Mattamy, Gates Global price; Centene on tap; Sinclair, Teva flat; Kaiser Aluminum, Allegheny trade up

By Paul A. Harris and Abigail W. Adams

Portland, Me., Nov. 20 – After opening the week with a pair of sessions that saw north of $2.5 billion of issuance apiece, high-yield issuance dropped off to just over $1 billion on Wednesday.

Two drive-by issuers raised $1,068,000,000, pricing one tranche each.

Gates Global LLC priced a $568 million issue of six-year senior notes (Caa1/B), and Mattamy Group Corp. priced an upsized $500 million issue of eight-year senior notes.

While the new deal activity slowed on Wednesday, two megadeals are on deck for Thursday.

Centene Corp. is set to price its $7.25 billion three tranche deal (Ba1/BBB-/BB+), and VICI Properties Inc. is on deck with a $1.75 billion offering of senior notes (B1/BB/BB).

Compass Minerals International is slated to price a $500 million offering.

In the European market, Jaguar Land Rover Automotive plc is expected to price a benchmark euro-denominated offering.

Meanwhile, the secondary space was soft on Wednesday with renewed trade concerns putting a damper on the market.

New paper remained in focus.

However, many of the new deals fell flat in the secondary with tight pricing leaving little room for movement – a general theme as the primary market churns out new paper at a dizzying pace.

Teva Pharmaceutical Industries’ newly priced 7 1/8% senior notes due 2025 (Ba2/BB) and Sinclair Television Group, Inc.’s 5½% senior notes due 2030 were wrapped around their issue price in the secondary space.

However, Kaiser Aluminum Corp.’s 4 5/8% senior notes due 2028 (Ba3/BB+) and Allegheny Technologies Inc.’s 5 7/8% senior notes due 2027 (B2/B) outperformed in the aftermarket with both issues seen well above their issue price.

Meanwhile, Hertz Corp.’s recently priced 6% senior notes due Jan. 15, 2028 (B3/B-) dropped in active trading on Wednesday with the notes now several points underwater.

Wednesday’s issues

Two drive-by issuers raised $1,068,000,000 during Wednesday’s session.

Gates Global priced a $568 million issue of six-year senior notes (Caa1/B) at par to yield 6¼%.

The yield printed at the wide end of the 6% to 6¼% yield talk. Initial talk was in the low 6% area.

Mattamy Group priced an upsized $500 million issue of eight-year senior notes (B1/BB) at par to yield 5¼%.

The issue size increased from $450 million.

The yield printed in the middle of yield talk in the 5¼% area, and tight to initial guidance in the low-to-mid 5% area.

The deal ended up playing to $1.5 billion of orders, a trader said.

Expecting a huge Thursday

With Wednesday's issuance in the book, the Nov. 18 week has thus far seen $6.32 billion of issuance.

That total is expected to more than double on Thursday with two megadeals headed for the block.

On Wednesday, Centene Corp. set price talk and tranche sizes in a revised offering of up to $7.25 billion of senior notes (Ba1/BBB-/BB+).

The revised deal, with price talk, comes as follows:

• $750 million add-on to 4¾% senior notes due Jan. 15, 2025 talked at 102.25 to 102.75, implying a yield range of 3.81% to 3.98%;

• $2.5 billion to $3 billion of notes due 2027 talked at 4½% to 4 5/8% (initial talk was 4¾% area); and

• $3 billion to $3.5 billion of notes due 2029 talked at 4¾% to 4 7/8% (initial talk was 5% area).

Although announced at a size of $7 billion, should the tranches of notes due 2027 and 2029 come at the top of their size ranges, total issuance could come to $7.25 billion, according to information contained in a brief circulated to investors on Wednesday morning.

Meanwhile, an add-on to the Centene 5 3/8% notes due 2026 was withdrawn and replaced with the add-on to the 4¾% notes due 2025.

VICI Properties’ $1.75 billion offering of senior notes (B1/BB/BB) in two tranches is also possible Thursday business, market sources say.

The deal features seven-year non-call-three notes with initial guidance in the low-to-mid 4% area and 10-year non-call-five notes with initial guidance in the high 4% area.

