Morning Commentary: Macy’s brings $850 million drive-by; junk flat to up ¼ point

By Paul A. Harris

Portland, Ore., March 2 – Macy's Retail Holdings LLC showed up Wednesday with the second junk bond offering of March.

The Cincinnati-based retailer plans to price $850 million of senior notes (Ba2/BB/BBB-) in two tranches in a drive-by.

The offer features $425 million of eight-year notes talked to yield 6% to 6¼%, in line with initial guidance in the low-6% area, and $425 million of 10-year notes talked at 6¼% to 6½%, tight to initial guidance in the mid-6% area.

The deal was half done in reverse inquiry, according to a bond trader, who added that both tranches are around two-times oversubscribed.

Elsewhere the new issue market was quiet, according to sources, who cited investor distractions, including ongoing geopolitical volatility in central Europe, uncertainty surrounding an anticipated March move by the Fed and the J.P. Morgan Global High Yield & Leveraged Finance Conference in Miami.

Meanwhile the month's first deal, the revived, restructured BellRing Distribution, LLC 7% senior notes due March 2030 (B3/B), continued to trade at a premium to its new issue price on Wednesday morning.

The BellRing paper was 101¼ bid, 101¾ offered in Wednesday morning trading, according to a bond trader, who recounted that the deal broke to 102 on Tuesday, then eased to 101 bid, 101½ offered.

The $840 million issue priced at par on Tuesday, heard to have been playing to $2 billion of demand, after being pulled last Thursday due to market volatility.

The maturity of the revived deal was eight years, versus the 10-year tenor of the deal that BellRing withdrew last week.

Elsewhere, the recently minted Twitter, Inc. 5% senior notes due March 2030 (Ba2/BB+) were par ½ bid, 101 offered, unchanged on Wednesday morning, the trader said.

Although Wednesday morning trading in the Twitter paper was light, a 101 5/8 bid had been hit, the source specified.

The $1 billion bullet deal, heard to be two-times oversubscribed, priced at par on Feb. 23.

In the broad high-yield market sources were marking cash bonds unchanged to up ¼ of a point in the early going on Wednesday, with the index up half a percent.

Fund flows

The dedicated high-yield bond funds saw $71 million of net inflows on Tuesday, according to a market source.

Actively managed high-yield funds saw a healthy $450 million of inflows on the day.

High-yield ETFs, however, were decidedly negative on the day, posting $379 million of outflows on Tuesday, the source said.

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