Sprint, PTC price; QVC trades up; Dealer Tire level; VICI active; Tesla gains

By Paul A. Harris and Abigail W. Adams

Portland, Me., Jan. 30 – The domestic high-yield primary market had another active session on Thursday with two $1 billion offerings pricing.

PTC priced an upsized $1 billion amount of senior notes (Ba3/BB-) in two tranches.

And Sprint Corp. priced a $1 billion issue of 7¼% eight-year senior guaranteed bullet notes (B1/B+/BB) at a discount.

Friday also promises to be busy with Advisor Group Inc.’s $575 million offering of eight-year senior secured notes (B/B+) and Castle US Holding Corp. (Cision)’s $300 million offering of eight-year senior notes (Caa2/CCC) on deck.

Meanwhile, the secondary space was volatile on Thursday with the market trading off early in the session but roaring back into the afternoon.

The market stood poised to close the day up ¼ point after dropping 3/8 point earlier in the session as investors continue to grapple with headlines concerning the coronavirus, a source said.

Recent issues were in focus with QVC, Inc.’s split-rated 4¾% notes due 2027 (existing ratings Ba2/BBB-/BBB-) active and trading at a large premium in the secondary space.

Following the high volume seen in the previous session, activity surrounding Dealer Tire LLC’s 8% senior notes due 2028 (Caa1/CCC) tempered on Thursday.

However, the notes maintained their large premium.

Among recent issues, VICI Properties LP and VICI Note Co. Inc.’s 4 1/8% senior notes due 2030 (Ba3/BB/BB) remained active with the notes returning to a 101 handle.

Outside of the new paper, Tesla Inc.’s 5.3% senior notes due 2025 were on the rise following a blowout earnings report.

PTC upsized and tight

In an active Thursday primary market PTC priced an upsized $1 billion amount of senior notes in two tranches, both of which came tight to talk.

The deal included a $500 million tranche of five-year notes that priced at par to yield 3 5/8%. The yield priced at the tight end of yield talk in the 3¾% area. Initial talk was in the 3 7/8% area.

PTC also priced a $500 million tranche of eight-year notes at par to yield 4%. The yield printed at the tight end of yield talk in the 4 1/8% area. Initial guidance was in the 4¼% area.

The deal, across both tranches, was upsized from $750 million and was heard to be playing to $3 billion of demand.

Sprint bullet notes

Sprint priced a $1 billion issue of 7¼% eight-year senior guaranteed bullet notes at 99 to yield 7.418%.

Although there was a buzz in the market that the Sprint deal was significantly oversubscribed, a trader remarked that, judging from the execution, demand for the paper could not have been too intense.

The issue price came on top of guidance. The yield came toward the wide end of yield guidance in the low 7% area.

The notes fell flat in the aftermarket and were largely wrapped around 99 after breaking for trade, a source said.

Judging by recent executions, demand for new issues remains robust, especially given that volatility – possibly related to apprehensions about coronavirus – has taken hold of the stock market as well as the high-yield secondary market, a syndicate official said.

The high-yield index closed Wednesday with a 6.03% composite yield, having widened from a recent multiyear low of 5.7%, according to a market source.

The composite yield got as wide as 6.2% on Monday, according to the source.

With the first month of the new year nearly complete, the junk index – which returned a whopping 14% for 2019 – has inched its way into the green, returning 0.18% for January to Wednesday's close (Jan. 29), the market source added.

Friday's primary session

Looking to Friday, Advisor Group is on deck with a $575 million offering of eight-year senior secured notes.

Official talk of 6½% to 6¾% surfaced Thursday.

The deal is heard to be playing to $1.7 billion of demand, a trader said.

Elsewhere, as the market awaits official talk, guidance on the Castle US Holding Corp. (Cision) $300 million offering of eight-year senior notes widened, the trader said.

Pricing is now 8¾% to 9%, from initial talk in the low 8% area, the source specified.

