Junk: Diversey in focus, skyrockets on buyout; WW gains on acquisition; DISH below par

By Paul A. Harris and Abigail W. Adams

Portland, Me., March 8 – Europe-based issuers were in the high-yield primary spotlight on Wednesday.

Belgium-based Azelis Group NV priced a €400 million issue of five-year senior notes (BB+/BB+) and Sweden-based Floatel International Ltd. set pricing on a $100 million offering of three-year super senior secured notes.

While the calendar remained empty, sources expected to see some business surface before the week draws to a close.

Meanwhile, it was another quiet session in the secondary space with volume light as the market digested the second day of Federal Reserve chair Jerome Powell’s congressional testimony.

While the market was soft early in the session, selling took hold into the close with the cash bond market falling 3/8 to ½ point.

“People don’t know what to think,” a source said. “The market doesn’t know what to do.”

With the primary calendar drying up, topical news was the driver of activity in the space.

And while the broader market was weak, acquisition news sparked large gains in some credits.

Diversey Holdings Ltd.’s 4 5/8% senior notes due 2029 (Caa1/B) skyrocketed double digits following news Solenis, a portfolio company of Platinum Equity, was buying out the company in an all-cash transaction valued at $4.6 billion.

WW International, Inc.’s 4½% senior notes due 2029 (B1/B) jumped 6 points after the company announced an acquisition that will expand the its weight loss services to prescription drugs.

However, the heavy market conditions continued to take a toll on recent issues.

Frontier Communications Holdings, LLC’s recently priced 8 5/8% first-lien senior secured notes due 2031 (B3/B/BB+) gave back all gains and returned to par in heavy volume on Wednesday.

DISH Network Corp.’s 11¾% senior secured notes due 2027 (Ba3/B+) continued their downtrend with the notes breaking below par for the first time since the issue priced in November 2022.

Europe active

The only action in the new issue market, on Wednesday, involved Europe-based issuers.

Belgium-based Azelis Group priced a €400 million issue of 5¾% five-year senior notes (BB+/BB+) at par, at the tight end of talk.

And in a Nordic execution, via Pareto, Sweden-based Floatel International set pricing on a $100 million offering of three-year super senior secured notes with an 11¼% coupon at par (see related stories in this issue).

Although market sources professed expectations that new issue business will surface soon, perhaps before the end of the week, no issuer names were proffered on Wednesday.

Diversey skyrockets

Diversey’s 4 5/8% senior notes due 2029 were the name of the day on Wednesday with the issue the largest gainer and the heaviest traded on Wednesday.

The 4 5/8% notes catapulted up 14 points following news private-equity firm Solenis would acquire the company in an all-cash transaction valued at $4.6 billion.

The 4 5/8% notes were marked at 90½ bid, 92½ offered early in the session.

They continued to climb as the day progressed and were seen changing hands at 96 heading into the market close, a source said.

There was $63 million in reported volume.

The notes were trading on an 82-handle heading into Wednesday’s session.

Investors were still assessing the takeover with the deal expected to close in the second half of 2023.

However, the notes will most likely continue to trade up to the 101 poison put, a source said.

WW gains

While Diversey’s 4 5/8% senior notes due 2029 were the largest gainers of Wednesday’s session on news of the company’s buyout, WW International’s (formerly Weight Watchers) 4½% senior notes due 2029 were the day’s second largest gainer following news of its upcoming acquisition of Weekend Health Inc. which does business as Sequence.

WW International’s 4½% senior notes due 2029 gained more than 6 points on the news.

The notes were trading on a 55-handle in the midafternoon and closed the day at 56 7/8, a source said.

The yield fell to about 15¾%.

While the notes made large gains, volume was light with $4 million on the tape heading into the close.

WW International announced on Wednesday it will purchase Weekend Health Inc. for $132 million.

Weekend Health operates the weight management telehealth platform Sequence, which prescribes pharmaceuticals used in the treatment of diabetes and obesity.

Frontier falls

Frontier’s recently priced 8 5/8% first-lien senior secured notes due 2031 returned all gains made over the past week and sank back to par.

The notes sank more than 1 point as a risk-off sentiment sparked by renewed rate concerns spread through the market.

They traded as low as 99¾ but closed the day wrapped around par, a source said.

There was $25 million in reported volume.

The 8 5/8% notes had a lackluster break after the $750 million issue priced at par on March 1.

However, they gained steam and rose to a 101-handle over the past week.

The notes were wrapped around 101 heading into Wednesday’s session.

DISH below par

DISH’s 11¾% senior secured notes due 2027 continued their downtrend and fell to a 99-handle on Wednesday.

The 11¾% notes sank 1 point to trade in the 99 3/8 to 99 5/8 context heading into the market close, a source said.

There was $22 million in reported volume.

Wednesday’s trading level marked the lowest for the notes since shortly after the company priced the initial $2 billion issue at 98.171 in November 2022.

The notes were strong performers and DISH again tapped the market in mid-January to price a $1.5 billion add-on to the notes at 102.

However, DISH has been under pressure over the past week and a half after a ransomware attack caused widespread service outages, which continue.

The company also has a heavy debt load and refinancing concerns are once again weighing on the market, a source said.

Fund flows

High-yield ETFs sustained a hefty $601 million of daily cash outflows on Tuesday, the most recent session for which data was available at press time, according to a market source.

Actively managed high-yield funds posted relatively modest inflows of $70 million on the day, the source said.

Indexes

The KDP High Yield Daily index was down 22 points to close Wednesday at 50.99 with the yield 7.51%.

The index fell 19 points on Tuesday after gaining 19 points on Monday.

The ICE BofAML US High Yield index was down 48.9 basis points with the year-to-date return now 2.441%.

The index fell 31.7 bps on Tuesday after gaining 33 bps on Monday.

The CDX High Yield 30 index was down 30 bps to close Wednesday at 101.69.

The index fell 67 bps on Tuesday after gaining 7 bps on Monday.

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