LCD News Today: Jan. 7, 2021

Primary leveraged loan market

It was another quiet session in the new issue market today, with two deals launching and just one other deal added to the new-issue calendar. TMS International and Productive Industrial Products hosted lender calls today to launch new term loans.

An Antares Capital-led arranger group set talk on the $435 million first-lien term loan that is part of the financing backing the acquisition of Protective Industrial Products by Odyssey Investment Partners. Price talk for the seven-year covenant-lite term loan is L+425, with a 0.75% Libor floor, offered at 99. Additional financing includes a privately placed $160 million second-lien term loan with pricing of L+825 and a 1% floor. Citizens Bank and Bank of Ireland are joint lead arrangers on the deal.

Pritzker-backed TMS International Corp. hosted a lender call this morning to launch its $150 million nonfungible term loan B due August 2024, with price talk coming in at L+275, with a 1% Libor floor and an original issue discount in the range of 97-98. Lenders are offered six months of 101 soft call protection. The deal is a J.P. Morgan-led transaction. Proceeds from the add-on term loan will be used for acquisition financing and general corporate purposes.

Looking ahead to next week, Careismatic Brands will launch a $575 million, seven-year first-lien term loan and a $140 million, eight-year second-lien term loan to support the sponsor-to-sponsor sale of the company to Partners Group from New Mountain Capital. UBS, Credit Suisse, Barclays, RBC Capital Markets, Macquarie and BMO Capital Markets are the arrangers. The company has an existing covenant-lite term loan B due June 2023 (L+375, 1% floor) that was originally issued when the firm was known as Strategic Partners Inc., before rebranding a year ago.

Primary leveraged loan market stories/links:

Careismatic Brands preps launch of financing for buyout by Partners Group

TMS International markets $150M incremental term; lender call Jan. 7

Secondary leveraged loan market

The secondary loan market showed no signs of slowing in today's session. The S&P/LSTA Leveraged Loan Index returned 0.42% in 2021 through Jan. 6 after yesterday's 0.18% daily return. Additionally, the share of loans in the index priced at par or above has jumped all the way to 21.9% as of Jan. 6, from 12.5% at the end of 2020.

TricorBraun Inc. announced today that it entered into a definitive agreement with Ares Management and Ontario Teachers' Pension Plan Board for the investors to acquire a majority interest in the company. The company's management and current majority owner, AEA Investors, will retain a significant investment in the company. The transaction is expected to close in the first quarter of 2021, subject to customary closing conditions and regulatory approvals. The company currently has a first-lien term loan due November 2023 (L+375, 1% Libor floor) that ticked up to 99.875/100.375 today, from 99.375/100.

Elsewhere, S&P Global Ratings placed Change Healthcare Inc. on CreditWatch Positive after the announcement yesterday that the company will be acquired by UnitedHealth Group for $25.75 per share in cash, representing a total purchase price of approximately $13 billion, including about $5 billion in debt. The ratings report notes that it expects all of the company's debt to be redeemed upon closing of the transaction, which is expected in the second half of 2021. The issuer's approximately $3.65 billion first-lien term loan due March 2024 (L+275, 1% Libor floor) was quoted at 100.125/100.5 today.

Finally, the average bid of LCD's flow-name loan composite shot up 55 basis points in today's reading to 99.55% of par, from 99.00 on Dec. 31, as the secondary loan market gets off to a red-hot start in 2021. All 15 names in the sample rose in today's reading, and the loan composite reached its highest level since Feb. 20, 2020. The broader S&P/LSTA LL 100 gained 75 basis points to an average bid of 97.99 on Jan. 6, from 97.23 on Dec. 30. That is the highest level for the LL 100 index since Feb. 23, 2020.

Secondary leveraged loan market stories/links:

TricorBraun to be acquired by Ares, Ontario Teachers' Pension Plan

Leveraged loan bids jump 55 bps in weekly reading

Primary high-yield market

Additional refi-driven transactions for U.S. high-yield issuers were launched today as borrowing costs remain attractive. Month-to-date, the average new-issue yield is 5.48%, down from December’s 5.84% average, according to LCD. The average option-adjusted spread was T+355 at the close on Jan. 6, shedding 6 basis points day to day, per the S&P U.S. Issued Corporate Bond Index. Year-to-date volume was expected at $7.2 billion at today's close.

Lamar Media Corp. moved off the shadow calendar with an expected $550 million offering of notes to support a tender offer for the company's $650 million of 5.75% senior notes due 2026. The 10-year bonds priced at the tight end of talk and at par to yield 3.625%. Cash on hand and borrowings under the company's senior secured revolving credit facility and Accounts Receivable Securitization Program will also support the refinancing. S&P Global Ratings yesterday revised the outlook on Lamar to stable from negative on "better-than-expected operating performance through the first three quarters of 2020 and our expectation that the company will maintain adjusted leverage in the 4.5x-5x range through 2021." The new issue is rated BB-/B1.

Hilcorp Energy Co. was underway with proposed eight- and 10-year senior notes to refinance outstanding 5% senior notes due 2024 and 5.75% senior notes due 2025. The shorter tenor was guided in the 6% area and the longer-dated paper in the 6.25% area. The deal was originally shopped as $1 billion total to be evenly split across both tranches, but market sources noted an expected $600 million to be placed of both maturities following an upsizing. Assigned issue ratings are BB-/Ba3.

