Morning Commentary: HUB’s $3 billion oversubscribed notes on tap; funds see outflows

By Paul A. Harris

Portland, Ore., Jan. 19 – HUB International Ltd. has the primary market spotlight to itself on Friday.

The Chicago-based insurance brokerage plans to place $3 billion of junk in a two-part deal that includes secured and unsecured high-yield notes.

A $1.1 billion add-on to the HUB International 7¼% senior secured notes due June 15, 2030 (B2/B), talked in the 102 area, was playing to $1.5 billion of demand as the Friday session got underway, a trader said.

Meanwhile, a $1.9 billion tranche of new eight-year senior notes (Caa2/B-), talked to yield in the 7½% area, was playing to $3 billion of demand on Friday morning, the trader said.

An active forward calendar is in place for the week ahead, with one deal announced but others believed to be in the wings.

KeHE Distributors, LLC began a roadshow on Wednesday for a $750 million offering of senior secured notes due 2029 (B3/B), in the market with initial guidance in the low-9% area.

Away from that announced offering, at least two other deals loom as possible business for the Jan. 22 week.

NGL Energy Partners is expected to show up with a $2.5 billion offering of high-yield notes.

Pro forma on the deal is in the 8½% area.

BofA Securities Inc. is expected to lead.

And England-based Merlin Entertainments plc is heard to be in the wings with $400 million of senior secured notes, proceeds of which will be used to refinance the company’s U.S. and euro term loans due 2026.

Recent deals

Among recent issues, the Wand NewCo 3 Inc. (Caliber Collision) 7 5/8% senior secured notes due January 2032 (B3/B) were 101¾ bid, 102 1/8 offered, up 1/8 of a point on the morning, the trader said.

The $1.25 billion issue priced at par on Thursday amid strong demand, which enabled the first-time issuer to drive pricing dramatically lower from initial guidance in the 8% area, a price range at which the deal commanded a whopping $7.5 billion of interest among investors, sources said.

The new CSC Holdings, LLC/Altice USA senior guaranteed notes due January 2029 (B2/B) were 101 bid, 101½ offered at mid-morning.

The $2.05 billion issue (from $1.25 billion) also priced at par on Thursday.

The Acrisure, LLC/Acrisure Finance, Inc. 8¼% senior notes due February 2029 (Caa2/CCC+) were par 7/8 bid, 101 3/8 offered on Friday morning.

The $925 million issue priced at par on Tuesday.

The high-yield index was unchanged to up 1/8 of a point at mid-morning, the trader said.

Fund flows

The dedicated high-yield bond funds sustained $101 million of net daily cash outflows on Thursday, according to a market source.

High-yield ETFs saw $52 million of outflows on the day.

Actively managed high-yield funds sustained $49 million of outflows on Thursday, the source said.

News of Thursday’s daily cash flows trails a Thursday report that the dedicated junk bond funds saw $1 billion of net inflows in the week to the Wednesday, Jan. 17 close, the 10th inflow in the past 11 weeks, an interval during which the high-yield funds saw $16.5 billion of net inflows, according to the market source.

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