisition is expected to close in the second quarter.

DISH’s exchange

The DISH saga continued with an added layer of complexity on Tuesday after the company announced an exchange offer for four series of senior notes.

DISH’s senior notes continued to trade lower following the exchange offer with investors “not happy,” a source said.

The 7¾% senior notes due 2026 (Caa2/CCC+) were off another 2 points to trade on a 56-handle.

There was $54 million in reported volume.

The 5 1/8% senior notes due 2029 sank another 1½ points to close the day at 36.

There was $45 million in reported volume.

The notes continued to move lower in heavy volume after the company announced an exchange offer for four series of notes.

The company is offering to exchange up to $1 billion in principal of the 5 7/8% senior notes due Nov. 15, 2024 for new 10% senior secured notes due 2030.

The company is also offering to exchange up to $3 billion in principal of its 7 3/8% senior notes due 2028, 7¾% senior notes due 2026 and 5 1/8% senior notes due 2029 for new 10% senior secured notes due 2034.

The new notes will be issued by DISH DBS Issuer LLC, a new subsidiary formed in DISH’s highly controversial asset transfer, and backed by the assets attributed to the subsidiary, which were primarily its DISH TV subscribers.

The exchange offer comes just one trading session after EchoStar launched an exchange for DISH’s outstanding convertible notes.

The company is offering to exchange the full outstanding amount of DISH’s 0% convertible notes due 2025 and 3.375% convertible notes due 2026 for new EchoStar 10% senior secured notes due 2030.

The EchoStar senior secured notes involved in the convertible notes exchange offer are backed by the wireless spectrum licenses involved in last week’s highly controversial asset transfer.

The transfer of the wireless spectrum assets outside of the reach of DISH DBS creditors raised the ire of investors with the company seemingly leaving the debt and weaker assets of the company with DISH DBS’ side of the capital structure, sources said.

The situation is “sticky,” a source said. “This is heading for the courts.”

Fund flows

The dedicated high-yield bond funds had $849 million of net daily cash inflows on Friday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs had $834 million inflows on the day.

Actively managed high-yield funds had $15 million of inflows on the day, the source said.

Indexes

The ICE BofAML US High Yield index fell 27.8 basis points with the year-to-date return now negative 0.416%.

The index added 97 bps the previous week.

The CDX High Yield 30 index fell 32 bps to close Tuesday at 105.61.

The index was up 101 bps on the week last week.

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