Ithaca Energy prices HY paper; DirecTV at a premium; McClaren up; McGraw-Hill recovers

By Paul A. Harris and Abigail W. Adams

Portland, Me., July 23 – The domestic high-yield primary market saw one deal price during Friday’s session.

UK-based Ithaca Energy (North Sea) plc priced a $625 million issue of 9% senior notes due July 2026 (B3//B+).

While volume in the name was light, they were trading at a premium to their issue price.

Only one deal remained on the forward calendar heading into the July 26 week. However, sources expect new issuance to continue at a steady pace.

Meanwhile, it was a quiet day in the secondary space.

While the market had a firm tone to it, not much was on the tape with many calling an early end to a tumultuous week.

“It’s been exhausting,” a source said.

Monday’s bloodletting was followed by a dramatic rebound on Tuesday and Wednesday with the market closing the week largely unchanged, sources said.

New issues continued to dominate the tape with the majority performing well.

DirecTV Entertainment Holdings LLC’s 5 7/8% senior secured notes due 2027 (Ba3/BB/BBB-) outperformed with the notes trading almost 4 points above their issue price.

McLaren Automotive’s 7½% senior secured notes due 2026 were also putting in a strong performance in the aftermarket.

McGraw-Hill Education, Inc.’s two tranches pared their losses from a rough start in the aftermarket. However, both still remained underwater heading into Friday’s close.

Friday’s primary

UK-based Ithaca Energy priced Friday's sole dollar deal, a $625 million issue of 9% senior notes due July 2026 (B3//B+) that came at par, at the wide end of talk.

While volume in the name was light, the notes were marked at par ½ bid, 101 offered after breaking for trade.

New issue activity should remain purposeful, if not frenetic, in the week ahead, sources say.

A couple of deals expected to come during the past week were shelved because of last Monday's sizable sell-off that seized equities and also generated an appreciable amount of selling in high-yield bonds.

Look for those deals to appear in the week ahead, the trader said.

Word also has it that Jefferies will take the wrapper off a $1 billion deal during the final week of July. The market was fishing for names on Friday, the trader said, adding that Burger King must be prominent among the list of suspects.

One deal was left on the active calendar as business expected to price in the week ahead.

Allen Media LLC and Allen Media Co-Issuer Inc. are in the market with a $340 million add-on to their 10½% senior notes due Feb. 15, 2028 (existing ratings Caa1/B-).

The deal is expected to price Tuesday.

DirecTV outperforms

DirecTV’s 5 7/8% senior notes due 2027 outperformed in the secondary space with the notes continuing to gain on Friday after a strong break.

The 5 7/8% notes jumped to 104 after closing the previous session on a 103-handle, sources said.

The notes were cheap and priced well wide of the BB index which has been trading at 3¼%.

They were still trading cheap at their current level with the yield on the notes about 5%, a source said.

However, the notes were trading notably tight to the DISH DBS Corp. (DISH Network Corp.) 5 1/8% senior notes due June 2029, which were trading Friday with a 5.3% yield to worst, another source said.

DirecTV’s 5 7/8% notes were the most active during Friday’s session with sellers only really appearing at the 104 level.

DirecTV priced a downsized $2.3 billion, from $3.1 billion, issue of the 5 7/8% notes at par on Thursday.

The yield printed tight to yield talk in the 6% area.

It was heard to have played to around $12 billion of orders.

While the cheapness in the deal was a reflection of some uncertainty regarding DirecTV’s business, the company was able to convince investors that it is poised to absorb subscriber losses, which may not be as bad as some analysts forecast, a source said.

McClaren at a premium

McClaren’s 7½% senior secured notes due 2026 (Caa1/CCC+/B) were also putting in a strong performance in the secondary space.

The 7½% notes were marked at 101 5/8 bid, 102 offered heading into the market close.

They were a touch weaker after closing the previous session at 101¾ bid, a source said.

McClaren priced a $620 million issue of the 7½% notes at par on Thursday.

Pricing came tighter than talk in the 7¾% area.

McGraw-Hill pares losses

McGraw-Hill’s two tranches of senior notes were paring their losses on Friday after a rough start in the aftermarket. However, both remained underwater heading into Friday’s close.

The 8% senior notes due 2029 (Caa2/CCC) traded straight down on the break and bottomed out around 97.

“Guys took a run at these,” a source said.

However, with the 8% notes trading at a discount, real money buyers came into the market and bid the notes back up to a 99-handle.

They were marked at 99¼ bid, 99¾ offered heading into Friday’s close, a source said.

The 5¾% senior secured notes due 2028 (B2/B) were stronger and closed Friday at 99 5/8 bid, par 1/8 offered.

There was a decent flow of buyers and sellers in both tranches, a source said.

The 5¾% notes and 8% notes priced at par on Wednesday.

$436 million Thursday inflows

The dedicated high-yield bond funds saw $436 million of net inflows on Thursday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs saw $444 million of inflows on the day.

Actively managed high-yield funds, however, were flat to slightly negative, sustaining $8 million of outflows on Thursday, the source said.

News of Thursday's daily flows trails a Thursday report that the combined funds sustained $742 million of net outflows in the week to the Wednesday, July 21 close, according to the Refinitiv Lipper Fund Flow Report Newsline.

It was the second consecutive weekly outflow from the junk funds, which ended the most recent week with cash flows of negative-$15.3 billion, year to date, according to the market source.

Also notable, for the first time in 28 weeks the dedicated bank loan funds saw outflows ($67 million) in the week to the July 21 close, according to the market source who remarked that a recent collapse in long-end Treasury yields favors fixed-rate debt over floating-rate debt.

Indexes

The KDP High Yield Daily index rose 4 points to close Friday at 70.18 with the yield now 3.69%.

The index gained 11 points on Thursday, 16 points on Wednesday, 2 points on Tuesday and 33 points on Monday.

The index was flat on the week.

The CDX High Yield 30 index gained 16 bps to close Friday at 109.75.

The index slid 3 bps on Thursday, gained 35 bps on Wednesday and 28 bps on Tuesday and sank 53 bps on Monday.

The index gained 23 bps on the week.

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