United Rentals prices; Bally’s junk megadeal on deck; Venture Global skyrockets in secondary

By Paul A. Harris and Abigail W. Adams

Portland, Me., July 30 – The domestic high-yield primary market rounded out an active week with one drive-by deal pricing.

United Rentals (North America), Inc. priced a $750 million issue of 10.5-year senior notes (Ba2/BB).

The coming week also promises to be active with $2.3 billion already on the forward calendar.

Bally’s Corp. plans to price a $2 billion two-part offering of senior notes (B3/CCC+/B-) and MDC Partners is expected to show up with a sizeable offering.

Meanwhile, it was a quiet end to the week in the secondary space with the market slightly softer as equities closed the day in the red.

However, volume outside of recent issues remained light and the majority of new deals continued to perform well.

Venture Global Calcasieu Pass LLC’s two tranches of senior secured notes (Ba3/BB) skyrocketed in the aftermarket with the notes continuing to gain on Friday following a strong break.

Centene Corp.’s new split-rated 2 5/8% senior notes due 2031 (Ba1/BBB-/BB+) were also trading at a premium to their issue price.

Friday’s primary

On Friday, United Rentals priced a $750 million issue of 3¾% senior notes due January 2032 at par, in the middle of talk, the session's sole issuer wrapping up the month of July in the high-yield primary market.

The first week in August is set to get underway to an active dollar-denominated new issue calendar.

Bally’s Corp. announced Friday that it plans to conduct a roadshow and price a $2 billion two-part offering of senior notes backing its acquisition of Gamesys Group plc in the week ahead.

It should go reasonably well because it’s a big acquisition deal from a familiar name in the gaming sector, from which there has not been an abundance of recent new issue activity, a trader said.

Also, the market continues to watch for MDC Partners to show up any day with possibly $1 billion or more of bonds backing its merger with Stagwell Media LP, sources say.

Lately the new issue market is showing some signs of bifurcation, with conspicuously sized, higher-rated deals drawing crowds of investors and pricing on the tights, while lower-profile issuers bearing heavier credit challenges limp across the finish line, sources say.

In the latter category, Akumin Inc., Allen Media LLC and Penn Virginia Corp. – deals that came with single-Bs, and sometimes triple-Cs – took their lumps during the last week of July.

However split-rated Centene was heard to have drawn a sizable, enthusiastic crowd for the $1.8 billion two-part deal it did on Thursday.

In part, that's because the market anticipates that Centene will eventually enter investment-grade Valhalla, so crossover accounts and even high-grade investors see in the name an opportunity to walk away with a much better spread than those available in their more familiar environs, a high-yield investor explained.

A trader, meanwhile, said that the crowd for a deal like Thursday's split-rated Centene issue also attracts investors coming with an entirely different agenda from that of the spread-shopping crossover and high-grade accounts.

Hedge funds and event-driven funds will look at a deal like Centene with an eye for the significant appreciation the bonds are apt undergo, should the anticipated rising star ratings materialize.

“If the upgrade ultimately doesn't happen, you're not really hurt,” the trader said.

“In either case it may be better than shopping for yield in a minefield of more challenging deals.”

Venture Global skyrockets

Venture Global’s two tranches of senior secured notes skyrocketed in the aftermarket with both tranches continuing to post gains in high-volume activity after a strong break the previous session.

Venture Global’s 3 7/8% senior secured notes due 2029 rose to a 102-handle on Friday.

They were changing hands in the 102 1/8 to 102 3/8 context heading into the market close.

The company’s 4 1/8% senior notes due 2031 jumped to a 103-handle.

They were changing hands in the 103½ to 103¾ area heading into the close.

The deal from the liquified natural gas producer played to massive demand and was upsized to $2.5 billion from its initial size of $1.5 billion.

The deal included a $1.25 billion tranche of the 3 7/8% notes and a $1.25 billion tranche of the 4 1/8% notes, which priced at par.

The 3 7/8% notes priced tight to yield talk in the 4% area; the 4 1/8% notes came on top of talk for a yield 25 basis points behind the shorter-duration tranche.

Centene at a premium

Centene’s newly priced 2 5/8% senior notes due 2031 were trading at a premium to their issue price, although the notes remained on a par-handle.

The 2 5/8% notes were changing hands in the par 5/8 to par 7/8 context heading into the market close, a source said.

Centene priced a $1.3 billion issue of the 2 5/8% notes at par on Thursday. Pricing came on top of price talk for a yield in the high 2% area.

The issue came as part of a two-tranche offering that included a $500 million add-on to the company’s 2.45% senior notes due 2028.

The 2.45% notes were active following the add-on and trading at a premium to their reoffer price. The 2.45% notes were changing hands in the 101 3/8 to 101 5/8 context heading into the market close.

The add-on priced at 100.875, on the tight end of price talk in the 100.75 area.

$618 million Thursday inflows

The dedicated high-yield bond funds had $618 million of net daily inflows on Thursday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs saw $578 million of inflows on the day.

Actively managed high-yield funds had $140 million of inflows on Thursday, the source said.

News of Thursday's daily flows follows a Thursday report that the combined funds saw $996 million of net inflows in the week to the Wednesday, July 28 close, according to the Refinitiv Lipper Fund Flow Report Newsline.

It was the fourth positive weekly flow in the past six weeks, according to the market source who added that notwithstanding the recent run of mostly positive cash flows, year-to-date the dedicated junk bond funds have sustained $14.3 billion of net outflows.

Indexes

The KDP High Yield Daily index rose 2 basis points to close Friday at 70.25 with the yield now 3.65%.

The index was up 3 bps on Thursday and 2 bps on Wednesday, was down 3 bps on Tuesday and up 3 bps on Monday.

The index posted a cumulative gain of 7 bps on the week.

The CDX High Yield 30 index sank 35 bps to close Friday at 109.17.

The index rose 9 bps on Thursday and 8 bps on Wednesday after dropping 28 bps on Tuesday and 12 bps on Monday.

The index posted a cumulative loss of 74 bps on the week.

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