Callon drives-by, 2023 notes top par; forward calendar grows; MicroStrategy down again

By Abigail W. Adams

Portland, Me., June 21 – The domestic high-yield primary market saw an active session with one drive-by deal pricing and several more joining the forward calendar on Monday.

Callon Petroleum Co. priced $650 million of seven-year senior notes (Caa2/CCC+) in a drive-by.

The new paper traded at a premium to their issue price on the break; however, they remained on a par-handle.

Callon’s 6¼% senior notes due 2023 popped above par for the first time in more than 1.5 years after the refinancing deal was announced with proceeds to be used to take out the 6¼% notes.

While only one deal cleared the primary market on Monday more than $3 billion joined the forward calendar.

Freedom Mortgage Corp., ITT Holdings LLC and VMED O2 UK Financing I plc were among the larger offerings announced on Monday.

Meanwhile, it was an uneventful day in the secondary space with the cash bond market largely unchanged and trading volume light.

MicroStrategy Inc.’s 6 1/8% senior secured notes due 2028 (B1/B-) were again under pressure alongside the price of Bitcoin.

Callon drives-by, 2023 notes top par

Callon Petroleum priced $650 million of seven-year senior notes (Caa2/CCC+) in a Monday drive-by at par with a coupon of 8%, according to a market source.

Pricing came at the tight end of talk for a yield of 8% to 8¼%. Early guidance was for a yield in the low 8% area.

The new paper was performing well on the break although it remained on a par-handle.

The notes were marked at par 3/8 bid, par ¾ offered, according to a market source.

Proceeds from the new offering will be used to redeem the oil and natural gas exploration and production company’s 6¼% senior notes due 2023.

Callon’s 6¼% notes were active on the news with the notes popping above par for the first time since January 2020.

The notes rose about ½ point to trade up to par ¼ heading into the market close, according to a market source.

There was more than $13 million in reported volume.

Monday’s level was the highest for the 6¼% notes in more than 1.5 years.

The notes have been below par since 2020 and were trading in the mid-70s at the start of the 2021, according to Trace data.

The calendar

Monday marked a substantial buildup in the forward calendar with the last full week of the second-quarter expected to be a monumental one for the primary market.

Freedom Mortgage plans to price a $650 million offering of long five-year senior notes (existing B2/B/B+) on Tuesday with early whispers for a high 7% area yield.

The deal looked attractive with early guidance wide enough to the company’s 7 5/8% senior notes due 2026 to make it worth playing, a source said.

ITT Holdings plans to price $1.22 billion of eight-year senior notes during the June 21 week with early guidance for the notes in the low 6% area.

VMED 02, or Virgin Media 02, a newly formed company that was created through the joint venture of Liberty Global’s Virgin Media and Telefonica SA’s 02 UK businesses, plans to price a £1.13 billion equivalent 10-year non-call five-year green senior secured dual-currency offering (exp. Ba3/BB-/BB+).

The deal includes a dollar-denominated tranche and a sterling-denominated tranche.

The dollar-denominated tranche will be a minimum of $750 million with initial price talk in the high 4% area, according to a market source.

MicroStrategy down again

MicroStrategy’s recently priced 6 1/8% senior notes due 2028 were again under pressure on Monday with the notes dropping back below par after rallying above the previous week.

The notes dropped more than 1 point to 99¼ during Monday’s session, according to a market source.

There was more than $8 million in reported volume.

Proceeds from MicroStrategy’s $500 million issue of the 6 1/8% notes, which priced at par, were used to purchase Bitcoin.

The notes have largely moved inline with the price of Bitcoin.

Bitcoin was again on the decline on Monday as China ramps up its crackdown on the crypto-currency.

Bitcoin was trading at $32,625, a decrease of 8.97%, shortly before 5 p.m. ET.

Technical analysis aficionados have been closely watching the price of Bitcoin as it forms a “death cross” pattern with its 50-day moving average dropping below its 200-day moving average over the past few sessions – an indication of future losses.

Fund flows

High-yield exchange traded and actively managed funds saw inflows on Friday, the most recent session for which data was available.

Exchange-traded funds saw inflows of $96 million while actively managed funds saw inflows of $50 million, according to a market source.

While Friday’s fund flows were a minor reprieve, high-yield funds have seen $14.9 billion in outflows year-to-date.

Indexes mixed

Indexes were mixed on Monday after posting cumulative losses the previous week.

The KDP High Yield Daily index shaved off 2 points to close Monday at 69.90 with the yield now 3.82%.

The index posted a cumulative loss of 24 points on the week last week.

The CDX High Yield 30 index jumped 30 points to close Monday at 109.93.

The index posted a cumulative loss of 62 bps on the week last week.

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