Downsized Arconic on HY deck for Thursday; Brand Industrial outperforms; DISH volatile

By Paul A. Harris and Abigail W. Adams

Portland, Me., July 26 – Wednesday, the junk bond action was in Iceland but the expected Arconic Corp. junk bond deal is on deck for Thursday pricing stateside.

Meanwhile, the secondary space continued to grind tighter on Wednesday as the Federal Open Market Committee delivered its widely anticipated 25 basis points rate increase.

“This market is relentless,” a source said.

While interest rates are now at their highest level since 2001, market players were focused on Fed official’s rosy outlook for the economy and chair Jerome Powell’s statements that the rate hikes were doing their intended job.

Earnings have supported the ‘soft landing’ narrative espoused by the Fed with few signs of recession in the numbers released thus far.

While recession fears have subsided and the economy has proven to be more resilient than expected, recession indicators are still flashing warning signs.

“The Fed’s own recession monitor is off the charts,” a source said.

While the broader market gained, new issues and topical news were the drivers of activity in the space with Brand Industrial Services, Inc.’s new 10 3/8% senior notes due 2030 (B3/B-) dominating the tape.

While several new deals have displayed lackluster performances after breaking for trade, Brand Industrial’s new paper outperformed with the notes jumping to a 101-handle.

DISH Network Corp.’s senior notes had a wild session with several tranches posting large gains early in the day before heavy selling dragged them into negative territory as the market digested the company’s long-speculated plan to sell its wireless services through Amazon.

Anywhere Real Estate Inc.’s (formerly Realogy Holdings Corp.) senior notes (B3/B) gave back some gains from the previous session when they were boosted due to an exchange offer.

Primary

Euro- and sterling-denominated junk bonds printed on Wednesday as British frozen food retailer Iceland priced £475 million equivalent of Iceland BondCo plc senior secured notes due Dec. 15, 2027 (B3/B/B+) in a dual-currency transaction.

Pricing on the fixed-rate tranche descended a crevasse worthy of the landscape of the company’s sovereign namesake.

A £265 million tranche of 10 7/8% fixed-rate notes priced at 99.204 to yield 11 1/8%, 12.8 basis points inside of the 11¼% to 11½% yield talk, and well inside early whisper in the mid-to-high 11% area.

It also featured €250 million of Euribor plus 550 bps floating-rate notes that priced at 97, on top of both spread talk and price talk.

No dollar deals were priced on the day.

One offer is on deck for Thursday.

Arsenal AIC Parent LLC launched the downsized secured bond portion of financing backing the buyout of Arconic Corp.

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

A big book – $4.25 billion, according to a sellside source – built at the high end of early guidance, but the downsizing suggests that descending price talk eroded that demand.

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 bps to 350 bps behind the secured notes. There were no updates on the that pricing, on Wednesday.

Proceeds from the downsized bonds were shifted to the bank loan.

One deal took a place on the active forward calendar.

Rain Carbon Inc. began a virtual roadshow for a $450 million offering of six-year second-lien senior secured notes (B3/B), which are set to price in the week ahead.

Rain Carbon joins KDC/One Development Corp./KDC US Holdings, Inc. in the market with a $500 million offer of five-year senior secured notes, also set to price in the July 31 week.

Brand Industrials outperforms

Brand Industrial’s new 10 3/8% senior notes due 2030 bucked a recent trend of new issues putting in lackluster performances in the secondary space with the notes jumping to a 101-handle.

The 10 3/8% notes traded up to 101¼ bid, 101½ which is where they leveled off, sources said.

The hefty coupon helped drive their aftermarket performance, a source said.

Brand Industrial’s priced a $1.335 billion issue of the 10 3/8% notes at par on Tuesday.

The yield printed tighter than the 10½% to 10¾% price talk.

DISH volatile

DISH’s senior notes went on a wild ride on Wednesday with the notes posting large gains at the open but dropping into negative territory by the close as investors digested the company’s long-awaited announcement about selling its wireless plans through Amazon.

The 7¾% senior notes due 2026 (B3/B-) were up 1 point early in the session to trade on a 64-handle.

They traded as high as 64½ at the open.

However, selling pressure set in as the session progressed with the notes closing the day down ½ point at 63, a source said.

The yield was 26¾%.

There was $29 million in reported volume.

DISH’s soon-to-mature 5 7/8% senior notes due Nov. 15, 2024 were less volatile due to their short duration, a source said.

The notes opened the day unchanged at 92 and closed down ½ point.

The notes ended the day at 91½ with the yield 13 1/8%.

There was $22 million in reported volume.

DISH’s 11¾% senior secured notes due 2027 (Ba3/B) popped as high as 101.

However, they closed the day down ¼ point at 99½ with the yield 11 7/8%.

While the announcement about selling wireless plans through Amazon initially caused a surge in DISH’s capital structure, heavy selling ensued as investors questioned whether the business development would be enough to save the ailing credit, sources said.

DISH has a heavy debt burden and high refinancing risk.

Anywhere Real Estate comes in

Anywhere Real Estate’s unsecured notes gave back some gains the previous session after a debt exchange bumped the notes up more than 3 points.

On Wednesday, the 5¾% senior notes due 2029 fell about 1¾ points to close the day at 75 with the yield 12 1/8%.

There was $23 million in reported volume.

The 5¼% senior notes due 2030 were down about 1 point to close the day at 72 3/8 with the yield 11¼%.

There was $15 million in reported volume.

Anywhere’s unsecured notes bounced more than 3 points the previous session after it announced an exchange, both public and private, for its 5¾% and 5¼% notes for up to $421.73 million in principal of new 7% second-lien senior secured notes due 2030 (Ba3). The exchange is discounted, whereby investors will receive $800 of new notes for $1,000 of existing notes, with the offer capped.

However, Anywhere’s unsecured notes had some selling pressure on Wednesday as Moody’s Investors Service downgraded them to B3 from B2.

Moody’s cited the increased proportion of secured to unsecured claims as the cause of the downgrade, Prospect News reported.

Fund flows

High-yield ETFs had $320 million of daily cash inflows on Tuesday, the most recent session for which data was available at press time, according to a market source.

Actively managed high-yield funds sustained comparatively modest outflows of $13 million, on the day, the source said.

The combined funds are tracking $485 million of net outflows for the week that was set to conclude with Wednesday’s close, according to the market source.

Indexes

The KDP High Yield Daily index gained 5 points to close Wednesday at 50.73 with the yield 7.31%.

The index was down 5 points on Tuesday and 2 points on Monday.

The ICE BofAML US High Yield index shed 2.2 bps with the year-to-date return now 6.621%.

The index was off 9 bps on Tuesday and gained 13.7 bps on Monday.

The CDX High Yield 30 index gained 22 bps to close Wednesday at 103.32.

The index fell 7 bps on Tuesday and added 3 bps on Monday.

© 2015 Prospect News.
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