Multimedia company Urban One Inc. in tomorrow's business will work to wrap an $825 million pitch of seven-year secured notes. Net proceeds, together with cash on hand, will be used to repay or redeem existing loans and the company's 8.75% senior secured notes due December 2022 and 7.375% senior secured notes due April 2022.

Primary high-yield market stories/links:

High-yield forward calendar

Hilcorp Energy circulates price talk for 2-part bond offering

Urban One offers $825M of secured bonds to repay debt; pricing Friday

Lamar Media places senior notes at par to yield 3.625%; terms

Secondary high-yield market

Surging Treasury yields and heavy supply started to weigh on the high-yield market, which underperformed equities today. The yield on the 10-year note rose 4 bps on the day and 16 bps on the week, to 1.08%, as the new-issue tally topped $5 billion. The CDX HY 35 nevertheless pushed higher for a third straight session, though indications bracketing 109.25 at the close remained down slightly from the Dec. 31 close, and the pandemic-era high of 109.57, on Dec. 4.

Bonds backing U.S. Steel Corp. rose across the board on the premise that a Democratic majority in the Senate will make it easier for the incoming administration to pass its proposed $2 trillion infrastructure spending plan. The borrower's most liquid 6.25% notes due 2026 were up 1.75 points on the day and 3.5 points on the week to trade above early-December highs at 96.625 after dropping into the low-90s in the intervening weeks.

Support for energy bonds continued as oil prices held firm above $50. Occidental Petroleum Corp.'s 7.5% notes due 2046 picked up another 3.5 points to set a new pandemic-era high of 116. Bonds backing Devon Energy Corp. and WPX Energy Inc. extended generic gains on the official completion of their merger. The WPX 4.5% notes due 2030 were up a point on the day and 2.25 points on the week at 109 on the highs from September trades with a 92 handle and a May dive into the low-50s. Devon Energy's 5% senior notes came off an intraday high of 119 to close at 118.375.

Urban One Inc.'s 8.75% senior secured notes due December 2022 gained 2 points to trade above par for the first time after the multimedia company said it would use proceeds of a new seven-year offering to redeem its 2022 bonds.

Wednesday's trio of new deals was a mixed bag, with Realogy Holdings Corp.'s upsized $600 million offering of 5.75% eight-year senior unsecured notes notching high trades of 102.25. Meanwhile, M.D.C. Holdings Inc.'s $350 million print of 2.5% senior unsecured notes due 2031 failed to trade any higher than 99.5 despite the issuer releasing positive preliminary fourth-quarter earnings results.

Splitting the difference was a $700 million tranche of 6% 8-year senior notes for Crestwood Midstream Partners LP, which drove the day's trading volume, and headed into the close on the highs at 101.125.

Secondary high-yield market stories/links:

Urban One offers $825 million of secured bonds to repay debt; pricing Friday

Realogy Holdings prints upsized 8-year notes to yield 5.75%; terms

Crestwood Midstream prints senior notes at par to yield 6%; terms

High-grade market

A pair of offerings today — $3 billion of fixed-to-floating notes for Standard Chartered PLC and $750 million of notes backed by funding agreements for Northwestern Mutual Life Insurance Co. — boosted issuance for the week to about $50 billion (ex-SAS and hybrid deals), or well ahead of syndicate projections for about $40 billion this week.

The Standard Chartered deal increased this week's hefty volume of Yankee bank bond supply to $16.25 billion, alongside $6.7 billion from Yankee captive finance issuers. The Northwestern Mutual deal marked the sixth FA-backed deal in the first four sessions of 2021.

The strong issuance flows come as IG bond funds attracted another big net inflow for the week to Wednesday. While total-return prospects are muted for the year ahead, resilient risk-sentiment is reflected in the CDX IG 35 contract, which again tested 50 bps today, near the pandemic-era low at 49.6 bps on Dec. 3, and now little changed for January after an initial blip wider for risk premiums on Monday.

Underlying rates continued higher today, which market participants suggest will only stoke the incentives for issuers to front-load what most desks project will be the second-biggest year on record for gross high-grade issuance in 2021, behind only last year's unprecedented total.

The yield average for the S&P U.S. Investment Grade Corporate Bond Index moved from a pandemic-era low of 1.73% on Dec. 31 to 1.83% at the Wednesday close, the latter marking a high since mid-November. That lurch higher of 10 basis points marked the biggest increase in rates over a comparable span since the days just ahead of the Fed's rally-triggering rollout of corporate liquidity facilities on March 23, 2020, index data show.

High-grade market stories/links

Standard Chartered places $3B of senior notes; terms

Northwestern Mutual Global inks debut FA-backed offering

Distressed news stories/links

McGraw-Hill extends bank maturities, issues new debt

ION Geophysical cut by S&P Global Ratings after it nets restructuring agreement

Valaris disclosure statement nets court approval

CLO market stories/links

Citi prices $401.6M Palmer Square Loan Funding 2021-1 static CLO

RBC prices $18M partial refi of Octagon XV CLO for Octagon Credit Investors