Ortho-Clinical, ADT, Air Transport, MEG Energy, PBF price; Presidio up; Ladder Capital flat

By Paul A. Harris and Abigail W. Adams

Portland, Me., Jan. 16 – The domestic high-yield primary market was on fire on Thursday with six deals clearing the market – four of which were megadeals, sized at $1 billion or more.

In drive-by action, ADT Inc. priced a $1.3 billion issue, CenturyLink, Inc. priced an upsized $1.25 billion issue and MEG Energy Corp. priced an upsized $1.2 billion issue.

PBF Holding Co. and PBF Finance Corp. priced a $1 billion issue, Ortho-Clinical Diagnostics SA priced an upsized $675 million issue and Air Transport Services Group, Inc. priced an upsized $500 million issue.

The new paper was in focus in the secondary space.

With Thursday a strong day for the energy sector, PBF’s new paper skyrocketed after breaking for trade.

Presidio Holdings Inc.’s recently priced 4 7/8% senior secured notes due 2027 (B1/B) and 8¼% senior unsecured notes due 2028 (Caa1/CCC+) were both trading at a premium in high-volume activity.

However, the unsecured tranche outperformed with investors scooping up the higher coupon offering.

Ladder Capital Corp.’s recently priced 4¼% senior notes due 2027 (Ba2/BB-) fell flat in the secondary space with the notes wrapped around par.

Novelis Corp.’s 4¾% senior notes due 2030 (B2/B+) remained active on Thursday with the notes improving on a strong day for the market.

Outside of recent issues, Bombardier Inc.’s junk bonds tumbled several points in active trading following news it may exit a joint venture which many believed would aid the struggling jet and train manufacturer.

A red-hot market

It's risk-on in the junk bond market, as investors are seeing a notably supportive backdrop for high-yield bonds, sources said on Thursday.

The market is gapping toward historic tights, according to an investor.

The high-yield composite spread was 412 basis points on Thursday, versus a historic tight of 360 bps in 2018.

The composite yield of 5.73% on Thursday may also be poised to move on its historic low of 5.21%, which came in the 2013-2014 timeframe, the investor said.

Megadeal action

A busy Thursday session saw four megadeals, sized $1 billion or more, clear the market.

In a drive-by, ADT Inc. priced a $1.3 billion issue of eight-year second-lien senior secured notes (B3/B-) at par to yield 6¼%.

The yield printed at the tight end of the 6¼% to 6½% yield talk.

CenturyLink launched and priced an upsized $1.25 billion issue of seven-year senior secured notes (Ba3/expected BBB-/expected BB+) at par to yield 4% in a quick-to-market Thursday trade.

Early guidance was in the 4 3/8% area, a trader said.

MEG Energy priced an upsized $1.2 billion issue of seven-year senior notes (B3/BB-/B+) at par to yield 7 1/8% in a drive-by, according to a market source.

The issue size increased from $800 million.

The yield printed at the tight end of yield talk in the 7¼% area.

The deal played to a $2.5 billion book, with $700 million of reverse inquiry at play, an investor said.

PBF Holding priced a $1 billion issue of eight-year senior notes (B1/BB/BB) at par to yield 6%, trailing a brief roadshow.

The yield printed in the middle of yield talk in the 6% area, and tight to initial guidance in the low 6% area.

The 6% notes traded as high as 103¼ after breaking for trade but came in and were changing hands around 102½ heading into the market close, a source said.

Upsized deals

Ortho-Clinical Diagnostics priced an upsized $675 million issue of eight-year senior notes (Caa2/CCC) at par to yield 7¼%.

The issue size was increased from $440 million.

The deal priced tight to talk in the mid 7% area, an investor said, and added that there was $700 million of reverse inquiry tiered into the deal.

Early guidance was in the 8% area, a trader said.

And Air Transport Services Group priced an upsized $500 million issue of eight-year senior notes (Ba3/B+) at par to yield 4¾%.

The issue size increased from $400 million.

The yield printed at the tight end of yield talk in the 4 7/8% area, and through initial guidance in the 5¼% area.

Presidio at a premium

Presidio Holdings’ two tranches of senior notes were trading at a premium in the secondary space. However, the unsecured tranche outperformed.

