Primary prices $3.7 billion from six issuers; MGM slips; Diamond Sports gains

By Paul A. Harris and Abigail W. Adams

Portland, Me., Oct. 14 – A big Wednesday in the new issue market had half a dozen companies, each with a single dollar-denominated tranche, price $3.7 billion face amount of junk.

Four of the six issuers upsized their offerings.

Half came as drive-bys.

Meanwhile, trading activity was relatively light in the secondary space as the active calendar of new deals took center stage.

While the market was soft heading into the close, it continued to hold up well amid the sell-off in equities, a source said.

MGM Resorts International’s 4¾% senior notes due 2028 (Ba3/BB-) slipped below par in active trading on Wednesday.

Diamond Sports Group LLC and Diamond Sports Finance Co.’s 5 3/8% senior secured notes due 2026 gained in active trading as holders of the company’s first-lien term loan organize to prevent transactions that will decrease the value of the company’s debt.

Solid executions

Six issuers brought $3.7 billion of new paper into the high-yield primary on Wednesday.

And if risk-aversion – related to politics, the pandemic or what have you – is creeping into the junk market it did not show itself in Wednesday's solid executions, with one tranche coming inside of talk, three pricing at the tight or rich ends, with the other two in the middle of talk.

Of particular note was Wednesday's megadeal from Rolls-Royce plc which priced approximately £1.99 billion equivalent of senior bullet notes (Ba3/BB-/BB+) in three tranches.

The dollar piece was a $1 billion tranche of 5¾% straight seven-year notes that priced inside of talk, and was heard to be playing to $4.5 billion of orders when books closed (see related story in this issue).

Also on Wednesday came news of the second deal withdrawal of the week.

Prime Focus World NV (DNEG plc) postponed a $375 million private offering of senior secured notes due 2025 (B2//BB-) that underwent a steep price climb, according to market sources who said that recent conversations involved a 9% coupon at a discount to yield in the 10% area, up from earlier guidance of 8¼% to 8½%.

Earlier in the week Ahead DB Holdings LLC withdrew from the market its proposed $375 million offering of seven-year senior secured notes.

However, Ligado Networks LLC, in the market with what sources roundabout are describing as a “hairy deal,” is pressing on with at least a piece of its debt refinancing effort, the size of which remains to be announced, although a benchmark size is expected, sources say.

Conversations on the first-lien piece have lately taken place in the context of 15½%, including a sizable PIK, a trader said on Wednesday.

When news of the deal first hit the market first-lien talk was 13%, including 9% PIK and 4% cash, discounted to 96.

At the outset there was also mention of a second-lien tranche (again no size announced) that could come 300 basis points behind the first-lien piece.

However there has been no recent mention of the Ligado second-lien notes, the trader said.

MGM slips

MGM Resorts’ 4¾% senior notes due 2028 slipped in active trading on Wednesday.

After spending their initial days in the aftermarket wrapped around par, the notes dropped down to a 99-handle.

They were changing hands in the 99 5/8 to 99¾ context heading into the market close, a source said.

While the 4¾% notes were heard to be in high demand during bookbuilding with the issue upsizing and pricing tight, the notes have had a lackluster reception in the secondary space.

MGM priced an upsized $750, from $500 million, issue of the 4¾% notes at par on Oct. 8.

Diamond Sports gains

Diamond Sports Group’s 5 3/8% senior secured notes due 2026 were among the major gainers of Wednesday’s session.

The notes rose 2 points to a 66-handle in high-volume activity.

The notes were on the rise as holders of the company’s first-lien term loan organize to prevent transactions that will decrease the value of its secured debt.

Lenders to Diamond Sports’ first lien term loan due Aug. 2026 hired Gibson Dunn as a legal advisor to challenge potential transactions that would devalue the company’s debt, a market source said.

While Diamond Sports’ secured notes were posting gains on the news, the company’s 6 5/8% senior notes due 2027 were largely unchanged at 48¾, a source said.

The Diamond Sports bonds were the subject of controversy in mid-June after parent company Sinclair attempted to exchange the 6 5/8% notes for new 12¾% secured notes due 2026 to reduce its debt load.

The offer was to exchange $1,000 principal amount of old notes for $467 principal amount of new notes and $133 in cash, as an early tender consideration.

The exchange was bitterly opposed by a group of holders due to the steep losses the exchange entailed.

Only $66 million, or 3.62%, of the 6 5/8% notes were tendered in the any-and-all exchange.

$349 million Tuesday inflows

The dedicated high-yield bond funds had $349 million of net daily inflows on Tuesday, the most recent session for which data was available at press time, according to a market source.

Actively managed high-yield funds had $335 million of inflows on the day.

High-yield ETFs had $14 million of inflows on Tuesday, the source said.

With only Wednesday's daily fund flow numbers remaining to go into the tally the combined funds are tracking $1.8 billion of net inflows for the week to Wednesday's close.

Also of note, leveraged loan funds are tracking $162 million of net inflows for the week to Wednesday's close, according to the market source.

Should a weekly inflow be reported on Thursday, when the cash flows of the various asset classes are expected to be reported by Refinitiv Lipper, it would be only the seventh inflow for the dedicated bank loan funds in the last 98 weeks, the source said.

Indexes mixed

Indexes were again mixed on Wednesday.

The KDP High Yield Daily index continued to gain.

The index was up another 6 basis points to close Wednesday at 66.85 with the yield now 5.39%.

The index was up 7 bps on Tuesday.

The ICE BofAML US High Yield index slipped 4.2 bps on Wednesday with the year-to-date return now 1.253%.

The index was up 23.3 bps on Tuesday.

The CDX High Yield 30 index dropped 16 bps to close Wednesday at 106.

The index was down 13 bps on Tuesday.

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