Primary prices enormous $8.99 billion; Mohegan around par; California Resources gains

By Paul A. Harris and Abigail W. Adams

Portland, Ore., Jan. 19 – A primary market stoked on encouragement from an incoming U.S. Treasury secretary came out of the extended holiday weekend with the throttle wide open on Tuesday, with 10 issuers raising $8.99 billion across a total of 11 tranches.

It was the biggest day in the primary market in over a year.

Meanwhile, the secondary space was firm on Tuesday.

However, there was a feeling of hesitancy as market players eye the threats of violence surrounding the inauguration of President-elect Joseph Biden, a source said.

“No one knows what’s going to happen tomorrow. I’m sure we’ll be off to the races again if things go as planned,” the source said.

New paper was in focus with activity in the secondary space light as the market awaited the onslaught of deals in the pipeline.

Mohegan Gaming & Entertainment’s 8% senior secured notes due 2026 (Caa1/B-) were still hovering around par.

TransDigm Inc.’s 4 5/8% senior notes due 2029 (B3/B-) were slightly improved in active trading on Tuesday after closing out the previous session largely wrapped around par.

California Resources Corp.’s 7 1/8% senior notes due 2026 (B2/B+) continued to gain momentum in high-volume activity.

Debt encouraged

Treasury secretary nominee Janet Yellen put a charge in the capital markets on Tuesday when she told Congress that economic stimulus from the government, in order to fight off the economic impacts of the pandemic, is presently more important than containing debt, a trader said.

“The floodgates are open,” the trader added.

One immediate impact of the outlook for more stimulus was that the recently priced Mohegan Gaming & Entertainment 8% senior secured notes due February 2026 (Caa1/B-) were lifted back above par after trading “super heavy” at 99 5/8 bid subsequent to pricing at par late last week in a $1.175 billion issue.

The notes appeared to be trading into firmer hands, the trader remarked.

Another piece of evidence came in the form of “triple-hooks” deals – offerings with C ratings from two of two, or three of three ratings agencies – which came on Tuesday.

All three triple-hook deals came upsized, in sharp executions.

They included the CHS/Community Health Systems Inc. massively upsized $1.775 billion issue of eight-year junior-priority secured notes (Caa3/CCC-/CC) which priced at par to yield 6 7/8% in a Tuesday drive-by.

The issue size increased from $750 million.

Proceeds, including the additional proceeds resulting from the $1.025 billion upsizing of the deal, will be used to refinance the 11% junior-priority secured notes due 2023.

The market was skeptical of the $750 million size on the wrapper of the deal that was announced on Tuesday morning, given that the company ultimately had around $1.77 billion of the 11% notes due 2023 outstanding, the trader remarked.

Also note the difference in coupons, with the new 6 7/8% junior priority notes taking out 11% paper of equivalent rank.

Elsewhere Uniti Group LP priced an upsized $1.11 billion (from $750 million) issue of eight-year senior notes (Caa2/CCC) at par to yield 6½%, at the tight end of yield talk in the 6 5/8% area, in a Tuesday drive-by.

And Park River Holdings Inc. priced an upsized $400 million issue (from $345 million) of eight-year senior notes (Caa1/CCC+/CCC+) at par to yield 5 5/8%, inside of talk (see related stories in this issue).

Tuesday was the biggest day in the high-yield primary market since Nov. 21, 2019 which had $9.3 billion including $7 billion in three tranches from Centene Corp.

Mohegan back to par

Mohegan Gaming’s 8% senior secured notes due 2026 pushed back above par, as mentioned above.

The notes were marked at par bid, par ¼ offered on Tuesday, a source said.

There was a little over $21 million on the tape heading into the market close.

The 8% notes have been stuck around par since breaking for trade last Friday.

While the notes carried a large coupon and were secured, they priced tight given the credit, a source said.

Mohegan priced a $1.175 billion issue of the 8% notes at par last Friday.

Initial guidance was in the low 8% area.

TransDigm improves

TransDigm’s 4 5/8% senior notes due 2029 were slightly improved in active trading on Tuesday.

The 4 5/8% senior notes were changing hands in the par 3/8 to par ½ context throughout the session.

There was more than $40 million on the tape heading into Tuesday’s close, according to a market source.

The notes closed out the previous session at par ¼.

While slightly improved, the notes were still down from the heights reached after breaking for trade.

The 4 5/8% notes traded as high as 101 after pricing on Jan. 14.

California Resources gains

California Resources’ 7 1/8% senior notes due 2026 continued to trade up in high-volume activity on Tuesday.

The notes were up ¾ point to trade in the 102¾ to 103 context heading into Tuesday’s close.

There was more than $30 million on the tape during the session.

The 7 1/8% notes have made steady gains since pricing on Jan. 14.

The senior notes offering is the oil and natural gas company’s first since emerging from Chapter 11 bankruptcy in October 2020.

The restructuring created a significantly improved balance sheet, a source said. The notes have also benefited from the rally in crude oil futures.

WTI crude oil futures rose to settle at $52.98, an increase of 62 cents or 1.18%, on Tuesday.

Indexes gain

Indexes launched the week in better positions.

The KDP High Yield Daily index rose 4 points to close Tuesday at 69.20 with the yield now 4.23%.

The index saw a cumulative loss of 4 points on the week last week.

The ICE BofAML US High Yield index was up 12.1 bps with the year-to-date return now 0.488%.

The index posted a cumulative gain of 13.7 bps on the week last week.

The CDX High Yield 30 index rose 27 bps to close Tuesday at 109.

The index posted a cumulative loss of 60 bps on the week.

© 2015 Prospect News.
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