Morning Commentary: Sirius Computer, Allied Universal on deck; Hannon Armstrong rises

By Paul A. Harris

Portland, Ore., June 27 – New issue activity in the high-yield bond market slowed from the intense pace set as the June 24 week got underway, a pace which saw in excess of $4 billion price between Monday and Wednesday.

Nevertheless at least two deals took places on deck to price Thursday.

Allied Universal Holdco LLC upsized its offering of high-yield notes to $1.85 billion from $1.55 billion on Thursday, increasing the size of the secured notes tranche while downsizing the concurrent term loan.

The revised deal features an upsized $800 million tranche of seven-year senior secured notes (B3/B-/BB-) talked to yield in the 6¾% area, tight to the 6¾% to 7% initial guidance. The secured tranche was heard to be two-times oversubscribed at its original $500 million size on Wednesday.

With the $300 million upsizing of the secured notes the concurrent seven-year covenant-lite first-lien term loan was downsized to $2.22 billion from $2.52 billion.

The size of the unsecured notes tranche, $1.05 billion of eight-year senior unsecured notes (Caa2/CCC/CCC+), remains unchanged. Official talk has the unsecured notes coming with a coupon in the 9% area at a discount to yield 10%. That yield would bring it 25 basis points wide of the wide end of initial talk that had the unsecured tranche pricing 250 bps to 300 bps behind the secured tranche.

The unsecured notes also underwent covenant changes primarily bearing upon how the company may disburse cash and incur additional debt.

Books close at 12:30 p.m. ET on Thursday, and the bonds are set to price thereafter.

Also, Sirius Computer Solutions, Inc. is set to price its $300 million offering of eight-year senior notes (Caa1/CCC+).

Talk of 10½% to 10¾%, well wide of initial price talk in the 10% area, surfaced Thursday, and document changes were expected.

Meanwhile, in a deal that went radio silent for over a week, Canada's Alpha Auto Group remains in the market with a junk bond deal, a trader said on Thursday.

The company marketed a $225 million offering of five-year notes during the June 17 week.

There is an order for the revived Alpha Auto deal at 11%, the trader said.

However, Virtu Financial is heard to have hit headwinds with its $525 million offering of seven-year first-lien senior secured notes that had been expected to price in a Wednesday drive-by, a market source said.

Hannon Armstrong up

The junk index was unchanged in the early going on Thursday, a trader said.

The new Hannon Armstrong Sustainable Infrastructure Capital Inc. (HAT Holdings I LLC/HAT Holdings II LLC) 5¼% green eligible senior notes due July 2024 (BB+/BB+), which saw a notable execution that saw them upsized and pricing through talk on Wednesday, continued to be prized paper on Thursday morning, a trader said.

There were sizable orders at 101½, the source noted.

The $350 million deal, upsized from $300 million, priced at par, coming 12.5 bps inside of yield talk in the 5½% area.

Wells Fargo was the left bookrunner.

Elsewhere, the new Antero Midstream Partners LP 5¾% senior notes due January 2028 (Ba3/BB+) were faring poorly in the secondary market on Thursday at 98 bid, 99 offered. The $650 million priced at par on Tuesday.

Wednesday outflows

The daily cash flows of the dedicated high-yield bond funds were negative on Thursday, according to a market source.

High-yield ETFs sustained $13 million of outflows on the day.

Actively managed high-yield funds saw $25 million of outflows on Thursday, the source said.

Nevertheless, owing to massive inflows early in the present weekly reporting period – $1.2 billion on June 20 and $1.29 billion on June 21 – the combined funds are anticipating that Lipper US Fund Flows will report a big weekly inflow when its fund flow information surfaces, which is expected to happen later on Thursday.

As of Wednesday’s close, the combined funds were tracking a whopping $3.1 billion of inflows on the week, the source said.

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