Morning Commentary: Brand Industrial 10 3/8% notes resume price climb; Arconic on deck

By Paul A. Harris

Portland, Ore., July 27 – The new Brand Industrial Services, Inc. 10 3/8% senior secured notes due August 2030 (B3/B+), which priced Wednesday and traded higher on the break, continued to appreciate in price on Thursday morning, according to a bond trader in New York.

The bonds were 101½ bid, 102 offered at mid-morning, after going out Wednesday at 101 3/8 bid, 101 7/8 offered, the source said.

The $1.335 billion issue priced at par, inside of talk.

Lean 2023 issuance volume has intensified demand for new bonds, allowing issuers to ratchet down yields, the trader remarked.

Brand Industrials’ debt refinancing effort also featured a $1.335 billion term loan.

There was rejiggering among the tranches ahead of pricing on Wednesday, with the bonds upsizing to $1.57 billion, as proceeds shifted from the term loan. Later in the day, however, both tranches were returned to their original $1.335 billion sizes, whereupon they were priced.

The broad high-yield market opened ¼ point better on Thursday, sources said.

With the Dow Jones industrial average up 0.05% at mid-morning, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was down 0.16%, or 12 cents, at $75.37.

Bonds priced earlier in the week by Univision Communications Inc. continued to trade at a premium to their issue price on Thursday morning, according to the trader, who had them par 5/8 bid, 101 1/8 offered.

The $500 million issue priced at par on Monday.

In the primary market, Arsenal AIC Parent LLC is on deck with the secured bond portion of financing backing the buyout of Arconic Corp.

The downsized $700 million tranche (from $900 million) of seven-year senior secured notes (Ba3/B+/BB+) launched late Wednesday at 8%, inside of the 8¼% to 8½% yield talk and well inside of the 8¾% to 9% early guidance.

The bond portion of the financing also includes a tranche of senior unsecured notes, which is downsized to $500 million from $725 million.

The unsecured notes are all being taken down by sponsor Apollo Global Management. Initial guidance on the unsecured notes had them pricing 300 basis points to 350 bps behind the secured notes.

With the shift of proceeds from both tranches of bonds to the bank portion of the financing, the concurrent term loan B upsized to $1.425 billion from $1 billion.

Away from Arconic, there are two dollar-denominated offerings on the active calendar.

kdc/one Development Corp., Inc. and KDC US Holdings, Inc. are marketing a $500 million offering of five-year senior secured notes (B3) with initial talk of 9¾% to 10%.

And Rain Carbon Inc. is shopping a $450 million offering of six-year second-lien senior secured notes (B3/B) with early talk in the low-to-mid 12% area.

Both are expected to price in the week ahead.

Fund flows

The dedicated high-yield bond funds sustained $352 million of net daily cash outflows on Wednesday, according to a market source.

High-yield ETFs saw $289 million of outflows on the day.

Actively managed high-yield funds sustained $63 million of outflows on Wednesday, the source said.

As the market awaits a Thursday report on the weekly cash flows of the various asset classes from fund-tracker Refinitiv Lipper, the combined funds are tracking $530 million of net outflows on the week that concluded with Wednesday’s close, according to the market source.

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