HighPeak on junk road; Fortrea adds; CCO Holdings rises; EquipmentShare jumps

By Paul A. Harris and Abigail W. Adams

Portland, Me., June 13 – While no deals cleared the domestic junk bond primary market on Tuesday, one offering joined the forward calendar with two large leveraged buyout deals heard to be coming soon.

HighPeak Energy Inc. is on the road with a $575 million offering of five-year senior notes.

And the market awaits the official announcement of Univar Solutions Inc.’s $1.8 billion offering of secured notes backing Apollo’s buyout of the company and Viasat Inc.’s $1.6 billion offering of senior notes supporting its Inmarsat acquisition.

Meanwhile, it was a firm day in the secondary space as credit spreads tightened on the heels of the latest Consumer Price Index report and in anticipation of a pause in rate hikes at the conclusion of the Federal Open Market Committee meeting on Wednesday.

However, the gains in the space were largely relegated to distressed credits with the market still in wait-and-see mode as it awaits greater clarity on the future of rates, a source said.

Market players will be paying close attention to Federal Reserve chair Jerome Powell’s press conference as it debates whether the Fed will hike, hold or cut rates in the second half of 2023.

With many still on the sidelines, new paper and topical news drove activity during Tuesday’s session with the most recent deals to clear the primary holding a premium to their issue prices.

Fortrea Holdings Inc.’s new 7½% senior secured notes due 2030 (Ba3/BB/BB+) continued to add in heavy volume after a strong break that lifted the notes to a 101-handle.

While Calumet Specialty Products Partners, LP and Calumet Finance Corp.’s new 9¾% senior notes due 2028 were flat on Tuesday, they held the nominal gains made on the break.

EquipmentShare.com Inc.’s 9% second-lien senior secured notes due 2028 (B3/B-) were among the weaker credits to make large gains during Tuesday’s session with the notes jumping 2 points after hitting an all-time low the previous week.

Outside of recent issues, Charter Communications, Inc. subsidiary CCO Holdings, LLC’s 7 3/8% senior notes due 2031 (B1/BB-) were lifted in heavy volume after the company extended the maturity of its 2024 credit facilities.

Tuesday’s primary

Tuesday’s new issue news came out of the Nordic segment of the euro-denominated market.

Sweden’s Assemblin announced the sale of €480 million of Apollo Swedish Bidco AB six-year senior secured floating-rate notes (B2/B/B). The deal comes with initial spread talk of Euribor plus 500 basis points with no Euribor floor. Initial price talk is 96 to 97.

The dollar-denominated primary market remained on its summer footing on Tuesday, with no deals pricing during the session.

One offering is stationed on the active forward calendar.

HighPeak Energy was scheduled to start a roadshow for its $575 million offering of five-year senior notes, in the market with initial talk in the 11½% to 12% context, including a discount.

The roadshow is expected to run through the end of the week.

Following Tuesday morning’s comparatively benign May Consumer Price Index Report – indicating that inflation may be declining – a bond trader in New York wondered where the deals are.

A pair of issuers are heard to be staging to bring big deals.

Univar Solutions is expected with a $1.8 billion offering of secured notes backing the buyout of the company by Apollo. Initial talk is in the 8¼% to 8½% area.

And Viasat’s $1.6 billion offering of senior notes, coming in support of its Inmarsat acquisition, and whispered with an all-in yield of 12%, is also near at hand, sources say.

Perhaps issuers and dealers are waiting to see if the Fed – now roundly expected to refrain from pushing through another rate increase at the conclusion of its June meetings on Wednesday – will attempt to drown the rallying capital markets by raising rates in defiance of those expectations, the trader said.

For issuers contemplating a pass at the market, the time is at hand, bond traders, investment bankers and high-yield investors say.

The least enthusiastic member of the party will be the issuer, of course, a portfolio manager conceded.

Company’s eyeballing near- and intermediate-term maturities must face the fact that they will be replacing bonds printed in the ultra-low-rate environment of the late teens and early 2020s, with bonds that will bear interest at significantly higher rates which reflect the present inflationary cycle and tighter money, the source said.

Fortrea in demand

Fortrea’s 7½% senior notes due 2030 continued to add in heavy volume on Tuesday after a strong break.

The notes gained another ¼ point after closing the previous session on a 101-handle.

They were trading in the 101 5/8 to 101 7/8 context heading into the market close, a source said.

There was $36 million in reported volume.

In a heavily oversubscribed offering, Fortrea priced a $570 million issue of the 7½% notes at par on Monday.

The yield printed at the tight end of the 7½% to 7¾% yield talk.

The deal was heard to be more than 6x oversubscribed.

Calumet flat

Calumet’s 9¾% senior notes due 2028 were flat on Tuesday although the notes maintained the nominal gains made on the break.

The 9¾% notes were trading in the par 1/8 to par 3/8 context heading into the market close, a source said.

There was $19 million in reported volume.

The deal played to strong demand during bookbuilding and was priced to perfection, sources said.

Calumet priced a $325 million issue of the 9¾% notes on Monday in a deal that was initially slated to be in the market through Tuesday.

The yield printed at the tight end of yield talk in the 9 7/8% area. Initial guidance was is in the 9% to 10% area.

CCO adds

CCO Holdings’ 7 3/8% senior notes due 2031 were lifted in heavy volume on Tuesday following news the company had extended the maturity of its 2024 credit facilities.

The 7 3/8% notes added ½ point to close the day wrapped around 97, a source said.

The yield was 7 7/8%.

There was $47 million in reported volume with the notes the most actively traded of Tuesday’s session.

The notes were in focus following news the company extended its receivables-based and revolving credit facilities from 2024 to 2026, a source said.

CCO Holdings priced a $1.1 billion issue of the 7 3/8% notes at par in late January.

The notes rank among one of the worst performing new deals of 2023 and have spent most of their time in the secondary space below par.

EquiptmentShare jumps

EquipmentShare.com’s 9% second-lien senior secured notes due 2028 were the focus of strong buying interest on Tuesday with the notes jumping more than 2 points to once again trade at a premium to their discounted issue price.

The 9% notes were trading in the 94¾ to 95¼ context in active trade, a source said.

There was $16 million in reported volume.

The 9% notes closed the previous session on a 92-handle after hitting an all-time low of 91½ the previous week, a source said.

The construction equipment and technology provider priced a $640 million issue of the 9% notes at 94.26 to yield 10½% on May 4.

Fund flows

High-yield ETFs sustained $207 million of daily cash outflows on Monday, the most recent session for which data was available at press time.

Actively managed high-yield funds had modest inflows of $16 million on the day.

The combined funds are tracking $200 million of net inflows on the week that will conclude with Wednesday’s close, according to a market source.

Indexes

The KDP High Yield Daily index added 3 points to close Tuesday at 50.68 with the yield 7.29%.

The index added 3 points on Monday.

The ICE BofAML US High Yield index rose 21.9 basis points with the year-to-date return now 5.171%.

The index gained 3.5 bps on Monday.

The CDX High Yield 30 index gained 10 bps to close Tuesday at 102.38.

The index fell 7 bps on Monday.

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