Cox Media on deck; Calpine in focus; Wynn Macau improves; Wyndham Destinations flat

By Paul A. Harris and Abigail W. Adams

Portland, Me., Dec. 11 – The domestic high-yield primary market was quiet on Wednesday – a sign that new deal activity may soon be coming to a close for the year.

However, three deals remain on the forward calendar with pricing expected before the end of the week – Korn Ferry’s $400 million offering of eight-year senior notes (Ba3/BB), AmWINS Group, Inc.’s $250 million tap of its 7¾% senior notes due July 1, 2026 (existing ratings B3/B-), and Cox Media Group’s $1.17 billion offering of eight-year senior notes (Caa1/CCC+).

Price talk for Cox Media Group’s offering was heard to be widening amid pushback from investors. However, the deal is expected to price during Thursday’s session.

In the Euro-denominated primary market, Berry Global Group Inc. is expected to price its upsized €900 million split-rated dual-tranche offering on Thursday.

Meanwhile, the secondary space was firm on Wednesday following the final Federal Reserve meeting of 2019.

New paper remained in focus with Calpine Corp.’s recently priced 4½% senior notes due 2029 (Ba2/BB) dominating activity in the secondary space.

The 4½% notes were trading at a slight premium to their issue price.

Wynn Macau, Ltd.’s newly priced 5 1/8% senior notes due 2029 (B1/BB-) also improved in active trading.

However, Wyndham Destinations Inc.’s 4 5/8% senior notes due 2030 (Ba2/BB-) remained wrapped around their issue price.

Outside of the recent issues, retailers were taking a beating on Tuesday.

Staples Inc.’s junk bonds and GameStop Corp.’s 6¾% senior notes due 2021 sank several points after announcing earnings.

Berry upsized, restructured

A conspicuously thin stream of primary market news on Wednesday seemed to signal that 2019 is fast drawing to a close in the new issue market, sources said.

The day's sole solid news nugget materialized in the form of initial price talk and structural revisions on a deal that features Indiana-based Berry Global Group Inc. attempting to refinance bank debt by means of a two-part placement of euro-denominated notes.

Although Berry's senior secured notes offer (Ba2/BBB-) is split-rated, it is coming high yield style, talked at yields rather than spreads.

The €900 million offer, upsized from €725 million, is coming in two bullet tranches: €500 million minimum of five-year notes with initial talk of 1% to 1¼%, and €300 million minimum of seven-year notes with initial talk of 1½% to 1¾%.

Prior to revision both tranches had standard call protection.

The shorter duration notes had a five-year non-call-two structure, while the longer dated tranche had a seven-year non-call-three structure.

The roadshow, which got underway on Monday, was set to conclude on Wednesday, and the deal is expected to price Thursday.

It is playing to healthy demand, a market source said.

Calendar

The dollar-denominated market continues to expect three deals to clear the market ahead of the coming weekend.

Although no solid news on any of the three surfaced on Wednesday, there was plenty of chatter about the biggest of the three, which is also the weakest, in terms of credit quality.

Cox Media Group has been on a roadshow for a $1,165,000,000 offering of eight-year senior notes (Caa1/CCC+), an Apollo-sponsored acquisition financing that has engendered considerable pushback from the market, sources say.

Early guidance had the deal being shopped in a low 8% context, sources say.

However, that talk is on the move, a trader said Wednesday, adding that pricing could go as high as 8½% to 9%, or maybe even higher, pending anticipated covenant changes.

A key bone of contention is the restricted payments basket, the trader said.

Amid all of the pushback, the deal is expected to be Thursday business, sources say.

Pending meaningful changes to the covenant package it should get done, the trader said.

Two other deals are on the active calendar.

Korn Ferry is selling $400 million of eight-year senior notes (Ba3/BB) with early guidance in the high 4% area to 5%.

And AmWINS Group is in the market with a $250 million add-on to its 7¾% senior notes due July 1, 2026 (existing ratings B3/B-), with early price talk of 103 to 104.

Both of those deals are expected to price ahead of the coming weekend.