Presidio’s 4 7/8% senior secured notes due 2027 were changing hands in the 101¼ to 101½ context, a market source said.

The bonds saw more than $61 million in reported volume during Thursday’s session.

The 8¼% senior unsecured notes due 2028 traded as high as 104 early in Thursday’s session.

However, the notes lost some steam as the session progressed and were changing hands in the 103 3/8 to 103 5/8 context heading into the market close, a market source said.

The tranche was one of the most heavily traded issues during Thursday’s session with more than $73 million in reported volume.

The New York-based IT solutions provider is not a highly rated company and proceeds from the offering will be used to help fund the leveraged buyout of the company by BC Partners, sources said.

While the unsecured tranche had a CCC rating, it had a good yield.

Investors were snapping up the unsecured tranche due to its coupon, a source said.

Presidio priced an $800 million two-tranche offering at the conclusion of a roadshow on Wednesday.

The deal included a $400 million tranche of the 4 7/8% notes and a $400 million tranche of the 8¼% notes, both of which priced at par.

The 4 7/8% notes priced at the tight end of yield talk in the 5% area. Initial talk was in the 6% area.

The 8¼% notes priced tighter than yield talk in the 8¾% area. Initial talk was in the high 9% area.

Ladder Capital flat

Ladder Capital’s 4¼% senior notes due 2027 fell flat in the secondary space.

The 4¼% notes were largely wrapped around par, a market source said. There was more than $59 million of the bonds on the tape heading into the market close.

While the trading level was a surprise given the New York-based REITs credit rating, the coupon was low, a market source said.

Ladder Capital priced an upsized $750 million issue of the 4¼% notes at par in a Wednesday drive-by.

The yield printed at the tight end of the 4¼% to 4½% yield talk.

Novelis improves

Novelis’ 4¾% senior notes due 2030 improved in active trading during Thursday’s session.

The 4¾% notes were up about ¼ point. They were changing hands in the 101½ to 101¾ context, a market source said.

The notes were previously trading in the 101 to 101¼ context – a level reached shortly after the Atlanta-based aluminum producer priced a $1.6 billion issue of the notes at par on Monday.

Bombardier tumbles

Bombardier’s junk bonds tumbled several points in high-volume activity on Thursday after the struggling manufacturer of jets, trains and public transportation vehicles announced it was considering leaving a previously hailed joint venture and warned of disappointing earnings.

Bombardier’s 7½% senior notes due 2025 fell 4½ points and stood poised to close the day at 97¾, according to a market source.

More than $62 million of the bonds were on the tape by the late afternoon.

The 7 7/8% senior notes due 2027 dropped 5 5/8 points to 96½ with more than $48 million in reported volume.

Bombardier priced a $2 million issue of the 7 7/8% notes at 99.246 in February 2019.

Bombardier announced on Thursday that it was considering leaving its joint venture with Airbus SE for its A220 jet program due to rising costs.

The company also warned that its fourth-quarter sales would disappoint.

The joint venture was previously hailed as a breakthrough for the company with Bombardier offloading the risks and costs of the A220 development to Airbus.

However, Bombardier is being asked to provide additional financing for the program due to program delays and cost overruns, Bloomberg reported.

The program may result in a write-down in fourth-quarter earnings, the company said in a press release.

$408 million Wednesday inflows

The dedicated high-yield bond funds saw $408 million of net inflows on Wednesday, the most recent session for which data was available at press time, an investor said.

High-yield ETFs saw $308 million of inflows on the day.

Asset managers saw $100 million of inflows on Wednesday, the investor said.

Meanwhile the dedicated junk funds saw a hefty $1.73 billion of net inflows on the week to Wednesday's close, according to Lipper US Fund Flows.

Indexes

Indexes were flat to up on Thursday after a mixed week.

The KDP High Yield Daily index was flat at 71.96. However, the yield rose 4 bps to 4.85%.

The index was up 4 bps on Wednesday, 3 bps on Tuesday and 2 bps on Monday.

The ICE BofAML US High Yield index gained 6.1 bps with the year-to-date return now 0.744%.

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

The CDX High Yield 30 index rose 8 bps to close Thursday at 109.60. The index was down 2 bps on Wednesday, 12 bps on Tuesday and 10 bps on Monday.

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