Another $3.56 billion clears junk primary; Viavi at a premium; RBC Bearings in demand

By Paul A. Harris and Abigail W. Adams

Portland, Me., Sept. 24 – The domestic high-yield primary market capped a high-volume week for new issuance with another $3.56 billion clearing the market.

The new deal activity pushed the weekly tally for new deals to $14.65 billion.

Altice France’s $2 billion offering of eight-year senior secured notes (B2/B) was the largest tranche to clear the market on Friday.

The final week of the third quarter is set to begin with one deal on the forward calendar – Ahern Rentals, Inc.’s $550 million of five-year senior secured second-lien notes (Caa1/CCC+).

Meanwhile, the secondary space was slightly soft on Friday although volume outside of new issues was light – a common theme over the past few months.

“People have a lot of cash but they can’t find anything in the secondary so the focus is on new issues,” a source said.

Recent deals were putting in mixed performances in the secondary space.

DexKo Global Inc.’s 6 5/8% senior notes due 2029 (Caa1/CCC) and Catalent, Inc.’s 3½% senior notes due 2030 (B1/BB-) were “holding on to par for dear life,” a source said.

While Viavi Solutions Inc.’s 3¾% senior notes due 2029 (Ba2/BB+/BB) were trading at a premium to their issue price, they remained on a par handle.

However, RBC Bearings Inc.’s 4 3/8% senior notes due 2029 (B2/B+) outperformed in the aftermarket with the notes jumping to a 102-handle.

Friday’s primary

The high-yield primary market, which started living up to the pre-Labor Day hype during the past week, put up another $3.56 billion of junk-rated, dollar-denominated issuance on Friday.

That upped the Sept. 20 week's total to $14.65 billion, despite the fact that Monday's session put up a goose egg.

Issuance is still well short of the $20 billion-per-week bust-up that some sources were forecasting in late August.

A more meaningful gauge is “September-October,” a trader said on Friday, adding that there is, by some accounts, a considerable calendar to digest during that period, including a backlog of bigger deals in the mergers and acquisitions category.

Altice France took the spotlight on Friday as it priced $2 billion of 5½% eight-year senior secured notes (B2/B) at par, in the middle of talk.

The deal broke to par bid, par ½ offered, according to a bond trader who added that tight pricing precluded a more dramatic post-break pop.

Along with the dollar notes, Altice also priced an €800 million tranche of 4 3/8% eight-year senior notes (B2/B), also at par, also in the middle of talk.

The September-October crossover week gets underway with one deal on the calendar.

Ahern Rentals plans to sell $550 million of five-year senior secured second-lien notes (Caa1/CCC+) via Oppenheimer & Co. during the week ahead.

The Las Vegas-based equipment rental company plans to use the proceeds to refinance its 7 3/8% senior secured second-lien notes due May 2023.

Those notes were 97 bid on Friday, yielding 9%, a bond trader said, adding that Friday's trading levels of the existing paper will no doubt kindle some interest in the new Ahern Rentals deal, which investors will expect to “come with some rate.”

Flat

In the secondary market, DexKo Global’s 6 5/8% senior notes due 2029 and Catalent’s 3½% senior notes due 2030 fell flat in the aftermarket with the notes at times lagging their issue prices.

They were “holding on to par for dear life,” a source said.

DexKo’s 6 5/8% senior notes due 2029 traded as low as 99 3/8 during Friday’s session, a source said.

However, they stood poised to close the day wrapped around par.

DexKo priced a $665 million issue of the 6 5/8% notes at par on Thursday.

The yield printed at the tight end of yield talk in the 6¾% area.

Catalent’s 3½% senior notes due 2030 traded in a range of 99 7/8 to par ¼ during Friday’s session.

However, they were on a par-handle heading into the close with the notes wrapped around par 1/8.

There was about $63 million in reported volume.

Catalent priced an upsized $650 million, from $450 million, issue of the 3½% notes at par on Thursday.

The issue priced at the tight end of the 3½% to 3 5/8% yield talk.

Viavi at a premium

Viavi Solutions’ 3¾% senior notes due 2029 were trading with a premium to their issue price in the secondary space, although they remained on a par handle.

The 3¾% notes traded as low as par on Friday. However, they gained steam heading into the close and were changing hands in the par 5/8 to par 7/8 context.

Viavi priced a $400 million issue of the 3¾% notes at par on Thursday.

The yield printed at the tight end of the 3¾% to 3 7/8% yield talk.

RBC in demand

RBC Bearings’ 4 3/8% senior notes due 2029 were in demand during bookbuilding and in the aftermarket with the notes shooting up to a 102-handle.

The 4 3/8% notes were changing hands in the 102 to 102 3/8 context heading into Friday’s close, a source said.

There was about $63 million in reported volume.

RBC Bearings priced a $500 million issue of the 4 3/8% notes at par on Thursday.

The yield printed low to the 4½% to 4¾% yield talk.

Fund flows

According to a Thursday report, the dedicated junk funds saw $536 million of net inflows in the week to the Wednesday, Sept. 22 close, according to the Refinitiv Lipper Fund Flow Report Newsline.

It was the fourth positive cash flow for the high-yield funds in the past five weeks, the market source said.

In the third quarter to date the junk funds have seen $1.7 billion of net inflows. That follows $3.3 billion of total net outflows in the second quarter and $10.6 billion of total net outflows in the first quarter, according to the source.

Year-to-date the combined high yield funds have sustained $12.1 billion of net outflows, according to the market source said.

Indexes

The KDP High Yield Daily index fell 6 basis points to close Friday at 70.28 with the yield now 3.54%.

The index was flat on Thursday, and gained 3 bps on Wednesday after sliding 8 bps on Tuesday and 9 bps on Monday.

The index was down 20 bps on the week.

The CDX High Yield 30 index fell 7 bps to close Friday at 109.67.

The index gained 10 bps on Thursday, 34 bps on Wednesday, and 10 bps on Tuesday after dropping 40 bps on Monday.

The index was up 7 bps on the week.

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