Graphic Packaging prices; Zayo mixed; Mattamy flat; AA struggles; Freeport-McMoRan lower

By Paul A. Harris and Abigail W. Adams

Portland, Me., Feb. 21 – Despite the volatility that rocked markets on Friday, one issuer was able to clear the domestic high-yield primary market with a solid execution.

Graphic Packaging priced an upsized $450 million issue of eight-year senior bullet notes (Ba2/BB+).

Meanwhile, the secondary space closed the week on soft footing.

While the market held throughout the early part of the session, it started to crack into the afternoon as the sell-off in equities accelerated.

The secondary space saw a lot of ETF selling and short covering in the afternoon, a market source said.

Several recent deals were struggling on the heavy day for the market.

Zayo Group Holdings Inc.’s recently priced tranches saw mixed performances in the secondary space with the secured tranche falling below par while the unsecured tranche traded with a healthy premium.

Mattamy Group Corp.’s 4 5/8% senior notes due 2030 (B1/BB) were largely stuck at par.

American Airlines Group Inc.’s 3¾% senior notes due 2025 (B1/BB-/BB-) traded well below their issue price with concern about the impact of the coronavirus on the airline weighing on investors.

Freeport-McMoRan Inc.’s recently priced 4 1/8% senior notes due 2028 and 4¼% senior notes due 2030 (Ba1/BB) continued to trend lower in active trading.

Primary plows through rocky day

Volatility, said to be generated by continuing investor concerns about the impact of coronavirus on global health and the world economy, took hold of the American and European stock markets on Friday.

The S&P 500 index fell 1.05% on the day.

One issuer found itself engulfed in Friday's volatility, and saw a solid execution, nonetheless.

Graphic Packaging priced an upsized $450 million issue of eight-year senior bullet notes at par to yield 3½% in a drive-by.

The issue size increased from $400 million.

Initial price talk was in the high 3% area, a bond trader said.

“It was pretty amazing to see Graphic Packaging go so well,” a syndicate banker remarked just ahead of Friday's close.

People are trying to get a fix on coronavirus, the banker said, noting Friday headlines tracking the advance of the virus into places as far flung as Iran, Italy and South Korea.

“It's a humanitarian catastrophe with vast economic implications,” the banker said, reiterating that investors, keening to take its measure, took stock prices lower on Friday.

Amid the volatility it is difficult to forecast junk bond new issue volume for the week ahead, the banker said, adding that to this point, with Graphic Packaging enjoying a solid execution on Friday, the high-yield primary market has been operating remarkably well.

Heading into the weekend the active forward calendar has just one dollar-denominated deal that is expected to clear during the final week of February.

Advantage Solutions Inc. started a roadshow on Friday for $1.145 billion of notes: $345 million 6.5-year senior secured notes with initial talk in the mid-to-high 6% area, and $800 million seven-year senior unsecured notes with initial talk in the high 10% area.

Zayo mixed

Zayo Group’s two tranches of senior notes were mixed in the secondary space on Friday with the unsecured tranche trading at a premium and the secured tranche lagging its issue price.

Zayo’s 4% senior secured notes due 2027 (B1/B) traded below par in high-volume activity.

The 4% notes were trading in the 99 3/8 to 99 5/8 context for much of Friday’s session but popped up to the 99½ to 99¾ area heading into the afternoon, a market source said.

While the secured notes were lagging their issue price, they were holding up well considering the down day for the market and the performance of some other recent deals, a market source said.

Zayo’s 6 1/8% senior unsecured notes due 2028 (Caa1/CCC+) were trading at a large premium on Friday. The notes were largely wrapped around 101 during the session, a source said.

Zayo priced a downsized $2.58 billion two-tranche offering on Thursday.

The deal included an upsized $1.5 billion tranche of the 4% notes and a downsized $1.08 billion tranche of the 6 1/8% notes, both of which priced at par.

The 4% notes priced at the tight end of the 4% to 4¼% yield talk and tighter than early guidance in the 4½% area.

The secured tranche was upsized from $1 billion.

The 6 1/8% notes priced at the tight end of yield talk in the 6¼% area and tighter than early guidance in the 6¾% area.

The unsecured tranche was downsized from $2.08 billion.

The overall size of the deal was initially $3.08 billion.

While downsized, both tranches were in high demand during bookbuilding with the order book exceeding $5 billion, sources said.

Mattamy flat

Mattamy’s 4 5/8% senior notes due 2030 were active on Friday.

However, the notes fell flat and were largely stuck at par in the secondary space, a source said.

Mattamy priced an upsized $600 million tranche of the 4 5/8% notes at par in a Thursday drive-by as part of a dual-currency offering.

The 4 5/8% notes priced in the middle of talk for a yield in the 4 5/8% area.

The tranche size increased from $500 million.

The deal also included a C$250 million tranche of eight-year notes, which priced at par to yield 4 5/8%.

American Airlines struggles

American Airlines’ 3¾% senior notes due 2025 were struggling in the secondary space on Friday.

The notes were changing hands in the 99¼ to 99¾ context for most of the session, sources said.

In addition to the tight pricing of the notes, the airline’s exposure to the coronavirus was weighing on investors, a source said.

While the notes were trading down on Friday, concern regarding the coronavirus’ impact on the airline may be overblown, a source said.

American Airlines is mostly a domestic carrier and may have limited exposure to the coronavirus, a source said.

“We’ll see what happens,” the source said. “It priced tight but it’s still a BB.”

American Airlines priced a $500 million issue of the 3¾% notes at par in a Thursday drive-by.

Pricing came at the tight end of talk for a yield in the 3 7/8% area.

Freeport-McMoRan down again

Freeport-McMoRan’s recently priced senior notes continued to trend lower in the secondary space, a market source said.

The 4¼% senior notes due 2030 were trading in the 99¼ to 99½ area on Friday. They were trading in the 99½ to par context on Thursday.

The mining company’s 4 1/8% senior notes due 2028 were changing hands in the 99 3/8 to 99 5/8 context, a source said.

They were changing hands between 99¾ and par on Thursday.

Heavy market conditions were taking a toll on the notes, a source said.

Freeport-McMoRan priced a $700 million tranche of the 4 1/8% notes and a $600 million tranche of the 4¼% notes at par on Wednesday.

The $1.3 billion offering was the second largest of the week.

Indexes down

Indexes closed Friday with losses. However, they were mixed on the week with one flat, one posting gains and another losses.

The KDP High Yield Daily index dropped 5 basis points to close Friday at 71.58 with the yield now 4.89%.

The index gained 1 bp on Thursday, was flat on Wednesday and rose 5 bps on Tuesday.

The index posted a cumulative gain of 1 bp on the week.

The ICE BofAML US High Yield index shaved off 5.9 bps with the year-to-date return now 1.194%. The index gained 12 bps on Thursday, 10.9 bps on Wednesday and 1 bp on Tuesday.

The index saw a cumulative gain of 17.6 bps on the week.

The CDX High Yield 30 index dropped 28 bps to close Friday at 108.78. The index was down 10 bps on Thursday, rose 6 bps on Wednesday and dropped 18 bps on Tuesday.

The index posted a cumulative loss of 50 bps on the week.

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