Primary high-yield market
Year-to-date volume is on track to total $30.4 billion at Tuesday's close, with the session slated for an additional $600 million in U.S. high-yield issuance. The single-day sum raises February's completed issuance to $6.4 billion. The average high-yield spread to U.S. Treasurys rose 5 basis points in Monday's session, finalizing at T+347, according to the S&P U.S. Issued High Yield Corporate Bond Index. The average yield to worst widened 4 bps, to 5.34%.
The slate of offerings eyed for pricing by the close includes Virtusa Corp.'s add-on 7.125% senior unsecured notes due 2028 backing a dividend payment. After initially pitching the tack-on at $130 million, the deal was trimmed to $50 million, making the borrower the latest to display a preference for floating-rate securities. Pricing for the senior notes was firmed at the wide end of 98.51-99 guidance. Proceeds, along with the seven-year incremental term loan now totaling $670 million and cash on hand, will be used for a dividend payment and to repay existing debt. The initial $350 million bond deal was inked in December 2020 to fund a buyout of the company by Baring Private Equity Asia. Unsecured debt ratings are CCC+/Caa2.
Last week, bond deals for Prince International Corp., McAfee Corp., and Scientific Games Corp.'s lottery business were also downsized in favor of a concurrent loan transaction.
Elsewhere, News Corp. placed a $500 million tranche of 5.125% senior notes due 2032 (BB+/Ba1) at the tight end of talk. The deal was shopped to fund the acquisition of the Base Chemicals and Oil Price Information Service, or OPIS, businesses from S&P Global and IHS Markit, and for general corporate purposes. The new issue is rated BB+/Ba1, reflecting a one-notch upgrade to the company's unsecured debt today at Moody's. Moody's also revised the outlook to positive from stable, citing improvement in operating results, improving free cash flows and a steady track record of conservative leverage and strong liquidity.
Tacora Resources Inc. completed a $50 million add-on to its 8.25% senior secured notes due 2026 to fund capital expenditure purposes and to add cash to the balance sheet. The tack-on priced at talk set at 99.01% of par. The original $175 million tranche of senior secured notes was placed in May 2021. Issue ratings are B/B2.
Primary high-yield stories/links
High-yield forward calendar
Virtusa firms pricing for downsized add-on bond offering, upsizes term loan
Tacora Resources prices add-on to 8.25% senior notes due 2026 at 99.01; terms
Studio City sets price talk for $300M of secured notes
M&A/LBO
News Corp. prices 10-year bonds for M&A at par to yield 5.125%; terms
Secondary high-yield market
The high-yield secondary market held steady today, resisting the ongoing volatility in the European market. Traders reported balanced flows after buyers emerged around yesterday's close. The 106.31 close for the CDX HY 37 was the contract's highest since Feb. 4.
Bonds backing Incora dominated trading volume and price swings following reports that the aerospace logistics company has engaged advisers to help it restructure some $100 million in bond interest payments due in May. The 8.5% secured notes, issued by Wesco Aircraft Holdings Inc. before it merged with Pattonair to form Incora, shed 4 points to a new low of 83.75. Having traded in the low to mid-90s since September 2021, the bonds have plummeted from a Jan. 18 close at 93, bouncing yesterday on a bout of short covering before resuming their downward trajectory. The Wesco 9% secured notes fared better, holding recent gains to trade 3 points above a Feb. 4 low of 82.5.
A raft of earnings generated very little trading action on the day, including Tenet Healthcare Corp.'s fourth consecutive quarterly earnings beat. Tenet bonds edged 0.25-0.50 points higher across the stack while its shares gained 5.75%, leading executive chairman Ron Rittenmeyer to bemoan the company's low valuation on this morning's earnings call. The most actively traded THC 6.125% senior unsecured notes due 2028 were changing hands around 101.625 after testing 106 at the end of December.
While a couple of new-money deals moved off the shadow calendar, near-term issuance has been driven by tack-ons. A $200 million boost to Crescent Energy Co.'s 7.25% senior notes due 2026 was the only pricing in Monday's session. The bonds gave up an early quarter-point gain to trade flat to where the add-on priced, at 101, with trading turning mixed heading into the close.
Secondary high-yield stories/links
Incora hires PJT, Alvarez, Milbank for restructuring as payments loom – WSJ
High-grade market
The high-grade primary market — which stalled out over three straight sessions — ground into low gear today with a four-deal docket shopped against a more stable market tone. The CDX IG 37 today ended tighter for the first time in five sessions, standing at 62.75 bps at the equity bell, down from 64 bps yesterday (a high since the fourth quarter of 2020) but still about 13 bps wider in the year to date.
Today's $2.175 billion issuance total, when excluding a $1.75 billion offering for state-owned Comisión Federal de Electricidad (LCD totals exclude SAS and hybrid deals), brings the rolling five-day sum to just $8.725 billion, and the 10-day rolling sum to about $23 billion. For reference, the amounts for the comparable calendar periods last year were $20.1 billion for the five-day sum and just shy of $75 billion for the 10-day total.
Despite another push higher for underlying Treasury yields, today's pricings all featured refinancing themes, including offerings for BCE Inc..'s Bell Canada subsidiary ($750 million), Kia Corp. ($700 million of green bonds), Morgan Stanley Direct Lending Fund, or MSDLF, ($425 million), and El Paso Natural Gas Co. LLC ($300 million). Bell Canada priced new 3.65% 30-year bonds to partially fund the refinancing of a larger C$1 billion offering of notes due 2023, as rating agencies today noted expectations for ongoing deleveraging at the company over the next couple of years. MSDLF, a business development company, upsized its deal from $300 million, after it netted first-time senior unsecured ratings last week to reflect the company's strategy to diversify its funding sources and refinance existing senior debt.
Distressed story links
Crew Energy upgraded by S&P Global Ratings to B- on improved credit metrics
Delayed Chapter 11 exit improved recoveries during pandemic – S&P Global Ratings
Incora hires PJT, Alvarez, Milbank for restructuring as payments loom – WSJ
Fridson: Misvaluation-spotting methodology for high-yield market validated