Borr, Cetera join calendar; junk reverses, closes with gains; Venture rises; Hess jumps

By Paul A. Harris and Abigail W. Adams

Portland, Me., Oct. 23 – Although no deals priced, Monday’s session had two sizable junk bond deals announced.

The deals, from Borr Drilling and Cetera Financial Group Inc., are set to price by midweek.

Meanwhile, it was a topsy-turvy day in the secondary space as Treasuries had wild swings after the 10-year Treasury yield crossed the 5% threshold.

The market had a heavy open with cash bonds down 1/8 to ¼ point as the 10-year Treasury yield shot up to 5.02%.

Then Pershing Square Capital chief executive officer Bill Ackman announced he had covered his short position in Treasuries.

“Everything ran up,” a source said.

The announcement sparked a surge in Treasuries as others followed Ackman’s lead and covered their short positions.

After broaching 5%, the 10-year Treasury yield dropped 7.8 basis points to close the day at 4.849%.

The cash bond market shook off its losses to close the day with an 1/8 to ¼ point gain while the CDX index added 3/8 point, a source said.

Venture Global LNG Inc.’s recently priced senior secured notes (B1/BB/BB) followed the trajectory of the broader market.

While both the 9½% senior secured notes due 2029 and the 9 7/8% senior secured notes due 2032 were flat at the open, they shot higher as the market firmed with both tranches trading more than 1 point above their issue prices.

While Monday turned into a surprisingly strong session for the market, topical news was the driver of the largest gains in the space.

Hess Midstream Partners LP’s senior notes (Ba2/BB+) jumped 2 to 3 points following news Chevron Corp. was acquiring parent company Hess in an all-stock transaction.

New deals

On Monday, it was announced that Borr Drilling plans to sell $1.5 billion of Borr IHC Ltd./Borr Finance LLC senior secured notes (expected B3/confirmed BB-/confirmed B) in two tranches on Tuesday.

The offer comes in tranches of five-year and eight-year notes, and is replete with amortization- and excess cash flow provisions.

Meanwhile Cetera Financial Group Inc. began a brief roadshow on Monday for a $700 million offering of Aretec Escrow Issuer 2 Inc. senior secured notes due August 2030 (B2/B).

Initial guidance has the notes coming to yield in the high-9% to 10% area, according to a market source who heard that there is $500 million of reverse inquiry in the deal.

Elsewhere the Global Aircraft Leasing Co., Ltd. and Global Sea Containers II Ltd.’s $1.95 billion offering of five-year senior PIK toggle notes (Ba2//BB-), which has been in the market for the better part of a fortnight, is heard to be in limbo after the company rejected covenant changes demanded by an investor representing an anchor order, which would have taken the book above deal-size, the trader said.

The co-issuers are in the market in order to raise cash to pay off $1.911 billion of GALC 6½% senior PIK toggle notes due September 2024.

Global Aircraft made three PIK payments on those 6½% notes during the height of the Covid shutdown, and investors are keen to incentivize the company to make interest payments on the new notes in cash, sources say.

The issuers addressed that concern in the new deal’s structure, with a novel 200 bps PIK step-up (the customary PIK step-up has been 75 bps).

However, investors want additional guarantees.

Venture Global rises

In the secondary market, Venture Global’s recently priced tranches continued to add to their gains with the notes now trading more than 1 point above their issue prices after a weak break.

The notes were flat early in the session with the broader market weak but shot higher as the session progressed.

The liquefied natural gas producer’s 9½% senior secured notes due 2029 were trading in the par 1/8 to par 3/8 context early in the session.

They shot up to a 101-handle as the session progressed and were trading in the 101 1/8 to 101 3/8 context heading into the market close, a source said.

Venture Global’s 9 7/8% senior secured notes due 2032 were wrapped around their discounted issue price at the open.

They shot up more than 1 point as buyers returned to the space to close the day in the par ¼ to par ½ context, a source said.

Venture Global priced a $2.5 billion tranche of the 9½% notes at par and a $1.5 billion tranche of the 9 7/8% notes at 99.214 to yield 10% on Oct. 19.

The notes had a heavy break and dropped below their issue prices after freeing for trade.

However, they closed last Friday on firmer footing.

Venture Global’s latest offering was the company’s third pass at the junk market in 2023.

After repricing on the heels of its latest offering, Venture Global’s 8 1/8% senior secured notes due 2028 leveled off.

The 8 1/8% notes due 2028 fell 3 points on the new offering with the notes now trading on a 95-handle with a yield of about 9½%.

However, Venture Global’s 8 3/8% notes due 2031, which were primed over in the latest offering, improved in active trade.

The notes gained 1 point to close the day wrapped around 94 with the yield about 9½%.

Hess Midstream jumps

Hess Midstream’s senior notes were among the largest gainers of the session following news that Chevron Corp. would acquire parent company Hess in an all-stock transaction.

Hess’ 5 1/8% senior notes due 2028 gained 2½ points to close the day at 92½ with the yield 7%, a source said.

The 5½% senior notes due 2030 jumped 3 points to close the day in the 91½ to 92 context with the yield also about 7%.

Hess Midstream’s 4¼% senior notes due 2030 jumped 3 points to close the day wrapped around 86 with a 7% yield, a source said.

The notes were on the rise following news that Chevron would acquire parent company Hess in an all-stock transaction with an enterprise value of about $60 billion, inclusive of Hess’ debt.

Fund flows

High-yield ETFs had $210 million of daily cash inflows on Friday, the most recent session for which data was available at press time, according to a market source.

However the ETFs have sustained $8 billion of net outflows, representing 12% of assets under management, in the past five weeks, the source said.

Actively managed high-yield funds sustained $127 million of daily outflows on Friday, according to the market source.

Indexes

The KDP High Yield Daily index was up 13 bps to close Monday at 48.42 with the yield 8.32%.

The index was off 74 bps on the week last week.

The ICE BofAML US High Yield index added 23.2 bps with the year-to-date return now 4.18%.

The index posted a cumulative loss of 129.8 bps on the week.

The CDX High Yield 30 index gained 31 bps to close Monday at 99.31.

The index posted a cumulative loss of 171 bps the previous week.

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