Three issuers price $1.85 billion; Chobani, Starwood at a premium; Parsley jumps

By Paul A. Harris and Abigail W. Adams

Portland, Me., Oct. 20 – The high-yield primary market continued to churn out new deals on Tuesday with three issuers pricing a cumulative $1.85 billion.

Among the issuers to clear the market on Tuesday were Dave & Buster's Entertainment, Inc. and Restaurant Brands International Inc.

The forward calendar also continued to grow with Aspen Insurance the latest issuer to offer PIK toggle notes.

Meanwhile, the secondary space firmed on Tuesday with the cash bond market up about ¼ point, a source said.

New paper was in focus and performing well in the aftermarket.

Dave & Buster’s and Restaurant Brands’ new notes were both trading with premiums in the aftermarket.

Chobani, LLC’s 4 5/8% senior notes due 2028 (B1/B-) continued to gain in active trading after a strong break the previous session.

Starwood Property Trust, Inc.’s 5½% senior notes due 2023 (Ba3/B+) were also trading at a premium to their issue price in active trading.

Outside of recent issues, Parsley Energy LLC and Parsley Finance Corp.’s senior notes jumped in active trading on news of a pending buyout.

Tuesday’s primary

Three issuers raised a combined total of $1.85 billion on Tuesday, each bringing a single tranche of dollar-denominated high-yield notes.

Two of those issuers came with drive-by deals.

Two of them upsized their offers.

Executions were solid, with one deal pricing upsized and tight to inwardly revised talk, one pricing at the tight end of talk and one pricing in the middle of talk.

Tuesday primary market action included Dave & Buster's which priced an upsized $550 million issue (from $500 million) of five-year senior secured notes (Caa1/B-) at par to yield 7 5/8%.

The yield printed at the tight end of revised yield talk in the 7¾% area. Earlier talk was 8% to 8¼%. Initial talk was in the mid-to-high 8% area.

It was a blowout in spite of the fact that the issuer drove pricing tighter and tighter while the deal was in the market, according to a bond trader who added that the orders amounted to at least four times the size of the original offer.

The notes immediately hit a 101-handle after breaking for trade. They were marked at 101½ bid, 101¾ offered, a source said.

The bonds were active with more than $75 million in reported volume.

Also on Tuesday, Restaurant Brands International priced an upsized $750 million issue (from $500 million) of 3½% 8.25-year first-lien senior secured notes (expected ratings Ba2/BB+) via issuing entities 1011778 BC ULC and New Red Finance Inc. (see related stories in this issue).

The new notes were also trading at a premium in the aftermarket.

They were marked at par ¼ bid, par ½ offered after freeing for trade.

It was the third time the Toronto-based fast-food company showed up at the high yield drive-through window since mid-September.

Since that time, it has raised a total of $2.65 billion.

On Sept. 16 the company priced $1.4 billion of 4% notes due October 2030.

Then on Oct. 14 Restaurant Brands tapped that issue of 4% notes due 2030 to the tune of $1.5 billion.

Both new issues, as well as the add-on, priced at par.

Calendar

Meanwhile the active forward calendar continued to build on Tuesday.

Announcements included the second PIK toggle holdco dividend deal to appear in as many days.

Aspen Insurance started a roadshow for a $500 million offering of Highlands Holdings Bond Issuer, Ltd. and Highlands Holdings Bond Co-Issuer, Inc. five-year senior secured PIK toggle notes.

In addition to funding a distribution the company plans to use proceeds to provide additional capital to its operating group, and to pay for the initial period’s interest expense (see related stories in this issue).

On Monday Multi-Color Corp. began marketing a $500 million offering of LABL Intermediate Holding Corp. five-year senior PIK toggle notes, with proceeds to fund a dividend to shareholders.

PIK toggle holdco dividend deals empower an issuer to increase its own leverage by paying “in-kind,” that is, with more notes instead of cash. And bond investors essentially get to watch their cash taken off the table and go straight into the pockets of shareholders.

Those are among the reasons for which market veterans tend to refer to them as “hot market deals.”

Chobani gains

Chobani’s 4 5/8% senior notes due 2028 continued their upward momentum in high-volume activity on Tuesday.

The notes were changing hands in the 101 3/8 to 101 5/8 context heading into the market close.

There was more than $74 million of the bonds on the tape by the late afternoon.

Chobani’s offering was “a blowout,” with the notes seeing a strong break despite the weak tape on Monday, a source said.

The notes quickly rose to a 101-handle, closing the previous session at 101¼.

Chobani priced an upsized $425 million, from $325 million, issue of the 4 5/8% notes at par in a Monday drive-by.

Pricing came at the tight end of yield talk in the 4¾% area. Initial talk was in the 5% area.

Starwood at a premium

Starwood Property’s 5½% senior notes due 2023 were trading with a decent premium to their issue price in the aftermarket.

The notes were changing hands in the par ½ to par ¾ context throughout Tuesday’s session.

Another source saw them trading up to par 7/8 heading into the market close.

While the issue was small, the bonds were active with more than $31 million in reported volume.

Starwood priced a $300 million issue of the 5½% notes at par in a Monday drive-by.

Pricing came at the tight end of the 5½% to 5¾% yield talk. Initial guidance was in the mid-to-high 5% area.

Parsley’s buyout

Parsley’s senior notes jumped in active trading on news Pioneer Resources Corp. was in talks to buy out the company.

Reports were confirmed after the close of the equity markets.

Parsley’s 4 1/8% senior notes due 2028 gained 4¾ points to close the day at 104½.

The 5 5/8% senior notes due 2027 gained 3¼ points to close the day at 106½.

The companies announced post-close that Pioneer would acquire all of Parsley’s outstanding shares and assume its debt in a deal valued at $7.6 billion.

Pioneer is an investment grade-rated company.

$284 million Monday outflows

The dedicated high-yield bond funds sustained $284 million of net daily outflows on Monday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs sustained $389 million of outflows on the day.

Actively managed high-yield funds were positive, seeing $105 million of inflows on Monday, the source said.

The combined funds are tracking $368 million of net outflows for the week that will conclude with Wednesday's close, according to the market source.

Indexes mixed

Indexes were flat to on the rise on Tuesday after launching the week on soft footing.

The KDP High Yield Daily index was flat on Tuesday closing the day at 66.77, which was flush with Monday’s close. However, the index shaved off 1 basis point to close the day at 5.4%.

The ICE BofAML US High Yield index gained 2.8 bps with the year-to-date return now 1.203%.

The index was up 10.1 bps on Monday.

The CDX High Yield 30 index gained 27 bps to close Tuesday at 105.6.

The index dropped 41 bps on Monday.

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