Two oversubscribed deals price in HY primary; Chemours struggles; funds lose $1.16 billion

By Paul A. Harris and Abigail W. Adams

Portland, Me., Aug. 5 – The new issue market put up another $1.85 billion in two junk-rated, dollar-denominated tranches on Thursday, as Ford Motor Credit Co. LLC and Crocs, Inc. priced oversubscribed deals in tight-pricing drive-by executions.

Meanwhile, it was a soft day in the day in the secondary space with several recent deals struggling.

Chemours Co.’s 4 5/8% senior notes due 2029 (B1/B) sank below par in active trading.

GPS Hospitality Holding Co. LLC’s 7% senior notes due 2028 (Caa1/B-/B-) fell flat with the notes closing the day below their issue price.

Outside of recent issues, CommScope, Inc.’s capital structure was under pressure following the company’s earnings report with the notes shaving off 2 to 3 points.

Meanwhile, the outflows continued with high-yield mutual and exchange-traded funds losing $1.16 billion in the week through Wednesday’s close, according to the Refinitiv Lipper Fund Flow Report Newsline.

Thursday primary

In the primary on Thursday the Crocs deal, a $350 million issue of 4 1/8% 10-year senior notes (B1/BB-) that priced at par, traded to par ½ bid, par ¾ offered, having been five-times oversubscribed, with a decent amount of reverse inquiry.

Meanwhile, the Bally's Corp deal, which had been expected to price Thursday, was pushed into Friday. The two-part senior notes offer (B3/CCC+/B) underwent a downsizing to $1.5 billion from $2 billion, while pricing continued to back up (see related stories in this issue).

With the stock markets in positive territory on Thursday morning a bond trader was seeing unmistakable weakness in junk.

Stocks and high-yield bonds appear to have decoupled, the trader said.

New issues have more or less held in, with one notable exception being Chemours (see below).

However away from recent issues bonds tend to be offered, the trader said.

Later in the day another trader said that liquidity is low, as a surprising number of major high-yield players appear to have carved out some time away from work, in early August.

Junk trended lower on the week, the trader said, marking cash bonds off 1/8 to ¼ of a point since Monday, with the exception of PG&E Corp., off a point on news that its equipment may have been involved in causing the Dixie wildfire in California.

The new issue market has been on an early August tear, the trader added, noting that thus far the first week in August has seen $13 billion of issuance, with another $1.8 billion teed up to price Friday.

People are looking for issuance to be dialed back, a bit, the trader said, adding that word in the market late Thursday held that the Aug. 9 week might possibly see half a dozen or fewer deals.

Chemours

Chemours’ 4 5/8% senior notes due 2029 were struggling in the aftermarket.

The notes were marked at 99 bid, 99¼ offered for most of Thursday’s session.

However, stabilizing bids were inevitably hit with the notes lifted slightly by the market close.

The 4 5/8% notes closed Thursday at 99½, according to a market source.

There was more than $63 million in reported volume.

The books for the deal were about deal size which resulted in some investors getting a larger allocation than expected, a source said.

Chemours priced a $650 million issue of the 4 5/8% notes at par on Wednesday.

The yield printed in the middle of yield talk in the 4 5/8% area.

GPS Hospitality

GPS Hospitality’s 7% senior notes due 2028 fell flat in the aftermarket.

The 7% notes were marked at 99 7/8 bid, par 1/8 offered heading into the market close, according to a market source.

There was more than $27 million in reported volume.

GPS Hospitality priced an upsized $400 million, from $385 million, issue of the 7% notes at par on Wednesday.

The yield printed at the tight end of the 7% to 7¼% yield talk.

CommScope under pressure

CommScope’s capital structure was under pressure on Thursday following disappointing earnings.

The 5% senior notes due 2027 dropped 1¼ point to close the day at 99¾.

There was $30.5 million in reported volume.

The 7 1/8% senior notes due 2028 fell 2¾ points to close the day at 105¼.

There was more than $25 million in reported volume.

The network communications technology provider’s senior notes were selling off following disappointing numbers.

While the company’s revenue of $2.19 billion was better than estimates for revenue of $2.18 billion, EBITDA of $308 million was below expectations for EBITDA of $313 million, according to a market source.

Indexes

The KDP High Yield Daily index fell 2 basis points to close Thursday at 70.09 with the yield now 3.71%.

The index dropped 11 bps on Wednesday and 4 bps on Tuesday after rising 1 bp on Monday.

The ICE BofAML US High Yield index gained 2 bps on Thursday with the year-to-date return now 3.886%.

The index was down 8.4 bps on Wednesday, 14.2 bps on Tuesday and 3 bps on Monday.

The CDX High Yield 30 index rose 34 bps to close Thursday at 109.34.

The index was down 14 bps on Wednesday, gained 6 bps on Tuesday and fell 9 bps on Monday.

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