JBS prices in junk market; Goodyear gains; Atlantica on 101-handle; Sotheby’s at a premium

By Paul A. Harris and Abigail W. Adams

Portland, Me., May 14 – The domestic high-yield primary market saw one deal price during Friday’s session.

In a heavily oversubscribed offering, JBS USA priced a $500 million issue of 10.5-year senior notes (Ba1/BB+).

The forward calendar is empty heading into the May 17 week with sources uncertain how active the primary will be.

Meanwhile, the secondary space closed out a volatile week on strong footing as fears about inflation eased following comments from several Federal Reserve officials.

New paper continued to dominate the tape with several recent deals performing well against a strong backdrop.

Following a strong break, Goodyear Tire & Rubber Co.’s two tranches of senior notes (B2/BB-/BB-) continued to gain in high-volume activity with both tranches closing the day on a 101-handle.

Atlantica Sustainable Infrastructure plc’s 4 1/8% senior green notes due 2028 (BB+/BB+) held on to the large premium reached after breaking for trade.

Sotheby’s/BidFair Holdings Inc.’s 5 7/8% exchangeable senior notes due 2029 (B2/B+) were also trading at a premium to their issue price.

However, with the structure of the notes unique, they played to a limited audience, a market source said.

Friday’s primary

JBS USA brought Friday's sole deal, driving by with a $500 million issue of 3¾% 10.5-year senior notes (Ba1/BB+) that came at par, at the tight end talk

It was heard to be four-times oversubscribed, having been ridden into the market on $200 million of reverse inquiry, according to a bond trader who added that high-yield investors know the credit and like it.

The notes saw a strong break and were poised to close the day at 101½, a source said.

The May 17 week gets underway to an empty active new issue calendar.

Although the volatility which took hold of the stock market in the middle of this past week left the junk bond market more or less unscathed, the new issue market may be poised to take a bit of a breather, a trader said.

Earnings reports are exerting a constricting force, the source added.

Nevertheless, demand for junk bonds remains formidable, sources say.

One indication is the low prices that the market is exacting from issuers.

At Thursday's close the ICE BofA High Yield Index posted a composite yield of 4.23%, an investor said.

That's just 15 basis points off of the 4.08% all-time low set in February 2021, according to a market source.

Goodyear gains

Goodyear’s two tranches of senior notes were in focus on Friday with the notes continuing to gain after a strong break.

Goodyear’s 5% senior notes due 2029 rose 1 point to trade in the 101½ to 101¾ context heading into the market close.

While the notes were changing hands with a healthy premium after breaking for trade on Thursday, they remained on a par handle.

Goodyear’s 5¼% senior notes due 2031 followed a similar trajectory. They were changing hands in the 101½ to 101 5/8 context heading into Friday’s close.

The notes closed the previous session in the par 5/8 to par 7/8 context.

Goodyear priced an $850 million tranche of the 5% notes and a $600 million tranche of the 5¼% notes at par on Thursday.

The 5% notes priced at the tight end of the 5% to 5¼% yield talk.

The 5¼% notes priced at the tight end of the 5¼% to 5½% yield talk.

Atlantica holds

Atlantica Sustainable Infrastructure’s 4 1/8% senior notes due 2028 held on to the large premium reached after breaking for trade on Thursday.

The 4 1/8% notes continued to trade on a 101-handle and were changing hands in the 101¼ to 101½ context heading into the market close.

There was more than $22.5 million of the bonds on the tape.

Atlantica priced a $400 million issue of the 4 1/8% notes at par on Thursday.

Pricing came at the tight end of the 4 1/8% to 4 3/8% yield talk.

Sotheby’s at a premium

Sotheby’s 5 7/8% exchangeable senior notes due 2029 were changing hands at a premium to their issue price.

The 5 7/8% notes were marked at par ½ bid, 101 offered on Friday.

There was more than $26 million on the tape during the session. However, sources did not expect to see the notes trade much after Friday’s session.

The notes were “packed away,” a source said, with the deal clubby.

The 5 7/8% notes, which are unsecured, will automatically turn into secured notes once the issuer has the capacity to secure the issue.

Due to its unique structure, the deal played to a limited audience, the source said.

BidFair Holdings Inc., which acquired Sotheby's in 2019, priced a $300 million issue of the 5 7/8% notes at par.

The yield printed at the tight end of yield talk in the 6% area.

Big Thursday outflows

The dedicated high-yield bond funds sustained $1.156 billion of net daily outflows on Thursday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs saw $731 million of outflows on the day.

Actively managed high-yield funds sustained $425 million of outflows on Thursday, the source said.

News of Thursday's daily flows follows a Thursday report that the dedicated high-yield funds had $672 million of net outflows in the week to the Wednesday, May 12 close, according to the Refinitiv Lipper Fund Flow Report Newsline.

High-yield ETFs sustained $1.1 billion of outflows during the week to Wednesday, meaning that the actively managed funds actually enjoyed positive flows during the period, the market source said.

The combined high-yield funds have sustained $8.9 billion of net outflows, year-to-date, the source added.

Indexes gain

Indexes closed Friday with gains although all saw cumulative losses on the week.

The KDP High Yield Daily index rose 5 points to close Friday at 69.61 with the yield now 3.88%.

The index fell 5 points on Thursday, 8 points on Wednesday and 10 points on Tuesday after gaining 2 points on Monday.

The index had a cumulative loss of 16 points on the week.

The CDX High Yield 30 index gained 34 bps to close Friday at 109.72.

The index also gained 29 bps on Thursday after dropping 40 bps on Wednesday, 11 bps on Tuesday and 25 bps on Monday.

The index posted a cumulative loss of 13 bps on the week.

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