Two junk bond issuers put up $1.2 billion; Vital Energy jumps; EquipmentShare.com active

By Paul A. Harris and Abigail W. Adams

Portland, Me., Sept. 19 – The junk bond primary market put up another $1.2 billion of new issuance on Tuesday, the same as Monday’s face amount, taking the week’s total of bonds sold to $2.4 billion.

Tuesday’s issuance came from a pair of single-tranche issuers.

Meanwhile, it was a soft day in the secondary space with the cash bond market shedding 1/8 point as the market braced for the Federal Open Market Committee’s Wednesday announcement, a source said.

There is a general consensus in the market that the Federal Reserve will again pause rate hikes.

However, the jury is still out for November and December with chair Jerome Powell’s press conference to be scrutinized for clues about the path forward.

While the broader market was risk-off ahead of the Fed, new and recent issues remained in focus.

Vital Energy, Inc.’s 9¾% senior notes due 2030 (B3/B) became the latest deal to buck the trend of new issuance hovering at slight premiums to their issue prices with the notes jumping in the aftermarket.

The company’s 10 1/8% senior notes due 2028 were also trading at a healthy premium to their reoffer price following an add-on.

EquipmentShare.com Inc.’s 9% second-lien senior secured notes due 2028 (B3/B-) were also active following an add-on with the notes trading at a premium to their reoffer price but below their previous trading level.

Solid Tuesday, more Wednesday

In the Tuesday market, Star Parent, Inc. (Syneos Health Inc.) priced a downsized $1 billion issue of seven-year senior secured notes (B1/B) at par to yield 9%.

The issue size decreased from $1.2 billion after having decreased earlier in the week from its original $1.7 billion size. Proceeds were shifted to the concurrent term loan.

The yield printed 25 basis points below the tight end of the 9¼% to 9½% yield talk, but came in line with initial guidance in the 9% area.

The deal was heard to have played to $5.8 billion of demand on Tuesday, and traded in a manner that reflected that level of demand, according to a bond trader who had the new Star Parent 9% notes going out 101¼ bid, 101½ offered.

Allocations tended to be sparing, the trader said, adding that the bulk of the bonds were heard to have been taken down by three accounts, with the next highest allocation being $25 million.

Beyond those four accounts allocations were spare, indeed, the trader said.

Elsewhere Tuesday Mercer International, Inc. priced a $200 million issue of five-year senior notes (B2/B) at par to yield 12 7/8%, at the tight end of yield talk in the 13% area. Initial guidance was 13% to 13¼%.

Mercer’s 12 7/8% coupon was the highest to print since mid-April.

Conuma Resources Ltd. priced $250 million of 13 1/8% senior secured notes due May 2028 on April 13.

Seven dollar-denominated issuers sold bonds with coupons of 12% or higher since the beginning of 2023, according to Prospect News data.

Meanwhile the week’s megadeal is on deck to price Wednesday.

Price talk surfaced Tuesday on the approximately $2.9 billion equivalent two-part offering of senior secured notes due Jan. 15, 2031 (Ba3/BB/BBB-) backing GTCR’s acquisition of a majority stake in Worldpay.

A $2 billion tranche of notes via issuing entity GTCR W-2 Merger Sub LLC is talked to yield 7½% to 7 5/8%, inside of initial guidance in the high-7% area.

A £700 million tranche of notes via GTCR W Dutch Finance Sub BV is talked to yield 8½% to 8 5/8%, inside of initial guidance in the high-8% area.

Vital Energy outperforms

Vital Energy’s 9¾% senior notes due 2030 became the latest deal to outperform in the aftermarket with the notes jumping 1 point above their discounted issue price on the break and continuing to log gains in heavy volume on Tuesday.

The 9¾% notes traded up another 1 point on Tuesday to close the day on a par handle.

They were trading in the par ¼ to par ½ context heading into the market close, a source said.

The notes closed the previous session on a 99-handle.

Vital Energy priced a $500 million tranche of the 9¾% notes at 98.742 to yield 10% on Monday in a two-part offering.

The yield printed at the tight end of the 10% to 10 1/8% yield talk.

Vital Energy also priced a $400 million add-on to its 10 1/8% senior notes due 2028 on top of talk at 101 for a 9.617% yield.

The 10 1/8% notes were also trading at a healthy premium to their reoffer price with the notes quickly reclaiming their previous level of 101 3/8 to 101 5/8, a source said.

The oil and natural gas exploration and development company became the latest to buck the trend of recent deals that have hovered around their issue prices.

The 9¾% notes priced cheap with the yield well wide of the B index, a source said.

While a foreboding sign for future inflationary prints, the bull run in oil was also supporting the notes’ aftermarket performance.

WTI crude oil futures are now trading firmly above $90 a barrel with futures closing Tuesday at $91.70.

EquipmentShare active

EquipmentShare.com’s 9% second-lien senior secured notes due 2028 were active following the previous session’s add-on with the notes trading at a premium to their reoffer price but below their previous levels.

The 9% notes were trading in a tight range of 98 1/8 to 98 3/8 throughout the session, a source said.

While a healthy premium to the add-on reoffer price of 97.75, the notes were trading on a 99-handle heading into Monday’s session.

EquipmentShare.com priced an upsized $400 million, from $300 million, add-on to its 9% notes at 97.75 to yield 9.605% in a Monday drive-by.

EquipmentShare.com’s 9% notes are among the notable performers of 2023 with the construction equipment company pricing the initial $640 million issue at 94.26 to yield 10½% in early May.

Fund flows

High-yield ETFs sustained a substantial $332 million of daily cash outflows on Monday, the most recent session for which data was available at press time, according to a market source.

Actively managed high-yield funds had a modest $15 million of inflows on the day.

The combined funds are tracking $783 million of net outflows on the week that will conclude with Wednesday’s close, according to the market source.

Indexes

The KDP High Yield Daily index was down 13 basis points to close Tuesday at 50.06 with the yield 7.66%.

The index shaved off 5 bps on Monday.

The ICE BofAML US High Yield index was down 16.9 bps with the year-to-date return now 6.866%.

The index fell 6.4 bps on Monday.

The CDX High Yield 30 index was down 8 bps to close Tuesday at 102.75.

The index took off 4 bps on Monday.

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