New junk paper: Caesars, PRA Group gain in heavy volume; Garda holds strong premium

By Paul A. Harris and Abigail W. Adams

Portland, Me., Jan. 24 – Tuesday was quiet in the junk bond primary sector, one day after a busy Monday.

Meanwhile, the secondary space closed a largely sideways day with a firm tone with the market shrugging off some weakness early in the session to end the day flat to nominally improved, a source said.

While the broader space was largely flat, new paper remained in demand with the issues to price during Monday’s session putting in strong aftermarket performances.

Caesars Entertainment Inc.’s 7% senior secured notes due 2030 (Ba3/B) continued to add after a strong break with the notes closing Tuesday on a 101-handle.

The new issue sparked activity in Colt Merger Sub Inc.’s senior notes, which were issued to finance Eldorado’s acquisition of Caesars.

PRA Group, Inc.’s 8 3/8% senior notes due 2028 (Ba2//BB+) were also on the rise on Tuesday with the notes adding to the gains made on the break.

Garda World Security Corp.’s 7¾% senior secured notes due 2028 (B2/B) held on to the strong gains made on the break in heavy volume on Tuesday.

Quiet Tuesday

On the heels of a big-ish Monday in the new issue market – $2.8 billion in three tranches, all upsized, all pricing tight to talk – the sound of crickets returned to the primary market on Tuesday: no deals priced, no deals announced.

Nevertheless, with five full market sessions remaining in the month, January issuance, which already tops the modest estimates heard at the outset of 2023, is the biggest month in the primary market in a year.

The new year has seen $14.5 billion of new high-yield bonds price in 19 junk-rated, dollar-denominated tranches.

The last bigger month was January 2022 which saw $23.7 billion in 38 tranches.

The Tuesday session closed with one dollar-denominated offering on the active new issue calendar.

Savers Value Village, Inc. plans to sell a $500 million offering of Evergreen AcqCo 1 LP/TVI, Inc. senior secured notes due April 2027 (B2/B).

The deal, scheduled to run a Tuesday through Thursday virtual roadshow, is in the market with initial guidance in the 10% area, and is coming on the back of $400 million of reverse inquiry, sources say.

Beyond the active calendar there are a couple of potential issuer names.

UK-based Harbour Energy plc and NRG Energy are both possible issuers in the run-up to Friday's close, sources say.

Caesars rises

Caesars’ 7% senior secured notes due 2030 dominated activity in the secondary space with the notes adding to the strong gains made after breaking for trade.

The 7% notes added ½ point on Tuesday to close the day on a 101-handle.

The notes were changing hands in the 101 to 101¼ context heading into the close, a source said.

There was $273 million in reported volume.

Caesars deal was a “blowout,” with the offering 4x oversubscribed, sources said.

Caesars priced an upsized $2 billion, from $1.25 billion, issue of the 7% notes at par in a Monday drive-by.

Pricing came at the tight end of the 7% to 7¼% yield talk.

The deal sparked activity in Colt Merger Sub’s secured and unsecured notes which were issued as part of the financing for Eldorado’s acquisition of Caesars.

While active, Colt Merger’s 6¼% senior secured notes due 2025 (Ba3/B) and 8 1/8% senior notes due 2027 (B3/B) were relatively unchanged.

The 6¼% notes continued to trade on a 99-handle with the notes closing at 99 5/8, a source said.

The yield was just shy of 6½%.

There was $16 million in reported volume.

The 8 1/8% notes remained on a par-handle and closed the day at par 5/8.

The yield was about 7.8%.

There was $15 million in reported volume.

Colt Merger’s notes priced as part of Eldorado’s acquisition of Caesars.

The acquisition was unique because it allowed the two companies to keep independent credit profiles.

Colt Merger’s 6¼% notes and 8 1/8% notes fell to Eldorado’s credit.

PRA Group adds

PRA Group’s 8 3/8% senior notes due 2028 continued to gain strength in heavy volume on Tuesday.

The 8 3/8% notes opened the day at par 3/8 but were lifted as the session progressed.

The notes traded as high as 101¼ in intraday activity but closed the day in the par ½ to 101 context.

There was $85 million in reported volume.

In a heavily oversubscribed offering, PRA Group priced an upsized $400 million, from $350 million, issue of the 8 3/8% notes at par on Monday.

The yield printed at the tight end of talk for a yield in the 8½% area.

Garda holds gains

Garda’s 7¾% senior secured notes due 2028 held on to the strong gains made since breaking for trade in heavy volume on Tuesday.

The notes were marked at par ¾ bid, 101¼ offered on Tuesday, a level reached shortly after breaking for trade.

There was $105 million in reported volume.

Garda priced an upsized $400 million, from $350 million, issue of the 7¾% notes at par on Monday.

The yield printed at the tight end of the 7¾% to 8% yield talk.

Fund flows

Negative cash flows continue to dog the dedicated high-yield bond funds, which have outflows in the first three of the present reporting week's five sessions, according to a market source.

On Monday, the most recent session for which data was available at press time, the funds saw a relatively modest $65 million of net outflows.

The high-yield ETFs sustained $47 million of outflows on the day.

Actively managed high-yield funds saw $18 million of outflows on Monday.

The combined funds are tracking $1.3 billion of net outflows for the week that will conclude with Wednesday's close, according to the market source.

Indexes

The KDP High Yield Daily index shaved off 3 points to close Tuesday at 53.33 with the yield 6.88%.

The index added 4 points on Monday.

The ICE BofAML US High Yield index shaved off 0.1 basis point with the year-to-date return now 3.764%.

The index added 3.4 bps on Monday.

The CDX High Yield 30 index gained 10 bps to close Tuesday at 102.65.

The index was up 44 bps on Monday.

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