Both Advisor Group and Cision are expected to price Friday.

QVC in focus

QVC’s split-rated 4¾% senior notes due 2027 were in focus and putting in a strong performance in the secondary space.

The 4¾% senior notes were changing hands in the 101 1/8 to 101 3/8 context in high-volume activity, according to a market source.

In a deal that was heard to be multiple times oversubscribed, QVC priced an upsized $575 million issue of the 4¾% notes at par on Wednesday.

Pricing came tighter than talk for a yield in the 5% area. Initial guidance had the notes coming to yield in the 5¼% area.

Dealer Tire level

While activity surrounding Dealer Tire’s 8% senior notes due 2028 waned on Thursday, the notes maintained their large premium.

The 8% senior notes due 2028 were changing hands in the 101¼ to 101¾ context early in the session although the notes were quiet heading into the afternoon, a market source said.

The notes saw about $12 million in reported volume during Thursday’s session.

While slow to trade on Thursday, the 8% notes were active after breaking for trade on Wednesday with more than $71 million in reported volume during the session.

The 8% notes saw a strong break, trading up to a 101 handle soon after freeing for trade.

Dealer Tire priced a $350 million issue of the 8% notes at par on Wednesday.

The yield printed tighter than the 8¼% to 8½% official price talk. Initial talk had been 8¾% to 9%.

VICI Properties active

VICI Properties’ 4 1/8% senior notes due 2030 remained active in the secondary space with the notes continuing to perform well.

While slightly weaker on Thursday, the 4 1/8% notes continued to trade on a 101 handle.

They were changing hands in the 101 3/8 to 101 5/8 context in active trading, a source said. The notes were largely trading in sympathy with the market.

While they traded up to a 101 handle soon after pricing, they dropped in Monday’s sell-off, only to rebound as the market recovered.

VICI is a solid BB credit and the issue is a large liquid one, which has been in demand, a source said.

VICI priced a $1 billion tranche of the 4 1/8% notes at par on Jan. 22.

The 4 1/8% notes priced as part of a three-tranche megadeal that included a $750 million tranche of 3½% notes due 2025 and a $750 million tranche of 3¾% notes due 2027.

While the 3½% and 3¾% notes have been less active, they continued to trade at a premium despite their tight pricing.

The 3½% notes were changing hands in the 101¾ to 102 context on Thursday.

The 3¾% notes were changing hands in the par ¾ to 101 1/8 context.

Tesla’s earnings

Tesla’s 5.3% senior notes due 2025 were on the rise following Wednesday’s blowout earnings report.

The 5.3% notes gained more than 1 point on Thursday.

They were changing hands in the 101 to 101½ context with more than $20 million in reported volume, a market source said.

The notes spent much of 2019 trading in the mid-80s.

However, the once struggling electric car manufacturer’s junk bond has steadily climbed throughout December and January as car delivery and production numbers beat analyst expectations and Tesla opened a new factory in Shanghai.

Tesla reported fourth-quarter earnings per share of $2.14 versus analyst expectations for earnings per share of $1.77.

Revenue was $7.4 billion versus analyst expectations of revenue of $7 billion.

Tesla also reported it is ramping up its production of the Model Y with deliveries expected to start in March.

Indexes mixed

Indexes were again mixed on Thursday.

The KDP High Yield Daily index was off 1 point to close Thursday at 71.38 with the yield now 5.08%. The index was up 7 bps on Wednesday and 3 bps on Tuesday after a 34 bps drop Monday.

The ICE BofAML US High Yield index dropped 21.3 bps with the index once again brushing up against negative territory. The year-to-date return is now 0.009%.

The index was up 10.9 bps on Wednesday and 39.9 bps on Tuesday after plunging 61.9 bps on Monday when it crossed over to the red.

The CDX High Yield 30 index rose 14 bps to close Thursday at 108.73. The index shaved off 18 bps on Wednesday, 63 bps on Tuesday and tumbled 70 bps on Monday.

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