Leviathan, Penske, Emergent, Element, Xerox price; Melco adds on; Service, Apache gain

By Paul A. Harris and Abigail W. Adams

Portland, Me., Aug. 4 – The domestic high-yield primary market continued to roll out the new issues on Tuesday with six issuers pricing a cumulative $5.5 billion in 10 tranches.

Xerox Holdings Corp., Element Solutions Inc., Penske Automotive Group, Inc., Emergent BioSolutions Inc., Leviathan-Delek (Leviathan Bond Ltd.) and Melco Resorts Finance Ltd. all cleared the market on Tuesday.

Wednesday also promises to be a busy session with offerings from Harvest Midstream I LP and Western Global Airlines LLC on deck.

Meanwhile, the secondary space was largely unchanged on Tuesday with the influx of new paper jolting trading activity despite Hurricane Isaias leaving many traders in the Tri-State area without power.

Apache Corp.’s two tranches of senior notes (Ba1/BB+/BB+) were active and trading with healthy premiums to their issue prices.

Service Corp. International’s 3 3/8% senior notes due 2030 (Ba3/BB) were also posting gains in the secondary space despite their tight pricing.

Tuesday’s session

Primary market news flow remained heavy on Tuesday, as the path to the new issue market has become clear for issuers armed with fresh earnings numbers, now that the earnings blackout of late July is in the rearview mirror.

Xerox Holdings priced an upsized, roadshow-marketed $1.1 billion (from $800 million) of senior notes (Ba1/BB) in two bullet tranches: $550 million of 5% five-year notes and $550 million of 5½% eight-year notes, both tranches coming tight to talk.

In a drive-by, Element Solutions doubled its deal size to $800 million, and priced the issue of eight-year senior notes at par with a tight to talk 3 7/8% yield.

Penske Automotive Group drove through with a $550 million issue of five-year senior subordinated notes (Ba3/B+) that came at par with a tight to talk 3½% yield.

The deal was trading at par ¾ 101¼ late Tuesday, a trader said.

In a drive-by deal heard to have gone very well, Emergent BioSolutions priced an upsized $450 million (from $400 million) issue of eight-year senior notes at par to yield 3 7/8%.

The yield printed at the tight end of yield talk in the 4% area, and deep inside of the 4½% to 4¾% initial guidance, a bond trader said, adding that it was heard to be playing to $4.5 billion (!) of orders at 3 7/8% – where it came – on Tuesday afternoon.

Melco Resorts Finance Ltd. priced an upsized $350 million (from $250 million) add-on to its 5¾% senior notes due July 21, 2028 (expected ratings Ba2/BB) at 101, the rich end of talk.

And Israel-based Leviathan-Delek (Leviathan Bond Ltd.) priced $2.25 billion of senior secured bullet notes (Ba3/BB-/BB) in four tranches, all coming either at talk, tight to talk or inside of talk.

The deal had a high-yield audience, especially among the fast money accounts, but is expected to trade as emerging markets paper, sources say.

Wednesday

Looking to Wednesday, Harvest Midstream I LP is on deck with a $600 million offering of eight-year senior notes (B1/BB-/BB-) talked Tuesday at 7½% to 7¾%, tight to the 7¾% to 8% whisper.

And Western Global Airlines is on deck for Wednesday with a downsized $410 million (from $420 million) offering of restructured five-year senior bullet notes (B3/B-/B+) talked to yield 8¾% to 9%.

Apache at a premium

Apache’s two tranches of senior notes were posting gains in active trading on Tuesday.

The oil and gas company’s 4 5/8% senior notes due 2025 were changing hands in the par ½ to 101 context on Monday.

The 4 7/8% senior notes due 2027 were trading in the par 3/8 to par 5/8 context in active trading.

The fallen angel priced a $500 million issue of the 4 5/8% notes and a $750 million issue of the 4 7/8% notes, both at par, on Monday.

The notes priced tighter than early guidance which was 5% to 5¼% for the five-year tranche and 5 3/8% to 5 5/8% for the seven-year tranche.

Proceeds will be used to fund tender offers for up to seven series of its notes.

Apache’s capital structure recently jumped following earnings and an oil discovery off the coast of Suriname that could provide some of the most profitable barrels of oil in the world.

Service Corp. gains

Service Corp.’s 3 3/8% senior notes due 2030 were also posting gains in active trading despite the tight pricing of the notes.

The 3 3/8% notes rose to a 101 handle on Tuesday. They were changing hands in the 101 1/8 to 101 3/8 context heading into the market close.

Service Corp. priced an $850 million issue of the 3 3/8% notes at par in a Monday drive-by.

Pricing came through the 3½% to 3¾% yield talk. Initial talk was for a yield in the 4% area.

Weekly flows at $4.2 billion

With two sessions remaining in the current reporting week, which will conclude with Wednesday's close, the combined funds are already tracking a whopping $4.2 billion of week-to-date inflows, according to the market source.

Indexes

The KDP High Yield Daily index gained 1 basis point to close Tuesday at 67.04 with the yield now 5.58%. The index was up 7 bps on Monday.

The ICE BofAML US High Yield index continued to teeter on positive territory.

The index added 0.3 bps with the year-to-date return now negative 0.01%.

The index gained 21.58 bps on Monday.

The CDX High Yield 30 index rose 13 bps to close Tuesday at 102.95. The index shaved off 2 bps on Monday.

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