Bausch Health megadeal, Syneos price; NRG in focus; MGM at a premium

By Paul A. Harris and Abigail W. Adams

Portland, Me., Nov. 18 – Wednesday's junk primary market action appeared to demonstrate that in a pandemic health and wellness is the place to be, as three tranches from two such issuers played to feverish demand.

Bausch Health Cos. Inc. priced an upsized megadeal and Syneos Health, Inc. also brought an upsized drive-by.

Meanwhile, it was a mixed day in the secondary space with the market opening strong but losing momentum as the session progressed and closing the day largely unchanged, a source said.

New deals continued to dominate the tape.

While the overall market was feeling heavy into the close, new paper continued to perform well.

NRG Energy, Inc.’s two tranches of senior notes (Ba2/BB+) were both trading with a premium in the aftermarket.

However, NRG’s longer duration notes were gaining momentum into the close while the shorter duration notes were losing it.

MGM Growth Properties Operating Partnership LP’s 3 7/8% senior notes due 2029 (B1/BB-/BB+) were also trading with a nominal premium in the aftermarket.

Rackspace Technology Global Inc.’s 5 3/8% senior notes due 2028 (Caa1/B-) continued to gain momentum in active trading with the notes rising to a 103-handle in active trading.

Robust health

Both Bausch Health and Syneos appeared with drive-bys in Wednesday’s market.

Bausch Health Cos. Inc. priced an upsized $2 billion amount (from $1.75 billion) of senior notes (B3/B/B) in a two-part deal.

It included $1 billion of 5% 8.25-year notes and $1 billion of 5¼% 10.25-year notes, both pricing at par, at the tight ends of talk.

The deal was playing to $4 billion of demand late Wednesday morning, according to a trader who later spotted the notes in both tranches trading at par bid, par ½ offered.

Meanwhile Syneos Health sold an upsized $600 million issue (from $500 million) of 3 5/8% 8.2-year senior notes (B2/BB-) inside of talk.

The deal, which was heard to play to $4.2 billion of orders across 152 accounts, was 101 3/8 bid, 101 7/8 offered, in active trading, shortly after the Wednesday close, a trader said (see related stories in this issue).

As if to put an exclamation point on this feverish appetite for high-yield debt in the health and wellness space, the Centene Corp. 3% senior notes due October 2030, which priced late September at par, in a $2.2 billion issue, were 106 bid on Wednesday, implying a yield to worst of 2% (!), traders said.

The new issue market has been running strong and steady, and appears poised to continue running thus through the remainder of the year, a bond trader said on Wednesday.

Look for $8 billion to $10 billion of issuance per week in the run-up to Christmas, the trader advised.

That just happens to be about the clip at which the new issue machine has been operating since the beginning of September, according to Prospect News data.

Notwithstanding an anemic election week which saw just $1.25 billion of issuance, the weekly run-rate since the beginning of September has been just under $9 billion.

NRG in focus

NRG’s two tranches of senior notes were both trading with premiums in the aftermarket.

However, the longer duration notes were gaining steam as the session progressed while the shorter duration notes were losing it.

NRG’s 3 5/8% senior notes due 2031 launched the day on a par-handle but climbed to a 101-handle as the session progressed.

They were changing hands in the 101½ to 101 7/8 context heading into the market close.

The bonds were in focus with more $94.5 in reported volume during Wednesday’s session.

The other tranche, NRG’s 3 3/8% senior notes due 2029 traded as high as 101 3/8 during Wednesday’s session.

However, they lost momentum and were changing hands in the par 5/8 to par ¾ context heading into the close.

There were more than $61 million of the bonds on the tape during the session.

NRG priced a $1.03 billion tranche of the 3 5/8% notes and a $500 million tranche of the 3 3/8% notes at par on Tuesday.

Pricing of the 3 5/8% notes came tighter than the 3¾% to 4% yield talk.

Pricing of the 3 3/8% notes came tighter than the 3½% to 3¾% yield talk.

MGM at a premium

MGM Growth Properties’ 3 7/8% senior notes due 2029 were trading with a nominal premium in the aftermarket.

The notes were changing hands in a range of par 1 /8 to par 5/8 during Wednesday’s session and stood poised to close the day at par ½, a source said.

There was more than $67 million in reported volume during the session.

MGM Growth Properties priced an upsized $750 million, from $500 million, issue of the 3 7/8% notes at par on Tuesday.

Pricing came at the tight end of yield talk in the 4% area.

Rackspace over 103

Rackspace’s 5 3/8% senior notes due 2028 continued to gain momentum in the aftermarket with the notes jumping to a 103-handle on Wednesday, a source said.

The 5 3/8% notes were up 1 point and stood poised to close the day at 103¾.

The bonds remained active with more than $20 million in reported volume.

Rackspace’s 5 3/8% notes have outperformed since breaking for trade. The notes rose to a 102-handle on Tuesday.

While the unsecured notes are on a lower credit tier, the company is stable, a source said.

$863 million Tuesday inflows

High-yield ETFs had $863 million of cash inflows on Tuesday, the most recent session for which data was available at press time, according to a market source.

Actively managed high-yield funds sustained $30 million of outflows on the day, the source added.

Indexes mixed

Indexes were again mixed on Wednesday.

The KDP High Yield Daily index gained 9 points to close Wednesday at 67.62 with the yield now 5.01%. The index added 2 points on Tuesday after gaining 14 points on Monday.

The ICE BofAML US High Yield index continued its upward momentum on Wednesday.

The index was up another 19.3 bps with the year-to-date return now 3.438%.

The index gained 11.5 bps on Tuesday and was up 36.6 bps on Monday.

The CDX High Yield 30 index dropped 26 bps to close Wednesday at 107.52.

The index shaved off 9 bps on Tuesday after rising 75 bps on Monday.

© 2015 Prospect News.
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