Junk to remain active in week ahead with calendar packed; NGL, Talos add to gains

By Paul A. Harris and Abigail W. Adams

Portland, Me., Jan. 26 – A quiet Friday in the dollar-denominated high-yield primary market capped a week with $6.3 billion of gross new issuance in eight junk tranches.

That’s well short of the previous week’s $8.6 billion total, but conspicuous, perhaps, as one of just 18 weeks since the beginning of 2023 (55 weeks, in all) to top the $5 billion mark, according to Prospect News data.

The week ahead is set to get underway with a $3.7 billion active calendar in place, a big-ish amount of business to carry across the weekend, a sellside source remarked.

Crash Champions/Champions Financing, Inc., Husky Injection Molding Systems/Titan Co. Borrower, LLC, Artera Services LLC, and Rakuten Group, Inc. are in line with offerings set to price in the coming week.

Meanwhile, it was a flat day in the secondary space on Friday with the market response to the latest piece of inflationary data muted, sources said.

The personal consumption expenditure report released Friday came in largely as expected with inflationary pressures continuing to cool.

The data did little to move the broader market, which was quiet outside of new and recent issues.

The deals to clear the primary market over the past week continued to put in solid performances in the secondary space with all trading at solid premiums to issue prices.

NGL Energy Partners LP’s newly priced senior secured notes (B2/B+/BB-) and Talos Production Inc.’s senior secured second-priority notes (B3/BB-/B+) continued the trend of strong performances with the tranches holding their gains after a strong break.

Hot primary

The week ahead promises to be replete with an offering from the recently popular collision repair space, as Crash Champions LLC/Champions Financing, Inc. is poised to place a $650 million offering of five-year senior secured notes (B3), in the market with early guidance is in the low-to-mid 9% area.

It follows a bang-up execution, last week, from Caliber Collision/Wand NewCo 3 Inc. which priced a $1.25 billion issue of 7 5/8% senior secured notes due January 2032 (B3/B) at par on Jan. 16.

Since the Caliber bonds broke for trading it has been “up, up and away” a trader commented on Friday, spotting those bonds trading at 103 1/8 bid, 103 5/8 offered.

That bodes well for market-comparable Crash Champions, the trader said.

Given the performance of the Caliber Collision paper, the Crash Champion bonds will likely come a bit tighter than might otherwise be expected, as high-yield investors clamor for exposure to these first-time issuers, especially given that they emanate from the non-cyclical collision repair sector, the trader said (Caliber was heard to have played to $7.5 billion of investor demand).

Joining Crash Champions on the active new issue calendar are the following:

• Husky Injection Molding Systems/Titan Co. Borrower, LLC with $1.3 billion of five-year senior secured notes, initial talk high-9% area;

• Artera Services LLC with $740 million of seven-year senior secured first-priority notes, initial talk 9% area, and

• Rakuten Group, Inc. $1 billion of three-year notes, initial talk 12% yield at a discount.

Away from those announced deals there is a shadow calendar of offers, most of them telegraphed as “other secured debt,” in bank meeting memos to lenders.

Shadow calendar names include Ineos Finance plc, UKG Inc., WestJet Loyalty LP and Shearer’s Foods LLC (Fiesta Purchaser, Inc.).

Shearer’s $500 million secured deal was heard to have been pre-marketed to investors during the past week.

NGL dominates

In the secondary, NGL Energy’s newly priced 8 1/8% senior secured notes due 2029 and 8 3/8% senior secured notes due 2032 dominated activity in the secondary space with the notes holding on to the gains made on the break.

The longer-duration notes were outperforming their shorter-duration counterparts.

The 8 3/8% senior notes due 2032 traded in the par ¾ to 101¼ context throughout the session.

The 8 1/8% senior notes due 2029 traded in the 101½ to 101 context.

Both tranches had more than $130 million in reported volume.

NGL’s offering included a $900 million tranche of the 8 1/8% notes and a $1.3 billion tranche of the 8 3/8% notes, both of which priced at par.

The yield for the 8 1/8% notes printed at the tight end of talk in the 8¼% area; the 8 3/8% notes came at the tight end of talk in the 8½% area.

Talos strong

Talos Productions’ newly priced 9% senior secured second-priority notes due 2029 and 9 3/8% secured second-priority notes due 2031 held on to the strong gains made on the break.

The longer-duration tranche again outperformed the shorter-duration counterpart with the 9 3/8% notes closing the day above a 101-handle.

The notes were trading in the 101¾ to 102¼ context in heavy volume throughout the session, a source said.

There was $64 million on the tape.

The 9% notes due 2029 were also strong with the notes continuing to trade on a 101-handle.

The notes were trading in the 101¼ to 101¾ context heading into the market close.

There was $71 million in reported volume.

Talos priced a $625 million tranche of the 9% notes and a $625 million tranche of the 9 3/8% notes at par on Thursday.

The 9% notes priced 25 basis points tighter than the tight end of the 9¼% to 9½% talk; the 9 3/8% notes priced on top of talk for a yield 3/8% behind the five-year notes.

Fund flows

The dedicated high-yield bond funds had $565 million of net daily cash inflows on Thursday, according to a market source.

High-yield ETFs had $372 million of inflows on the day.

Actively managed high-yield funds had $193 million of inflows on Thursday.

News of Thursday’s daily cash flows follows a Thursday afternoon report that the combined funds had $72 million of net inflows on the week to the Wednesday, Jan. 24 close, according to the source who cited information reported by fund-tracker Refinitiv Lipper.

It was the eleventh weekly inflow in the past 12 weeks, an interval which has had $16.6 billion of net inflows.

Year-to-date the combined junk funds have had $406 million of net inflows, according to the market source.

Indexes

The KDP High Yield Daily index climbed 4 bps to close Friday at 50.7 with the yield now 6.82%.

The index gained 12 bps on Thursday, 5 bps on Wednesday, dipped 4 bps on Tuesday and gained 6 bps on Monday.

The index gained 23 bps on the week.

The ICE BofAML US High Yield index was up 11 bps with the year-to-date return now negative 0.034%.

The index gained 20.6 bps on Thursday and 11.1 bps on Wednesday, was down 8.5 bps on Tuesday and gained 29.3 bps on Monday.

The index added 63.5 bps on the week.

The CDX High Yield 30 index added 3 bps to close Friday at 106.02.

The index gained 31 bps on Thursday after sliding 5 bps on Wednesday, 5 bps on Tuesday and 6 bps on Monday.

The index added 18 bps on the week.

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