Primary quiet; KIK in focus; Antero, Live Nation at a premium

By Paul A. Harris and Abigail W. Adams

Portland, Me., Dec. 18 – The domestic high-yield primary market was quiet on Friday after a high-volume week that saw a cumulative $11.6 billion price in 24 junk-rated, dollar-denominated tranches.

While many feel the primary market will remain closed for the remainder of the year, there may still be a deal or two before all is said and done, sources said.

Meanwhile, the secondary space was largely unchanged on Friday with volume light as the end of the year approaches.

New issues remained in focus and continued to perform well.

KIK Consumer Products’ two tranches of senior notes were active and trading at a steep premium to their issue price.

Antero Resources Corp.’s 8 3/8% senior notes due 2026 (B3/B) continued to trade on a 101-handle after a strong break the previous session.

While the notes did not reach the same heights as some of the other issues, Live Nation Entertainment, Inc.’s 3¾% senior secured notes due 2028 (B1/B+) were also seen at a premium to their issue price in active trading.

Friday’s primary

The first four sessions of the past week saw the new issue bourse generate $11.6 billion of proceeds in 24 junk-rated, dollar-denominated tranches.

However on Friday the primary market put up a goose egg, as liquidity thinned, sources said.

To all appearances on Friday the 2020 primary market has run its course, however market sources advise that, though it is unlikely, there could be business in the early part of the pre-Christmas week.

Late Friday an investor said that it appears the new issue market is done for the year.

The month of December to Friday's close saw $30 billion of issuance.

Issuers taking advantage of the late-year issuance window, in the technically robust high-yield primary market, paid something of a premium for doing so, a trader said on Friday.

That's because those issuers were not only competing for investors' attention against the dwindling year-end calendar, but they were also competing against each other in order to get deals done, the trader said.

Issuance premiums, thus extracted, help to explain why December issues, in the main, have performed exceptionally in the secondary market, the source added.

KIK in focus

KIK’s two tranches of senior notes were trading with large premiums to their issue prices in high-volume activity.

However, as has been a recent theme in dual-tranche offerings that include a secured and unsecured tranche, the unsecured notes outperformed

KIK’s 5% senior secured notes due 2026 (B2/B-) were changing hands on a 102-handle and were seen trading as high as 102 7/8 in the late afternoon.

The 7% senior notes due 2027 (Caa2/CCC) rose to a 103-handle and were seen changing hands at 103½ in the late afternoon.

The tranches were the most actively traded in the secondary space with more than $85 million in reported volume by the late afternoon.

KIK priced a downsized $1 billion, from $1.125 billion, two-tranche offering on Thursday.

The deal included a downsized $475 million tranche, from $600 million, of the 5% notes and a $525 million tranche of the 7% notes – both priced at par.

The 5% notes came at the tight end of the 5% to 5¼% yield talk. Initial guidance was in the 6% area.

The 7% notes came at the tight end of the 7% to 7¼% talk. Initial guidance was in the 8% area.

Antero on a 101-handle

Antero Resources’ 8 3/8% senior notes due 2026 (B3/B) continued to trade on a 101-handle after a strong break.

The notes were marked at 101 3/8 bid early in the session. They were changing hands at 101¾ in the late afternoon.

Antero priced a $500 million issue of the 8 3/8% notes at par on Thursday. Pricing came at the tight end of talk for a yield in the 8½% area. Initial guidance was in the high 8% area.

Live Nation at a premium

Live Nation’s 3¾% senior secured notes due 2028 did not reach the same level as some other recent deals; however, the notes were trading with a solid premium in the aftermarket.

The notes were changing hands in the par ½ to 101 context on Friday, a level reached shortly after breaking for trade, sources said.

The notes were active with more than $30 million in reported volume during the session.

Live Nation priced a $500 million issue of the 3¾% notes at par on Thursday.

Pricing came at the tight end of the 3¾% to 4% yield talk. Initial guidance was 4¼% to 4½%.

$655 million Thursday inflows

The dedicated high-yield bond funds saw daily cash inflows of $655 million on Thursday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs saw $505 million of inflows on the day.

Actively managed high-yield funds saw $150 million of inflows on Thursday, the source said.

News of Thursday's daily flows trails a Thursday afternoon report that the combined funds sustained $1 billion of net outflows in the week to the Wednesday, Dec. 16 close, according to the Refinitiv Lipper Fund Flow Report Newsline.

Parsing those weekly flows, the high-yield ETFs actually sustained $1.2 billion of outflows, during that period, while actively managed funds saw positive cash flows on the week, the market source said.

Net inflows to the combined high-yield bond funds since the week ending March 25 stood at $64.6 billion, as of Thursday's close, according to the market sources.

Indexes mixed

Indexes were mixed on Friday with some posting slight losses while others continued to gain.

The KDP High Yield Daily index shaved off 2 points to close the day at 68.68 with the yield now 4.48%.

The index was up 8 points on Thursday, 3 points on Wednesday, 5 points on Tuesday and 7 points on Monday.

The index posted a cumulative gain of 15 points on the week.

The ICE BofAML US High Yield index gained 5 bps with the year-to-date return now 5.525%.

The index was up 8.3 bps on Thursday, 4.7 bps on Wednesday, 4.5 bps on Tuesday and 13.4 bps on Monday.

The index posted a cumulative gain of 35.9 bps on the week.

The CDX High Yield 30 index was down 11 bps to close Friday at 109.07.

The index gained 21 bps on Thursday, dropped 19 bps on Wednesday, and gained 31 bps on Tuesday and 1 bp on Monday.

The index was up 22 bps on the week.

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