LABL, Option Care price in junkland; Kosmos on a 101-handle; Carnival comes in

By Abigail W. Adams and Paul A. Harris

Portland, Me., Oct. 22 – Two issuers priced a total of three junk-rated, dollar-denominated tranches with an overall face amount of $1.46 billion in the domestic high-yield primary market on Friday.

LABL, Inc. priced a downsized $960 million two-tranche offering and Option Care Health, Inc. priced a $500 million issue of eight-year senior notes (B3/B-).

The week ahead also promises to be busy with Lifescan Global Corp.’s $800 million two-part offering and CA Magnum Holdings, which has $1.01 billion of five-year secured notes on deck.

Meanwhile, the secondary space opened the day unchanged but grew soft as the session progressed with ETF selling pressuring the overall market, sources said.

The cash bond market was down about 1/8 point, a source said.

However, the energy sector remained strong with crude oil futures continuing their climb.

While volume in the name was light, Kosmos Energy Ltd.’s 7¾% senior notes due 2025 (B3/B+/B) were trading up to a 101-handle.

Summit Midstream Holdings LLC and Summit Midstream Finance Corp.’s 8½% senior secured notes due 2026 (B3/BB-/B+) remained active. While the notes were trading off their highs heading into the close, they maintained a large premium to their discounted issue price.

Carnival Corp.’s 6% senior notes due 2029 (B3/BB-/B+) were also active with the notes giving back some of their gains in the high-volume activity.

Friday’s primary

In the Friday primary, LABL priced a downsized $960 million amount (from $1.21 billion) of notes backing the acquisitions of Multi-Color Corp. and Fort Dearborn Co. by Clayton Dubilier & Rice.

The two-part deal featured a downsized $500 million tranche of 5 7/8% seven-year senior secured notes (B2/B-) that priced at 99.293 to yield 6%. The tranche size decreased from $750 million.

It also featured a $460 million tranche of eight-year senior unsecured notes (Caa2/CCC+) that priced at par to yield 8¼%.

Pricing on both tranches widened while the deal was in the market, and both underwent covenant changes.

Meantime, Option Care Health priced a $500 million issue of 4 3/8% eight-year senior notes (B3/B-) at par, at the tight end of talk.

At close of books orders totaled $3 billion for the $500 million of notes offered, a trader said (see related stories in this issue).

The Oct. 22 week saw $10.3 billion of junk-rated, dollar-denominated issuance, a little more than $1 billion under the $11.4 billion per week run rate since Labor Day.

The biggest week in the series was the week of Sept. 27, which had $16.5 billion.

The lowest amounts of issuance came in the abbreviated, four-session weeks following the Labor Day ($6 billion) and Columbus Day ($8.6 billion) holiday weekends.

Apart from those, the lowest amount of weekly issuance for a full week since Labor Day came in the Sept. 13 week, which saw $9.4 billion.

The week ahead gets underway with issues on the active forward calendar including LifeScan Global with an $800 million two-part offering of senior secured notes, and CA Magnum Holdings, which is selling $1.01 billion of five-year secured notes backing Carlyle Group's buyout of Mumbai, India-based Hexaware Technologies.

That deal is being run on the U.S. high-yield desk, sources say.

Kosmos on a 101-handle

While activity in the name was relatively light, Kosmos Energy’s 7¾% senior notes due 2025 were putting in a strong secondary performance with the notes trading up to a 101-handle into the close.

The 7¾% senior notes were changing hands in the 101 to 101 3/8 context in the late afternoon, a source said.

There was about $16 million in reported volume.

While the overall market saw a weak session on Friday, the high-coupon short-duration notes from the energy sector were performing well.

WTI crude oil futures continued to grind higher on Friday with WTI crude oil futures settling at $83.76, an increase of $1.26 or 1.53%.

In an offering that was heard to be as much as 3x oversubscribed, Kosmos Energy priced a $400 million issue of the 7¾% notes at par on Thursday.

Active

While the notes were coming in from their highs, Summit Midstream’s 8½% senior secured notes due 2026 continued to put in a strong performance in the secondary space.

The 8½% notes were wrapped around 101 in the late afternoon, a source said.

There was about $20 million in reported volume.

The energy company’s 8½% notes have outperformed in the secondary space since the notes priced at 98.5 to yield 8.883% on Wednesday.

The yield on the notes is now 8.2%.

Carnival comes in

Carnival’s 6% senior notes due 2029 were softer in active trading on Friday.

The notes were down about 3/8 point.

They were changing hands in the par ¼ to par 3/8 context heading into the close after trading in the par ½ to par 5/8 context at the open.

The notes saw about $20 million in reported volume.

In its third pass at the high-yield market in 2021 alone, the cruise line operator priced a $2 billion issue of the 6% notes at par on Tuesday.

Carnival priced a $2.41 billion issue of 4% first priority senior secured notes due 2028 at par in July and a $3.5 billion issue of 5¾% senior secured notes due 2027 at par in February.

$729 million Thursday inflows

The dedicated high-yield bond funds saw a hefty $729 million of net daily inflows on Thursday, the most recent session for which data was available at press time, according to a market source.

Much of that amount was taken in by the high-yield ETFs which saw $634 million of inflows on the day.

Actively managed high-yield funds saw $95 million of inflows on Thursday, the source said.

News of Thursday's daily flows trails a Thursday afternoon report from Refinitiv Lipper that the combined funds saw $2.3 billion of net inflows in the week to the Wednesday, Oct. 20 close, the largest weekly inflow seen since the week to April 7, according to the market source.

With the most recent week in the tally the year-to-date cash flows of the combined junk funds stood at negative-$12.2 billion, the source added.

Indexes

The KDP High Yield Daily index slid 5 points to close Friday at 69.37 with the yield 3.86%.

The index shaved off 1 point on Thursday after gaining 1 point on Wednesday. The index was down 1 point on Tuesday and 2 points on Monday for a cumulative loss of 8 points on the week.

The CDX High Yield 30 index fell 19 bps to close Friday at 109.05.

The index dropped 15 bps on Thursday after gaining 6 bps on Wednesday and 16 bps on Tuesday. The index was down 5 bps on Monday.

The index fell a cumulative 29 bps on the week.

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