Solenis, Weatherford on deck; secondary under pressure; Springs Window sinks further; Pactiv lags

By Paul A. Harris and Abigail W. Adams

Portland, Me., Sept. 20 – In the face of capital-market turbulence on Monday, as dramatic financial and political events in China create hazards for the global economy, the dollar-denominated high-yield primary market generated a reasonably steady volume of news.

No dollar deals priced, but the stage was set for an active Tuesday.

Solenis, in the market with a massive, multi-tranche buyout deal, downsized its four-part offering of high-yield notes by around $300 million equivalent.

Houston-based energy services provider Weatherford International Ltd. plans to price a $500 million offering of seven-year senior secured first lien notes.

The secondary space was under pressure on Monday as fear of a contagion from the prospective collapse of China Evergrande Group and the upcoming Federal Reserve meeting sparked a run from risk assets.

While the overall cash bond market was off about ½ to 1 point depending on the credit, volume remained light with accounts reluctant to sell despite the weakness in the market, a source said.

Accounts are still flush with cash that they will need to put to work. If the market volatility causes a slowdown in the new issue market, that money will get put to work in the secondary.

“We’ll see if there’s any kind of sustainability to this move,” a source said. “People want a pullback because they want to buy, just not at all-time tights.”

SWF Escrow Issuer Corp.’s (Springs Window Fashions) 6½% senior notes due 2029 (Caa2/CCC) continued to trend lower after a sloppy break.

Pactiv Evergreen Group Issuer Inc.’s 4 3/8% senior secured notes due 2028 (B1/B+) were also lagging their issue price.

American Axle & Manufacturing, Inc.’s 5% senior notes due 2029 (B2/B+) succumbed to the pressure on Monday with the notes dropping 1 point to close the day on a 98-handle.

Primary generates news

Solenis, in the market with a massive, multi-tranche buyout deal, downsized its four-part offering of high-yield notes by around $300 million equivalent, and shifted the proceeds to its concurrent bank loan

Books close at 10 a.m. ET on Tuesday.

Houston-based energy services provider Weatherford International Ltd. plans to price a $500 million offering of seven-year senior secured first lien notes (expected ratings Ba3/B) on Tuesday.

The deal, which was announced on Monday, is in the market with initial guidance in the high 6% to 7% area.

With the Dow closing down 614 points on Monday, junk took a bit of a hit, with cash bonds down half a point to a point, depending upon the name, a trader said.

Recent issues were conspicuous among the deals that underwent selling, source added.

Coinbase Global, Inc.'s 3 3/8% senior guaranteed notes due Oct. 1, 2028 (Ba1/BB+) were down a point on the day at 96¼ bid, 96¾ offered.

The $1 billion tranche priced at par last Tuesday.

The Coinbase Global 3 5/8% senior guaranteed notes due Oct. 1, 2031 (Ba1/BB+) were down a point on the day at 96½ bid, 97 offered, a trader said.

The $1 billion tranche of 10-year notes also priced at par last Tuesday.

Both issues were off, Monday, as much as a point and a half in intraday trading, but retraced some lost ground ahead of the close.

Noting the present trading levels, and retracing the early secondary market underperformances of both Coinbase issues, the trader asserted that the massive book-sizes heard roundabout the market, as the bond sale was taking place, belong in the “fable” section of library.

Away from Coinbase there was a notable volume of bids-wanted-in-competition (BWICs) amid Monday's volatility, the trader said.

Investors are trying to absorb the massive changes set in train by the Chinese Communist Party and its general secretary Xi Jinping.

It's not just distressed real estate giant Evergrande Group and its $300 billion of debt growing ever more toxic, and spreading contagion throughout the global financial system, the trader said.

In what appears to be Cultural Revolution 2.0, Xi and the party have also come down on gaming, adversely impacting such enterprises as Wynn Macau and MGM China. Among the government's proposals are increased supervision of gaming operations, profit distributions and promotion of non-gaming operations.

The party has also visited its wrath upon the tech sector, and reality television, which it deems degenerate.

Mr. Xi has ultimately come down upon wealth, itself.

Right now China is posing a conundrum to investors that transcends the $615 million of dollar-denominated bond debt Evergrande is on the hook for in the run-up to 2022, which is plenty to think about in itself, the trader said.

Friday flows

High-yield ETFs sustained $272 million of outflows on Friday, the most recent session for which data was available at press time.

Actively managed high-yield funds saw $105 million of inflows on the day, the source said.

Springs Window under pressure

SWF Escrow’s (Springs Window) 6½% senior notes due 2029 continued to trend lower in active trading on Monday.

The notes were marked at 97¾ bid, 98¼ offered heading into Monday’s close, a source said. They traded as low as 97¼ at the height of the sell-off during Monday’s session.

There was more than $43 million in reported volume.

The notes were “a dog out of the shoot,” a source said.

While they briefly traded above par after breaking for trade on Friday, they immediately sank below and closed Friday’s session around their current level.

Pricing was tight for the credit.

SWF Escrow priced $625 million of the 6½% notes at par on Friday.

Pricing came in line with talk for a coupon in the 6½% area. Initial guidance had the deal coming to yield in the high 6% area.

Pactiv lags

Pactiv’s newly priced 4 3/8% senior secured notes due 2028 were also lagging their issue price on Monday.

The notes were marked at 99½ bid, par offered heading into the close, a source said.

However, the dip in the notes is not expected to last with the issue expected to improve on a stronger day for the market.

Pactiv priced a $500 million issue of the 4 3/8% notes at par on Friday.

Pricing came at the tight end of talk for a yield in the 4½% area. Initial guidance was for a yield in the 4½% to 4¾% area.

American Axle sinks

American Axle’s 5% senior notes due 2029 succumbed to the selling pressure on Monday with the notes dropping more than 1 point to a 98-handle.

The 5% notes were changing hands in the 98½ to 98 ¾ context heading into the market close, according to a market source.

There was more than $16 million in reported volume.

American Axle’s 5% notes have struggled since the company priced the $600 million issue at par on Aug. 16.

The notes have largely traded on a 99-handle since pricing.

Indexes

The KDP High Yield Daily index slid 9 basis points to close Monday at 70.39 with the yield now 3.47%.

The index posted a cumulative gain of 2 bps on the week last week.

The CDX High Yield 30 index dropped 40 bps to close Monday at 109.2.

The index posted a cumulative loss of 6 bps on the week last week.

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