Primary raises $3.32 billion; secondary under pressure; Post flat; TopBuild, TTM trade up

By Paul A. Harris and Abigail W. Adams

Portland, Ore., Feb. 25 – Another six high-yield issuers priced deals on Thursday for $3.32 billion on the heels of a Wednesday when $4.35 billion of new paper also came from half a dozen issuers.

Meanwhile, it was a brutal day in the secondary space with “everything getting hit,” a source said.

Investors resumed their flight from risk assets as the 10-year Treasury yield hit its highest level in a year.

While short-duration notes held up well, longer duration notes and CCC-credits took the brunt of the sell-off.

Rate-sensitive names were down as much as 1 point on the day, a source said.

While the overall market was under pressure, TTM Technologies, Inc.’s 4% senior notes due 2029 (Ba3/BB-/BB) outperformed with the notes rising to a 101-handle.

While coming in from the heights reached after breaking for trade, TopBuild Corp.’s 3 5/8% senior notes due 2029 (Ba2/BB) maintained a decent premium given the market conditions.

While DaVita Inc.’s 4 5/8% senior notes due 2030 (Ba3/B+) were initially trading well above the reoffer price of its $1 billion add-on, they came in as the session progressed.

Post Holdings, Inc.’s 4½% senior notes due 2031 (B2/B+) were stuck at their issue price in high-volume activity.

Meanwhile, the outflows continued with high-yield mutual and exchange-traded funds losing $2.217 billion through Wednesday’s close, according to the Refinitiv Lipper Fund Flow report.

Stormy backdrop

Half a dozen issuers priced single-tranche junk deals on a big Thursday in the primary market, raising a combined total of $3.32 billion.

The action took place as Treasury rates continued to gap higher, sparking a sell-off in equities.

As the yield on 10-year governments topped 1.5% (1.53% at the close) high-grade bonds and higher quality junk bonds came under pressure, traders said.

The market heard that some investment-grade deals were pulled on Wednesday.

Higher credit quality high-yield bonds, which are seen to be somewhat sensitive to spreads, and other junk bonds from certain sectors including the financial space came under pressure, sources said.

In the primary market the bloom appeared to be off the rose.

Of Thursday's executions, only one (U.S. Acute Care Solutions, LLC) priced at the tight end of talk, while two priced at the wide ends of talk.

Only one Thursday deal upsized, although it was a big-ish upsize: Cheniere Energy Partners, LP priced $1.5 billion of 4%10-year senior notes (Ba2/BB) at par. However, the Cheniere refinancing deal, which was upsized from $1 billion, was one of the deals that came at the wide end of talk.

Thursday's action left a large calendar of deals expected to clear during the Friday session.

These include the Ardagh $2.65 billion equivalent four-part offering of green bonds (see related stories in this issue).

TTM outperforms

TTM Technologies’ 4% senior notes due 2029 were outperforming the market on Thursday with the notes rising to a 101-handle despite the weakness in the market.

The 4% senior notes were marked at 101¼ bid, 101½ offered heading into the market close.

“Good for today’s tape,” a source said.

The notes continued to gain on Thursday after breaking at par 7/8 bid the previous session.

TTM Technologies priced a $500 million issue of the 4% notes at par on Wednesday.

The yield printed in the middle of yield talk in the 4% area.

The deal was heavily oversubscribed and was heard to have played to an order book of $2.6 billion.

TopBuild holds premium

While coming in from the heights reached after breaking for trade, TopBuild’s 3 5/8% senior notes due 2029 were holding on to a premium despite the weakness in the market.

The 3 5/8% notes were marked at par 3/8 bid, par 5/8 offered heading into the market close, a source said.

There was more than $58.5 million in reported volume during the session.

The performance of the notes was a surprise to some sources given they priced on a 3-handle and were of a longer eight-year duration.

Lower coupon, rate-sensitive names of longer duration have been particularly hard hit by rising Treasury yields.

However, the notes were coming in from the heights reached after breaking for trade.

The notes broke at 101¼ bid, a source said.

TopBuild priced a $400 million issue of the 3 5/8% notes at par on Wednesday.

The yield printed at the tight end of yield talk in the 3¾% area.

Post Holdings flat

Post Holdings’ 4½% senior notes due 2031 fell flat in the aftermarket.

The notes were stuck at their issue price and were marked at 99 7/8 bid, par 1/8 offered for much of the session.

While the notes saw little movement in price, they were active in the secondary space with more than $156 million in reported volume.

The offering was heavily oversubscribed with $3 billion in orders and the notes were largely priced to perfection, sources said.

Post priced a $1.8 billion issue of the 4½% notes at par on Wednesday.

Pricing came at the tight end of the 4½% to 4¾% yield talk.

Davita’s add-on

DaVita’s 4 5/8% senior notes due 2030 were active following a $1 billion add-on.

While the notes were initially trading at a premium to their reoffer price, they came in to close the day largely flush with their reoffer price.

The 4 5/8% notes were 102¾ bid in the morning.

However, they lost momentum as the sell-off in risk assets accelerated and stood poised to close the day at 101¾ bid, 102 offered.

DaVita priced an upsized $1 billion, from $750 million, add-on to the 4 5/8% notes at 101.75 on Wednesday.

The notes priced at the rich end of the 101.25 to 101.75 price talk.

Indexes down

The KDP High Yield Daily index dropped 14 points to close Thursday at 69.62 with the yield now 3.94%. The index was down 2 points on Wednesday, 8 points on Tuesday and 2 points on Monday.

The ICE BofAML US High Yield index dropped 29.7 bps with the year-to-date return now 0.899%. The index rose 1.2 bps on Wednesday after falling 6.6 bps on Tuesday and 8.7 bps on Monday.

The CDX High Yield 30 index dropped 97 bps to close Thursday at 108.17.

The index gained 28 bps on Wednesday and 26 bps on Tuesday after dropping 40 bps on Monday.

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