Dealer Tire, QVC, Allied Universal add-on price; Sprint, PTC on deck; Intelsat crumbles; L Brands gains

By Paul A. Harris and Abigail W. Adams

Portland, Me., Jan. 29 – The domestic high-yield primary market was active on Wednesday with three deals pricing and the forward calendar growing.

QVC, Inc. priced an upsized $575 million split-rated issue of seven-year senior bullet notes (existing ratings Ba2/BBB-/BBB-).

Allied Universal Holdco LLC and Allied Universal Finance Corp. priced a $540 million tack-on to the UNSEAM 6 5/8% senior secured notes due July 15, 2026 (B3/B-) in a Wednesday drive-by.

And Dealer Tire LLC priced a $350 million issue of DT Issuer LLC eight-year senior notes (Caa1/CCC).

The forward calendar also grew with Sprint Corp. planning to price a $1 billion offering of eight-year senior guaranteed bullet notes (expected ratings B1/B) on Thursday, and PTC is expected to price $750 million of senior notes (expected ratings Ba3/BB) on Friday.

Meanwhile, the secondary space was largely flat on Wednesday as market players eyed the growing calendar.

With the market recovering from the bout of volatility caused by the coronavirus, Dealer Tire’s new paper saw a strong break in active trading.

However, activity in the secondary space was largely topical on Wednesday.

Intelsat SA’s junk bonds dominated activity in the secondary space with the capital structure crumbling as concern mounts about the payment the satellite telecommunications company will receive from the C-Band.

L Brands, Inc.’s junk bonds saw large gains in active trading following news of a management shake-up and the potential sale of its struggling Victoria’s Secret brand.

Netflix Inc.’s 4 7/8% senior notes due 2030 reached their highest level since pricing on Wednesday.

Razor sharp executions

The Wednesday session generated a heavy news flow in the high-yield primary market.

Amid strong demand for bonds, two of the day's three issuers priced their deals through talk.

QVC priced an upsized $575 million split-rated issue of seven-year senior bullet notes (existing ratings Ba2/BBB-/BBB-) at par to yield 4¾%.

The issue size increased from $500 million.

The yield printed through yield talk in the 5% area. Initial guidance had the notes coming to yield in the 5¼% area.

The deal was a “blowout, multiple-times oversubscribed,” a New York-based bond trader said.

The new notes will be traded on the investment-grade desk, sources say.

In a drive-by, Allied Universal priced a $540 million tack-on to the UNSEAM 6 5/8% senior secured notes due July 15, 2026 (B3/B-) at 105.75, with a 5.16% yield to worst.

The issue price came at the rich end of the 105.25 to 105.75 price talk.

And Dealer Tire LLC priced a $350 million issue of eight-year senior notes (Caa1/CCC) at par to yield 8% at the conclusion of its roadshow.

The yield printed 25 basis points through the 8¼% to 8½% official price talk. Initial talk had been 8¾% to 9%.

The bonds were trading well in the secondary market late Wednesday, at 101 3/8 bid, 101½ offered, a New York-based trader said.

The calendar

Sprint plans to price a $1 billion offering of eight-year senior guaranteed bullet notes (expected ratings B1/B) on Thursday.

The calendar for the Feb. 3 week also built on Wednesday.

And Software company PTC is expected to price $750 million of senior notes (expected ratings Ba3/BB) on Friday. The deal is coming in tranches of five-year notes with two years of call protection and eight-year notes with three years of call protection. Tranche sizes remain to be determined.

Those take a place aboard an active calendar that includes Castle US Holding Corp. (Cision) with $300 million of eight-year senior notes whispered in the low 8% area, and AG Issuer, LLC/Advisor Group Inc. with $575 million of eight-year senior secured notes, with early guidance in the 7% area.

All of that business is expected to clear ahead of Friday's close.

Looking to the Feb. 3 week, Allen Media, LLC and Allen Media Co-Issuer, Inc. began a roadshow for a $300 million offering of eight-year senior notes (S&P: B-) on Wednesday.

Initial price talk has the deal coming to yield in the low-to-mid 10% area.

A global investor conference call is scheduled for Thursday.

The roadshow runs through the middle part of the Feb. 3 week.

Intelsat crumbles

Intelsat’s capital structure crumbled on Wednesday as concern mounted about the amount the satellite broadcaster would receive for the sale of its C-Band spectrum.

Intelsat’s 9½% senior notes due 2023 sank 9½ points to 54. With more than $122 million in reported volume, the notes were the most actively traded issue in the secondary space.

Intelsat’s 8 1/8% senior notes due 2023 were a close second. The notes dropped 9 points to 42½ with more than $103 million in reported volume, according to a market source.

Intelsat’s 8½% senior notes due 2024 dropped 2 5/8 point to 84 3/8 and its 9¾% senior notes due 2025 dropped 2¾ points to 86¼.

Intelsat’s capital structure was crumbling following news that the chairman of the Federal Communications Commission was leaning towards a set incentive payment structure for the C-Band with a set payment of $5 billion for members of the C-Band Alliance, according to a market source.

Legislation was also recently introduced to the U.S. Senate that would limit the payout to satellite companies for the C-Band, a source said.

Intelsat’s junk bonds have risen and fallen on speculation of how much it will receive for making the C-Band available to mobile phone operators for the adoption of 5G in the United States.

L Brands gains

L Brands junk bonds were posting gains following news of a leadership shakeup and the possible sale of one of its brands.

L Brands 6 7/8% senior notes due 2035 rose 4 5/8 points to 97¾ in the late afternoon, according to a market source. The bonds were active with more than $45 million in reported volume.

The 7½% senior notes due 2029 rose a little over 2 points to 106½ with more than $34 million in reported volume.

News broke on Wednesday that L Brands chief executive officer Leslie Wexner was considering stepping down from his post and considering the sale of the struggling Victoria’s Secret brand.

Activist investors have long been calling for Wexner’s removal as L Brands, the parent company of Victoria’s Secret and Bath & Body Works, has struggled.

Netflix

Netflix’s 4 7/8% senior notes due 2030 were on the rise in active trading on Wednesday.

The notes gained 1¾ points to 105 1/8 with more than $30 million in reported volume, according to a market source.

Wednesday’s level was the highest the notes have traded since pricing at par in October 2019.

While the notes were slightly weaker following the company’s Jan. 21 earnings report, they climbed on Wednesday when the 10-K report was filed with the Securities and Exchange Commission.

$496 million Tuesday outflows

The dedicated high-yield bond funds saw $496 million of net outflows on Tuesday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs sustained $281 million of outflows on the day.

Actively managed high-yield funds saw $215 million of outflows on Tuesday, the source said.

Factoring in last Friday's whopping $1.73 billion outflow from the high-yield ETFs, the biggest daily outflow on record from that fund category, and with only Wednesday's fund flow numbers left to go into the tally, the combined funds are tracking a hefty $2.76 billion of net outflows for the week to Wednesday's close, according to the market source.

Indexes mixed

Indexes were mixed on Wednesday.

The KDP High Yield Daily index rose 7 points to close Wednesday at 71.39 with the yield now 5.07%.

The index was up 3 bps on Tuesday after a 34 bps drop Monday.

The ICE BofAML US High Yield index continued to recover from Monday’s sell-off. The index was up 10.9 bps with the year-to-date return now 0.222%.

The index gained 39.9 bps on Tuesday, popping back to the green after turning negative on Monday. The index plunged 61.9 bps on Monday.

The CDX High Yield 30 index shaved off 18 bps to close Wednesday at 108.59. The index jumped 63 bps on Tuesday after tumbling 70 bps on Monday.

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