Zayo, AA price; Advantage Solutions on deck; Freeport-McMoRan lags; MSCI trades up

By Paul A. Harris and Abigail W. Adams

Portland, Me., Feb. 20 – The domestic high-yield primary market continued at a steady pace on Thursday.

Zayo Group Holdings Inc. priced its two-tranche megadeal, which was downsized to $2.58 billion.

While downsized, the tranches priced tight and played to massive demand.

American Airlines Group Inc. priced a $500 million issue of five-year senior bullet notes (B1/BB-/BB-) in a drive-by.

Mattamy Group Corp. was also heard to be in the market with a dual-currency offering, although final terms were not available by press time.

Advantage Solutions Inc. joined the forward calendar and announced that it had commenced a $1.145 billion two-part offering.

Meanwhile, new paper continued to dominate activity in the secondary space.

Freeport-McMoRan Inc.’s newly priced 4 1/8% senior notes due 2028 and 4¼% senior notes due 2030 (Ba1/BB) were struggling in the aftermarket with both tranches closing the day below their issue price.

However, MSCI Inc.’s 3 5/8% senior notes due 2030 (Ba2/BB+) were trading at a large premium in high-volume activity, despite their tight pricing.

Outside of the new paper, L Brands Inc.’s junk bonds were volatile following the highly anticipated announcement about the sale of its Victoria’s Secret brand.

While the notes traded off early in the session, they closed the day largely unchanged.

Meanwhile, fund flows were largely flat on the week with high-yield mutual and exchange-traded funds seeing a nominal outflow of $40 million, according to Refinitiv Lipper US Fund Flows.

Huge demand for Zayo

The new issue machine continued to crank steadily on Thursday.

Zayo Group Holdings placed $2.58 billion of high-yield notes in a downsized two-part trade.

The secured portion of the deal saw an upsized $1.5 billion tranche of seven-year senior notes (B1/B) price at par to yield 4%. The secured tranche was upsized from $1 billion. The yield printed at the tight end of the 4% to 4¼% yield talk, and well inside of earlier guidance in the 4½% area.

The unsecured portion saw a downsized $1.08 billion tranche of eight-year senior notes (Caa1/CCC+) price at par to yield 6 1/8%. The unsecured tranche was downsized from $2.08 billion. The yield printed at the tight end of yield talk in the 6¼% area, and deep inside of earlier guidance in the 6¾% area.

Despite the fact that the overall amount of bonds sold decreased by $500 million from the original overall size of $3.08 billion, demand across both tranches of bonds was massive, allowing both tranches to price deep inside of initial guidance, sources said.

With the downsizing of the bonds the company upsized its U.S. seven-year covenant-lite first-lien term loan to $4.75 billion from $4.235 billion.

Ultimately around $1 billion shifted to the secured notes and loan from the unsecured bonds, reflecting demand, a trader said.

Of the secured bonds and the loan, investors noted that the loan afforded more lender protection than the secured bonds, the source added.

American, Mattamy, Advantage

Elsewhere Thursday, American Airlines Group priced a $500 million issue of five-year senior bullet notes at par to yield 3¾%.

The yield printed at the tight end of yield talk in the 3 7/8% area.

And Mattamy Group was in the market with $500 million of 10-year senior notes and C$225 million of eight-year senior notes both rated B1 by Moody's Investors Service and BB by S&P Global Ratings.

Both tranches were talked, Thursday, in the 4 5/8% area.

However final terms were not available at press time.

Meanwhile, Advantage Solutions announced that it has commenced a $1.145 billion two-part offering.

Although lead bookrunner BofA Securities Inc. has yet to step forward with details on timing, the structure and initial price talk are known to the market, sources say.

The deal will feature a $345 million tranche of 6.5-year senior secured notes, with initial talk in the mid-to-high 6% area, and $800 million of seven-year senior unsecured notes with initial talk in the high 10% area.

Freeport-McMoRan lags

Freeport-McMoRan’s newly priced senior notes saw a lackluster reception in the secondary space with both tranches closing Thursday below their issue price.

The 4 1/8% senior notes were changing hands in the 99¾ to par context in active trading during Thursday’s session, according to a market source.

The notes lost the slight premium they saw on the break when the notes traded up to par ¼.

The mining company’s 4¼% senior notes due 2030 were also struggling.

The notes were trading in the 99½ to par context on Thursday and stood poised to close the day at 99 7/8, a source said.

The lackluster performance of the notes was attributed to their tight pricing.

Freeport-McMoRan priced an upsized $1.3 billion two-tranche offering in a Wednesday drive-by.

The company priced a $700 million tranche of the 4 1/8% notes and a $600 million tranche of the 4¼% notes at par.

The 4 1/8% notes priced at the tight end of the 4 1/8% to 4 3/8% yield talk.

Similarly, the 4¼% notes priced at the tight end of the 4¼% to 4½% yield talk.

The initial size of the deal was $1 billion.

MSCI trades up

MSCI’s 3 5/8% senior notes were trading at a large premium to their issue price despite their tight pricing.

After a strong break, the notes continued to gain and were wrapped around 101 in high-volume activity on Thursday.

The 3 5/8% notes traded up to par ¾ after freeing for trade on Wednesday.

The New York-based finance company priced a $400 million issue of the 3 5/8% notes at par in a Wednesday drive-by.

Pricing came at the tight end of yield talk in the 3¾% area. Initial talk had the deal coming to yield in the 3 7/8% area.

L Brands level

L Brands’ senior notes were volatile following news about the sale of a 55% stake in its Victoria’s Secret brand.

While the notes traded off early in the session, the retailer’s 6¾% senior notes due 2036 and 6 7/8% senior notes due 2035 closed the day largely unchanged.

The 6¾% notes traded off 3 points to a 101 handle after the initial announcement.

However, they rebounded as the session progressed and closed the day flat at 104½, according to a market source.

The 6 7/8% senior notes due 2035 traded off about 2 points early in the session but also firmed as the afternoon progressed.

The notes also stood poised to close the day largely unchanged around 105.

L Brands announced on Thursday that it was selling a 55% stake in its Victoria’s Secret brand to Sycamore Partners for $525 million and retaining a 45% minority stake.

The deal values the struggling lingerie retailer at $1.1 billion.

Initial reports of negotiations valued Victoria’s Secret at $3 billion.

While the asset sale was below expectations, proceeds, together with cash on hand, will be used to reduce about $1 billion in debt, according to a company news release.

The minority stake enables L Brands to participate in any upside from a turnaround at Victoria’s Secret and frees Bath & Body Works, which accounted for 90% of L Brands’ operating income, for continued growth, the company said.

In addition to the sale, L Brands announced the anticipated departure of chief executive officer Les Wexner.

Indexes mixed

Indexes were again mixed on Thursday as they have been for most of the week.

The KDP High Yield Daily index gained 1 basis point to close the day at 71.63 with the yield now 4.85%. The index was flat on Wednesday and rose 5 bps on Tuesday.

The ICE BofAML US High Yield index gained 12 bps with the year-to-date return now 1.253%. The index was up 10.9 bps on Wednesday and 1 bp on Tuesday.

The CDX High Yield 30 index dropped 10 bps to close Thursday at 109.06. The index rose 6 bps on Wednesday and dropped 18 bps on Tuesday.

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