If and when they do, it is possible that in their wakes the curtain will fall on the high-yield new issue market for the year, 2019, sources say.

Calpine in focus

Calpine’s 4½% senior notes due 2029 dominated activity in the secondary space with the notes trading at a premium to their issue price.

The notes were seen changing hands at par ½ in the late afternoon, a market source said.

With more than $131 million in reported volume, the notes were the most actively traded issue in the secondary space.

The Houston-based power generator priced an upsized $1.25 billion issue of the 4½% notes at par on Tuesday.

The issue size increased from $750 million.

The yield printed in the middle of yield talk and initial talk, both of which were set in the 4½% area.

Wynn Macau improves

Wynn Macau’s new 5 1/8% senior notes due 2029 improved in active trading on Wednesday.

The notes were changing hands just shy of par 7/8 in the late afternoon after closing Tuesday around par 1/2, according to a market source.

There was $33 million in reported volume by the late afternoon.

In a deal that was marketed to both emerging markets and high yield accounts, Wynn Macau priced a $1 billion issue of the 5 1/8% notes at par on Tuesday.

The yield printed tighter than yield talk in the 5 3/8% area. Initial guidance was in the mid-5% area.

The deal was heard to be heavily oversubscribed and playing to $4 billion in orders, a source said.

Wyndham Destinations flat

Wyndham Destinations’ 4 5/8% senior notes due 2030 fell flat in the aftermarket, sources said.

The 4 5/8% notes at times dipped below par but were largely trading at par in active trading.

The notes saw $27 million in reported volume by the late afternoon.

The notes’ lackluster performance in the secondary space was no surprise given the coupon, which was low for the credit, a market source said.

Wyndham Destinations priced an upsized $350 million issue of the 4 5/8% notes at par on Tuesday.

The issue size increased from $300 million.

The yield printed in the middle of the 4½% to 4¾% yield talk. Early guidance was in the 4¾% area.

Retail under pressure

Retail names were taking a beating on Wednesday with earnings reports from the sector continuing to disappoint, sources said.

Staples’ 10¾% senior notes due 2027 dropped 4 5/8 points to par 3/8 in high-volume activity, according to a market source.

The 7½% senior notes due 2026 also sank more than 4 points and stood poised to close the day at par ¼.

The office supplies retailer reported third-quarter earnings prior to the market open on Wednesday.

While EBITDA improved to $253 million from $243 million year-over-year, sales were down 1.3%, according to a market source.

GameStop’s 6¾% senior notes due 2021 were among the biggest losers of Wednesday’s session.

The notes from the gaming merchandise retailer sank 5 5/8 points to 94½ in active trading, according to a market source.

The notes saw more than $14 million in reported volume.

The notes sank following GameStop’s third-quarter earnings report which saw sales decline 23.2% year-over-year and revenue drop 25.7%.

The earnings reports were the latest from the retail sector that have disappointed investors.

Michaels Stores, Inc.’s 8% senior notes due 2027 (B1/B) traded off the previous week following its third-quarter earnings miss.

The 8% notes have yet to recover and remain on a 91 handle.

$202 million Tuesday inflows

The dedicated high-yield bond funds saw $202 million of daily net 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 saw $207 million of inflows on the day, while the high-yield ETFs sustained outflows totaling $5 million, the source said.

With only Wednesday's daily fund flows number remaining to go into the tally, the combined funds are tracking $718 million of net inflows for the week to Wednesday's close, according to the market source.

Indexes gain, CDX skyrockets

Indexes were on the rise on Wednesday after a mixed start to the week.

The KDP High Yield Daily index rose 4 bps on Wednesday with the yield now 5.11%. The index was up 4 bps on Tuesday and 10 bps on Monday.

The ICE BofAML US High Yield index rose 13.8 bps with the year-to-date returns now 12.903%. The index gained 13.9 bps on Tuesday and 9.7 bps on Monday.

The CDX High Yield 30 index skyrocketed 114 bps on Wednesday to close the day at 108.66. The index was down 2 bps on Tuesday and 26 bps on Monday.

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