GFL Environmental and Pike drive by junkland; Tenneco lifted; First Quantum eyed

By Paul A. Harris and Abigail W. Adams

Portland, Me., Nov. 29 – Drive-by issuers GFL Environmental Inc. and Pike Corp. priced a combined $1.4 billion in the junk bond market on Wednesday.

Meanwhile, it was a strong day in the secondary space with the cash bond market adding another 3/8 to ½ point with a strong GDP print adding fuel to the soft-landing scenario economists are now widely anticipating, a source said.

While some sources remain skeptical, it was risk-on in the secondary with buyers active in the market.

Tenneco Inc.’s 8% senior secured notes due 2028 (B1/B) were lifted in heavy volume as buyers returned for the struggling notes.

Venture Global LNG Inc.’s 9½% senior secured notes due 2029 and 9 7/8% senior secured notes due 2032 (B1/BB) made strong gains in active trade.

However, First Quantum Minerals Ltd.’s senior notes (/B+) remained heavy as market players speculate about the future of its Panamanian mine.

Drive-by issuers

Two issuers, each bringing a single dollar-denominated tranche of junk, raised $1.4 billion on Wednesday.

Ontario-based waste management and environmental services provider GFL Environmental priced a handsomely upsized $1 billion issue (from $700 million) of secured notes (Ba3/BB-) at par to yield 6¾%.

And Pike Corp. priced a $400 million unsecured issue (B3/B-) at par to yield 8 5/8%, playing to a book that was around two-times deal size.

Both came as drive-bys.

Both priced at the tight ends of talk.

In their wake, Summit Materials, LLC and Summit Materials Finance Corp. staged for an expected Thursday execution, talking their $800 million offering of seven-year unsecured notes (Ba3/BB) to yield in the 7½% area, inside of initial guidance.

The deal is heard to be a blowout, according to a trader who said that it was five-times oversubscribed at 7¾%.

A big part of that demand was heard to be comprised of limit orders, the source noted, adding that word is books are still twice deal-size at 7½%.

Noting that 10-year Treasuries closed below 4.3% for the first time since mid-September, and that equities are providing a supportive backdrop for high-yield bonds, the trader said that the market feels good, but added that recent deals don’t exactly seem like no-brainers.

As to demand for speculative-grade bonds, offers-wanted-in-competition (OWICs) outnumbered bids-wanted-in-competition (BWICs) by more than a five-to-one margin on Wednesday, the trader said.

Tenneco lifted

Tenneco’s 8% senior secured notes due 2028 were lifted in heavy volume on Wednesday with buyers active in the space.

The 8% notes gained 3/8 to ½ point.

They were trading in the 82¼ to 82½ context throughout the session with the notes poised to end the day wrapped around 82 3/8, a source said.

The yield was about 12 7/8%.

There was $58 million in reported volume.

The notes have made large gains over the past month as the broader market rallied.

They traded to an all-time low of 78 in late October.

However, sources still describe the hung-debt offering as a disaster.

The $1.9 billion issue priced at 85 to yield 11.933% in August to clear hung debt from Apollo’s buyout of Tenneco.

Despite the deep discount, the notes have never traded above their issue price in the aftermarket.

Venture Global gains

Venture Global’s 9½% senior secured notes due 2029 and 9 7/8% senior secured notes due 2032 made strong gains in heavy volume on Wednesday.

The 9½% notes jumped a little more than 1 point to close the day on a 103-handle.

The notes were trading in the 103 3/8 to 103 5/8 context heading into the market close, a source said.

The yield was about 8½%.

There was $16 million in reported volume.

The 9 7/8% senior secured notes due 2032 shot up 1½ points to a 102-handle.

They were wrapped around 102½ heading into the close with the yield about 9¼%, a source said.

There was $23 million in reported volume.

Wednesday’s session marked the highest level for both tranches since the company priced an add-on to the notes in early November.

In its fourth pass at the junk market in 2023, Venture Global priced a $500 million add-on to the 9½% notes and a $500 million add-on to the 9 7/8% notes at 101 on Nov. 6.

The company initially priced a $2.5 billion tranche of the 9½% notes at par and a $1.5 billion tranche of the 9 7/8% notes at 99.214 to yield 10% on Oct. 19.

First Quantum eyed

First Quantum’s senior notes remained heavy on Wednesday as market players speculate about the future of its largest asset – its Panamanian copper mine.

First Quantum’s 8 5/8% senior notes due 2031 fell about 1 point early in the session to trade on a 78-handle.

However, they pared their losses and closed the day largely unchanged in the 79½ to 79¾ context.

The yield was about 13%.

There was $16 million in reported volume.

The 6 7/8% senior notes due 2027 were off about ½ point to close the day on a 79-handle.

They were changing hands in the 79¼ to 79¾ context heading into the market close, a source said.

The yield was about 13 7/8%.

There was $10 million in reported volume.

While the Panamanian president has vowed to shutter First Quantum’s mine following Tuesday’s supreme court ruling, which held the government’s contract with the company was unconstitutional, First Quantum has stated it is open to dialogue.

The mine ceased operations on Tuesday due to the court ruling and widespread protests which were preventing the delivery of critical supplies to the mine.

However, the market is widely expecting operations to ultimately come back online, a source said.

Holders seem to be comfortable owning the bonds with a 13%-handle yield, the source said.

The Panamanian mine is First Quantum’s largest asset and composes about 50% of its EBITDA.

Indexes

The KDP High Yield Daily index gained 37 basis points to close Wednesday at 49.48 with the yield 7.33%.

The index added 9 bps on Tuesday and was flat on Monday.

The ICE BofAML US High Yield index gained 66.2 bps with the year-to-date return now 9.488%.

The index added 29.9 bps on Tuesday and 21.3 bps on Monday.

The CDX High Yield 30 index gained 5 bps to close Wednesday at 103.81.

The index added 11 bps on Tuesday.

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