Junk primary market caps active week with $2.55 billion; broadcaster sell-off spreads

By Paul A. Harris and Abigail W. Adams

Portland, Me., Feb. 9 – In an active Friday session two junk bond issuers priced three dollar-denominated tranches to raise a total of $2.55 billion.

London-based insurance brokerage Ardonagh Group priced an upsized $2.3 billion equivalent three-part junk offering and Finland-based Amer Sports Co. priced an upsized $800 million issue of seven-year senior secured notes (B1/BB).

With Friday’s action in the tally, gross issuance for the Feb. 5 week came to $9 billion.

Market players are expecting $5 billion to $7 billion of new issue business in the week ahead with one or two big deals on deck, including one big deal from a well-known high-yield issuer.

Meanwhile, the secondary space closed the week on firm footing with the cash bond market notching modest gains to eke out a positive weekly return, a source said.

While the market was under some selling pressure in the early part of the week as the market abandoned hope for a March rate cut, it quickly eliminated its losses with buyers active and market technicals strong.

New issues remained the area where investors were putting money to work although the performances of new and recent deals were becoming increasingly credit-specific.

Consolidated Energy Finance SA’s 12% senior notes due 2031 (B2/BB-/BB-) held on to the strong gains made on the break in active trade on Friday with the juicy yield helping to drive the aftermarket performance.

However, AssuredPartners, Inc.’s 7½% senior notes due 2032 (Caa2/CCC+) continued to lose ground in heavy volume.

Outside of recent issues, broadcasters remained under pressure with several names in the sector lower as markets assess the impact of the new ESPN, Fox and Warner Bros. sports streaming partnership.

Gray Television, Inc.’s senior notes (Caa1/B) and E.W. Scripps Co.'s senior notes continued to fall after heavy selling earlier in the week.

Sinclair Broadcast Group, Inc.’s 4 1/8% senior secured notes due 2030 (Ba3/BB-) and Tegna Inc.’s 4 5/8% senior notes due 2028 (Ba3/BB) were also pushed lower in active trade on Friday.

Active primary

In the Friday primary market, London-based insurance brokerage Ardonagh Group upsized its three-part junk offering to approximately $2.3 billion equivalent from approximately $2.06 billion equivalent.

The deal included an upsized $750 million tranche (from $500 million) of Ardonagh Finco Ltd. seven-year senior secured notes (B-/B) that priced at par to yield 7¾%, at the tight end of talk.

The sole unsecured tranche came from issuing entity Ardonagh Group Finance Ltd. which priced $1 billion of eight-year senior notes (CCC/CCC) at par to yield 8 7/8%, also at the tight end of talk.

Demand for the Ardonagh dollar-denominated notes was around $3.5 billion across both the secured and unsecured tranches, according to a trader.

A different trader had the dollar-denominated notes – the secured and unsecured paper – trading in a context of par 3/8 bid, par 7/8 offered, in the middle of the New York afternoon on Friday.

The Ardonagh deal also included a €500 million tranche of Ardonagh Finco seven-year senior secured notes (B-/B) that priced at par to yield 6 7/8%, at the tight end of talk.

Elsewhere, Finland-based Amer Sports priced an upsized $800 million issue (from $600 million) of seven-year senior secured notes (B1/BB) at par to yield 6¾%, at the tight end of talk.

A blowout deal, the issue commanded a massive $6 billion of orders ahead of the Friday morning close of books, sources said.

With Friday’s action in the tally, gross issuance for the Feb. 5 week came to $9 billion, well short of the previous week, the Jan. 29 week, at $12 billion – the biggest week for issuance in well over two years.

Look for $5 billion to $7 billion of new issue business in the week ahead, a syndicate banker advised on Friday, adding that there would be one or two big deals, including one big deal from a well-known high-yield issuer. The official declined to disclose issuer names or industry sectors.

The Feb. 12 week will be a front-loaded week, the banker added, noting that it will precede the extended Presidents Day holiday weekend. Unlike the week just concluded, it is unlikely that there will be any dollar-denominated primary market business on Friday, Feb. 16, the source said.

Consolidated Energy holds gains

Consolidated Energy’s 12% senior notes due 2031 held on to the strong gains made on the break in active trade on Friday.

The 12% notes continued to trade in the 101¼ to 101¾ context, a source said.

