Junk: Stena, Hannon add-ons price; Grifols falls on short-seller report; Tenneco rises

By Paul A. Harris and Abigail W. Adams

Portland, Me., Jan. 9 – The pace of the news flow in the new issue market quickened on Tuesday, a session that had two deals price off of the high yield syndicate desks.

Stena International priced an upsized $700 million issue (from $400 million) of seven-year senior secured notes (Ba2/BB+) and Hannon Armstrong Sustainable Infrastructure Capital, Inc. priced an upsized $200 million add-on to the HAT Holdings I LLC and HAT Holdings II LLC 8% green senior notes due June 2027 (Baa3/BB+/BB+).

Wednesday also promises to be an active session with Hilton Grand Vacations Inc. accelerating the timing of its $900 million offering of eight-year senior secured notes (Ba2/BB+/BB+).

The shadow calendar also continued to grow with Caliber Collision (Wand NewCo 3 Inc.) and NGL Energy Partners LP expected to tap the market.

Meanwhile, it was a flat day in the secondary space with the cash bond market either side of unchanged as the market awaits the release of Thursday’s Consumer Price Index report.

The market’s end-of-year exuberance over the end to the Federal Reserve’s rate hike campaign and pending rate cuts has faded in the early days of 2024 with the market now debating when rate cuts will begin, a source said.

The launch of earnings and macro data are expected to be market moving events in the days and weeks ahead.

As the market awaits more clarity on the rate horizon, new issues and topical news were driving activity in the secondary space.

Bread Financial Holdings, Inc.’s 9¾% senior notes due 2029 (Ba3/BB-/BB-) and Morgan Automotive’s 8¼% senior notes due 2031 (B2/B+) were active following the add-ons of the previous session.

While the broader market was flat, Grifols, SA's 4¾% senior notes due 2028 (Caa1/B-) sank 4 to 5 points after a short-seller report took aim at the company’s reporting.

Tenneco Inc.’s 8% senior secured notes due 2028 (B1/B) continued their upward momentum with the notes now trading at premium to their deeply discounted issue price.

Tuesday’s primary

In the primary, Stena International priced an upsized $700 million issue (from $400 million) of seven-year senior secured notes (Ba2/BB+) at par to yield 7¼%, at the tight end talk.

The notes broke to par 1/8 bid, par ¼ offered, a bond trader said.

Stena came back to the market in the new year with its bond deal after conducting a non-deal roadshow last September, following which the company declined to make an offering.

Meanwhile a crossover deal from Hannon Armstrong featured an upsized, split-rated $200 million add-on (from $100 million) to the HAT Holdings I LLC and HAT Holdings II LLC 8% green senior notes due June 2027 (Baa3/BB+/BB+) that priced at 102.75 to yield 7.02%.

Demand for the issue was heard to have quickly built to three-times its original $100 million size, a trader said.

The tap came at the rich end of price talk.

The active calendar

The Tuesday session also generated news on the active forward calendar.

Hilton accelerated the timing of its $900 million offering of Hilton Grand Vacations Borrower Escrow LLC eight-year senior secured notes (Ba2/BB+/BB+), now set to price on Wednesday, one day ahead of its announced timing which had it remaining in the market until Thursday.

Pending official price talk, early guidance has the deal coming to yield in the 7% area.

Books were heard to be in excess of two-times deal-size, a trader said on Tuesday afternoon.

Meantime, privately held Global Auto Holdings Ltd., a debut issuer, continues to market its $1.05 billion two-part offering of senior notes.

The deal includes $525 million of five-year notes, initial talk 8 1/8% to 8 3/8%, and $525 million of eight-year notes, initial talk 8½% to 8¾%.

Books have been slow to build, the trader said.

The shadow calendar

Away from active issues a shadow calendar is beginning to take shape, sources say.

Caliber Collision is expected to launch a $1.25 billion offering of senior secured notes late this week or in the week ahead.

The Lewisville, Tex.-based collision repair company kicked off a $2.525 billion term loan B on Monday.

Proceeds will be used to refinance debt and to fund a distribution to shareholders.

And NGL Energy Partners is expected to show up in the primary market during the week ahead with a $2.5 billion offering of high-yield notes in five-year and seven-year tranches.

Pro forma on the deal is in the 8½% area, a trader said.

BofA Securities, Inc. is expected to lead.

Active add-ons

Bread Financial’s 9¾% senior notes due 2029 and Morgan Automotive’s 8¼% senior notes due 2031 were active on Tuesday following the add-ons of the previous session.

Bread Financial’s 9¾% notes were trading at a strong premium to their reoffer price.

The notes were marked in the 101½ to 102 context and stood poised to close the day wrapped around 101¾, a source said.

There was $24 million in reported volume.

Bread Financial priced an upsized $300 million, from $200 million, add-on to the 9¾% notes at 101 on Monday.

Morgan Automotive’s 8¼% senior notes due 2031 were wrapped around their reoffer price in active trade.

The notes were marked at 102½ bid, 102¾ offered early in the session.

They closed the day wrapped and 102½.

There was $38 million in reported volume.

Morgan Automotive priced an upsized $350 million, from $300 million, add-on to the 8¼% senior notes at 102.5 on Monday.

Grifols falls

Grifols’ 4¾% notes due 2028 had heavy selling pressure on Tuesday with the notes falling as much as 6 points in intraday activity after a short seller took aim at the company.

The 4¾% notes sank to an 85-handle in early trading but recouped some losses as the session progressed.

They were trading in the 87½ to 88 context heading into the market close with the yield about 7 7/8%, a source said.

There was $32 million in reported volume.

The notes were in focus after a short-seller report by Gotham City alleged the company was misrepresenting its leverage and overstating profits.

Tenneco rises

Tenneco’s 8% senior secured notes due 2028 continued their upward momentum on Tuesday with the notes now trading well above their discounted issue price.

The 8% notes added another ¾ point with the notes now trading on an 87-handle.

They were marked in the 87 to 87½ context heading into the market close with the yield about 11 3/8%, according to a market source.

There was $25 million in reported volume.

The notes have gained almost 2 points over the past two trading sessions.

Tenneco’s 8% senior secured notes have long been pointed to as a disaster with the notes trading well below their discounted issue price of 85 since the $1.9 billion issue priced in August 2023.

However, the late-year market rally lifted the notes to the 84 to 85 context in the final few trading sessions of 2023.

The notes held on to their gains despite the market pullback last week and have been the focus of strong buying interest over the past two sessions.

Fund flows

The dedicated high-yield bond funds had $677 million of net daily cash inflows on Monday, according to a market source.

High-yield ETFs had $672 million of inflows on the day.

Actively managed high yield funds had $5 million of inflows on Monday.

The combined funds are tracking $952 million of net inflows on the week that will conclude with Wednesday’s close, according to the market source.

Indexes

The KDP High Yield Daily index gained 10 basis points to close Tuesday at 50.58 with the yield 6.86%.

The index was up 11 bps on Monday.

The ICE BofAML US High Yield index was up 14.5 bps with the year-to-date return now negative 0.653%.

The index added 31 bps on Monday.

The CDX High Yield 30 index was flat to close Tuesday at 105.67.

The index added 51 bps on Monday.

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