As the market awaits official price talk and timing, the deal is heard to be playing to $3 billion of orders, a trader said.

Compass Minerals International is also expected to price its $500 million offering of eight-year senior notes (B1/B+) on Thursday.

Initial talk is 6% to 6¼%.

In the European primary market, Jaguar Land Rover Automotive plc is expected to price a benchmark euro-denominated offer of senior guaranteed notes (B1/B+/BB) Thursday.

The deal is coming with an expected size of €500 million, and with initial talk in the low 6% area, a market source said.

Teva flat

Despite reports of being massively oversubscribed, Teva’s dollar-denominated tranche fell flat in the secondary space with the notes largely wrapped around their issue price.

Teva’s new 7 1/8% senior notes due 2025 traded in a range of 99 7/8 to par ¼ in high volume activity on Wednesday.

However, most prints were at par, according to a market source. The notes saw more than $100 million in reported volume.

Teva priced an upsized $1 billion tranche of the 7 1/8% notes at par as part of a dual-currency deal on Tuesday.

The tranche size increased from $750 million.

The yield printed at the tight end of the 7 1/8% to 7¼% yield talk, which tightened from earlier talk in the 7½% area. Initial talk was in the high 7% area.

The dollar-denominated tranche was heard to be massively oversubscribed with one source placing the books at $5.8 billion early Tuesday.

The deal also included an upsized €1 billion tranche of 6% notes which priced at par. The tranche size increased from €750 million.

Sinclair lags

Sinclair Television’s newly priced 5½% senior notes due 2030 also saw a lackluster reception in the secondary space with the notes at times lagging their issue price.

The 5½% notes traded in a range of 99 7/8 to par during Wednesday’s session and stood poised to close the day at 99 7/8, according to a market source.

More than $30 million of the bonds were on the tape by the late afternoon.

Sinclair priced a $500 million issue of the 5½% notes at par in a Tuesday drive-by.

The yield printed at the wide end of the 5¼% to 5½% yield talk.

Kaiser Aluminum at a premium

While many of the deals to price in recent weeks have fallen flat in the secondary, Kaiser Aluminum’s 4 5/8% senior notes due 2028 were putting in a strong performance.

The 4 5/8% notes traded as high as 101 during Wednesday’s session before closing the day at par 7/8, according to a market source.

The bonds saw more than $28 million in reported volume by the late afternoon.

Kaiser Aluminum priced a $500 million issue of the 4 5/8% notes at par in a Tuesday drive-by.

The yield printed at the tight end of yield talk in the 4¾% area and inside of initial guidance in the high 4% area to 5%.

Allegheny outperforms

Allegheny Technologies’ 5 7/8% senior notes due 2027 were among the best performing paper to price in recent weeks with the notes seen more than 2 points above their issue price.

The 5 7/8% notes began the day just above par but gained strength as the session progressed and closed the day on a 102 handle, a market source said.

The notes were seen changing hands at 102 3/8 shortly before the market close. The bonds saw more than $33 million in reported volume.

Allegheny priced a $350 million issue of the 5 7/8% notes at par on Tuesday.

The yield printed at the tight end of yield talk in the 6% area.

The small issue was in demand during bookbuilding with the timing of the deal accelerated.

Hertz struggles

Hertz’s 6% senior notes due 2028 continued to struggle in the secondary with the notes falling well below their issue price in active trading on Wednesday.

The 6% senior notes dropped more than 2 points to close the day at 97, according to a market source.

The bonds saw more than $20 million in reported volume during Wednesday’s session.

The 6% notes were changing hands with a slight premium shortly after the rental car company priced the $900 million offering on Nov. 14.

However, like many of the recent deals that “priced on the screws,” or tightly, the 6% notes soon dipped below their issue price, sources said.

The 6% notes closed Tuesday at 99¼.

Indexes down again

Indexes were again down on Wednesday as they have been for much of the week.

The KDP High Yield Daily index dropped 10 bps to close Wednesday at 70.78 with the yield now 5.27%. The index was down 14 bps on Tuesday and 7 bps on Monday.

The CDX High Yield 30 index dropped 21 bps to close Wednesday at 106.82. The index was down 27 bps on Tuesday and 10 bps on Monday.

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