Torrent of issuance prices in junkland; Rakuten hits new low; Altice France down again

By Paul A. Harris and Abigail W. Adams

Portland, Me., April 16 – The Tuesday session generated an absolute torrent of new issue news in both the dollar- and euro-denominated high-yield primary markets.

Meanwhile, it was another soft day in the secondary space on Tuesday with Federal Reserve chair Jerome Powell signaling a higher-for-longer rate environment in the wake of strong inflationary data.

The cash bond market was off another ¼ to 3/8 point with the market’s year-to-date gains eliminated over the past week, a source said.

The market dramatically repriced since last Wednesday’s Consumer Price Index report with the market now questioning if the Fed will cut rates, not when.

While the market remains new issue focused with the primary market still very much open, the strong performance of new paper seen in the first quarter has started to wane.

Rocket Software Inc.’s downsized Tuesday offering was “not a good sign” for the market, a source said.

From recent deals, Rakuten Group Inc.’s 9¾% senior bullet notes due 2029 (BB), a heavily sought after deal that made strong initial gains in the aftermarket, had heavy selling pressure on Tuesday with the notes falling below issue price for the first time since breaking for trade.

While trading volume remained thin outside of new and recent issues, earnings and topical news continued to spark activity in outstanding issues.

Altice France SA’s senior secured notes were down in active trade as creditors band together ahead of debt negotiations with the company.

Primary market

The frantic primary market left a trader in New York pondering why, in a session that saw cash bonds slide ¼ of a point amid liquidity that was nothing to write home about, eight issuers announced dollar-denominated deals scheduled to clear the market before the coming weekend.

The answer to this puzzler possibly has to do with rates, the trader said.

“People are probably watching rates climb, and they want to get their deals done before they climb higher,” the source remarked.

Ten-year Treasuries were headed out Tuesday yielding 4.67%, the trader noted, adding that they began April yielding 4.33%.

“That’s a pretty big move,” the source observed.

On Tuesday, three dollar-denominated issuers brought a total of five junk tranches, raising an overall total of $3.8 billion.

ZF North America Capital Inc. (Ba1/BB+) priced $1.5 billion of green senior bullet notes in two drive-by tranches.

The deal featured an $800 million tranche of six-year notes that priced at par to yield 6¾%, and a $700 million tranche of eight-year notes that priced at par to yield 6 7/8%.

Both tranches came tight to talk.

Demand across both tranches came to around $3.7 billion, according to a bond trader who added that the demand was skewed toward the shorter maturity paper.

The bonds in both tranches were wrapped around par in late Tuesday afternoon trading, the source added.

Sunoco LP also priced $1.5 billion of senior notes (Ba3/BB/BB+) in two tranches in a drive-by.

That deal included $750 million of eight-year notes that priced at par to yield 7¼%, and $750 million of five-year notes that priced at par to yield 7%.

Both tranches came in the middle of talk.

The deal was heard to be playing to $2 billion of demand, slightly skewed toward the eight-year notes, a trader said.

And Rocket Software Inc. priced a downsized $800 million issue (from $1 billion) of 4.5-year senior secured notes (B3/B-/BB-) at par to yield 9%, in the middle of talk.

The deal underwent investor-friendly covenant changes, a trader said.

Along with those five tranches from Tuesday’s trio of issuers, the session featured announcements of dollar-denominated bonds being offered by Six Flags Entertainment Corp. (Six Flags Theme Parks Inc.) and Empire Communities Corp., in addition to Australia-based Perenti Finance Pty Ltd., Ireland-based Flutter Entertainment plc (Flutter Treasury DAC), and France’s Vallourec SA.

And there were also five euro-denominated tranches announced on Tuesday. all of them expected to price ahead of Friday’s close.

Rakuten falls

From recent issues, Rakuten’s 9¾% senior bullet notes due 2029 had heavy selling pressure on Tuesday with the notes sinking below their issue price for the first time since breaking for trade in early April.

The 9¾% notes were off 1 point in heavy volume.

They opened the day on a 99-handle and continued to move lower as the session progressed.

The notes were trading in the 98 7/8 to 99 1/8 context heading into the market close, according to a market source.

There was $19 million in reported volume.

Rakuten priced a $2 billion issue of the 9¾% notes at 99.512 to yield 9 7/8% on April 3.

The deal was a “blowout,” sources said, with books in excise of $11 billion prior to pricing.

The notes shot up to a 101-handle their initial days in the market but have since faded.

Tuesday marked the first time the notes have traded below their discounted issue price.

While the majority of deals to price in the first quarter met with solid demand and traded up in the aftermarket, that trend is starting to change, sources said.

Several deals to price last week are now trading below their issue prices.

Altice France falls further

Altice France’s senior secured notes were lower in heavy volume as creditors ban together in preparation for debt talks with the company.

Altice France’s 8 1/8% senior secured notes due 2027 (Caa1/CCC+) were the most active in the debt stack with the notes falling 1½ points.

The notes were changing hands at 75¾ heading into the market close with the yield 19 7/8%, a source said.

There was $25 million in reported volume.

Altice France’s 5½% senior secured notes due 2029 (Caa1/CCC+) were also off 1½ points.

The notes were wrapped around 65 with a yield of 15 1/8% heading into the close, a source said.

There was $23 million in reported volume.

The telecom’s 5½% senior secured notes due 2028 (Caa1/CCC+) were also down 1½ points to trade at 66 7/8 in the late afternoon.

The yield was about 18%.

There was $17 million in reported volume.

The activity in Altice France’s secured notes comes as the company’s secured creditors ban together in preparation for debt negotiations.

Secured creditors were heard to be entering into a cooperation agreement in upcoming debt negotiations.

Altice France’s capital structure has crumbled since reporting earnings in late March and issuing a warning to creditors that they may need to participate in discounted transactions.

Indexes

The KDP High Yield Daily index was down 21 basis points to close Tuesday at 49.23 with the yield now 7.41%.

The index was down 20 bps on Monday.

The ICE BofAML US High Yield index was down 40.7 bps with the year-to-date returns turning from positive territory to a negative 0.33%.

The CDX High Yield 30 index dropped 17 bps to close Tuesday at 105.19.

The index was down 59 bps on Monday.

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