There was $24 million in reported volume.

The notes offered a juicy yield which helped drive the aftermarket performance, a source said.

Consolidated Energy priced an upsized $605 million, from $580 million, issue of the 12% notes at par on Thursday.

The yield printed at the wide end of the 11¾% to 12% yield talk.

AssuredPartners weaker

AssuredPartners’ 7½% senior notes due 2032 continued to weaken in heavy volume on Friday with the notes off another 1/8 to ¼ point.

The 7½% notes dropped to trade in the 99¾ to par context.

There was $31 million in reported volume.

While the notes traded as high as par 3/8 on the break, they gave back their gains to close the previous session wrapped around par.

AssuredPartners priced a $500 million issue of the 7½% notes at par in a Wednesday drive-by.

Streaming woes

Broadcasters continued to take a hit on Friday from the ESPN, Fox and Warner Bros. sports streaming alliance as market players assessed the impact on their bottom line.

Selling in Gray Television’s senior notes continued with the notes down another 2 to 3 points.

Gray Television’s 5 3/8% senior notes due 2031 sank another 2½ points with the notes breaking below a 69-handle.

They opened the day on a 70-handle and continued to move lower as the session progressed, a source said.

The notes were trading in the 68½ to 69 context heading into the market close with the yield rising to 11½%, a source said.

There was $11 million in reported volume.

The notes have fallen more than 7 points on the week with the notes trading on a 76-handle on Monday.

The 7% senior notes due 2027 sank 2½ points to close the day wrapped around 90 with the yield about 10¾%.

There was also $11 million in reported volume.

The notes have also fallen about 7 points on the week with the notes trading on a 97-handle on Monday.

E.W. Scripps’ 5 3/8% senior notes due 2031 (B3/B+) were off another 1½ points to close the day at 67 with the yield about 12 5/8%.

The 5 7/8% senior notes due 2027 were off about 2 points to close the day at 82¾ with the yield now 12 1/8%.

E.W. Scripps’ notes have fallen 4 to 5 points since the streaming alliance was announced.

While selling pressure has been concentrated in Gray Television and E.W. Scripps, other broadcasters were taking a hit in active trade on Friday.

Sinclair’s 4 1/8% senior secured notes due 2030 were down 2 points to close Friday wrapped around 73 with the yield now 9 5/8%, a source said.

There was $9 million in reported volume.

The notes opened the week on a 76-handle.

Tegna’s 4 5/8% senior notes due 2028 were off 1 point to close the day in the 90¾ to 91¼ context, a source said.

There was $7 million in reported volume.

The notes have fallen about 2 points on the week.

While the streaming alliance was pressuring broadcasters as the market assessed the impact it will have on their bottom lines, some sources expressed surprise that broadcasters had not seen the development coming.

Fund flows

The dedicated high-yield bond funds had $389 million of net daily cash inflows on Thursday, according to a market source.

High-yield ETFs had $319 million of inflows on the day.

Actively managed high-yield funds had $70 million of inflows on Thursday, the source said.

News of Thursday’s daily cash flows follows a Thursday afternoon report that the combined funds had $549 million of net inflows during the week to the Wednesday, Feb. 7 close, the market source said, making reference to data reported by fund-tracker Refinitiv Lipper.

Year to date the dedicated junk bond funds have had $3.6 billion of net inflows, a reversal of fortune, as the funds sustained $7 billion of net outflows during the entire year of 2023, according to the market source.

Indexes

The KDP High Yield Daily index added 4 basis points to close Friday at 50.67 with the yield now 6.8%.

The index shaved off 2 bps on Thursday, gained 9 bps on Wednesday and 21 bps on Tuesday after falling 24 bps on Monday.

The index was up 8 bps on the week.

The ICE BofAML US High Yield index added 10.5 bps with the year-to-date return now 0.184%.

The index inched up 0.5 bp on Thursday, added 20.4 bps on Wednesday and 19.2 bps on Tuesday after falling 33.6 bps on Monday.

The index added 16 bps on the week.

The CDX High Yield 30 index added 26 bps to close Friday at 106.04.

The index inched up 4 bps on Thursday and 7 bps on Wednesday after falling 5 bps on Tuesday and 22 bps on Monday.

The index added 10 bps on the week.

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