Fortress, Comstock add-ons price; junk under pressure; TIH lower; CSC notes below par

By Abigail W. Adams

Portland, Me., April 2 – The domestic high-yield primary market continued to roll out deals on Tuesday with two drive-by issues pricing.

Fortress Transportation and Infrastructure Investors LLC priced an upsized $700 million in seven-year senior notes (Ba3/B+/BB-) and Comstock Resources Inc. priced an upsized $400 million mirror add-on (B2/B/B+).

The activity is expected to continue on Wednesday with two of the three deals on the forward calendar slated to price.

Rakuten Group Inc. circulated price talk for its $1.25 billion in five-year bullet notes with pricing expected early Wednesday.

Herbalife International Inc. and HLF Financing Sarl LLC are also slated to price a $700 million offering in five-year senior secured notes (Ba2/B+).

However, the deal was heard to be struggling with books not yet full early Tuesday despite the massive demand in the market for new issuance.

Meanwhile, the secondary space had some selling pressure on Tuesday with the latest round of macro data sending a risk-off sentiment through the market.

“This morning, it was getting rocked pretty hard,” a source said.

With the Consumer Price Expenditure report released Friday still reflecting stubborn inflation and the JOLTS report showing signs of a cooling economy, fears about a stagflation scenario were beginning to resurface, a source said.

The cash bond market was off ¼ to 3/8 point with several bids-wanted-in-competition lists circulating the market, a source said.

Panther Escrow Issuer, LLC and Panther Co-Issuer, Inc.’s 7 1/8% senior secured notes due 2031 (B2/B/B+), which priced to back the buyout of TIH, LLC, had some selling pressure with the notes coming in from the heights reached since breaking for trade.

Altice USA, Inc. subsidiary CSC Holdings, LLC’s 11¾% senior guaranteed notes due 2029 (B2/B), which had held up comparatively well as Altice France SA’s debt stack collapsed, cracked on Tuesday with the notes dropping 2 points to trade below par for the first time since pricing.

Drive-by window

Two issuers tapped the drive-by window on Tuesday raising a cumulative $1.1 billion.

Fortress Transportation and Infrastructure Investors priced an upsized $700 million in seven-year senior notes at par to yield 7%, according to a market source.

Pricing came at the midpoint of talk for a yield in the 7% area.

Early guidance was for a yield in the 6¾% to 7% area.

Comstock Resources priced an upsized $400 million mirror add-on to its 6¾% senior notes due 2029 in a Tuesday drive-by at 93 to yield 8.526%.

Pricing came on top of talk for a reoffer price of 93.

Early guidance was for a reoffer price in the 93 area.

The notes are non-fungible to the outstanding issue, which had been trading around 95 with a yield of 8% prior to the deal announcement, a source said.

The deal elicited a credit rating downgrade with Fitch Ratings lowering Comstock’s unsecured rating to B+ from BB- with the outlook revised to negative.

Fitch cited concerns about liquidity deterioration and the company’s ability to decrease leverage as reasons for the downgrade.

On deck

The primary market promises to continue at a steady pace on Wednesday with two deals on deck.

Rakuten talked its $1.25 billion in five-year bullet notes in the 10% area with pricing expected early Wednesday.

Early guidance was for a yield in the mid-10% area.

The offering was playing to heavy demand with books heard to be at $6 billion early Tuesday.

While there is heavy demand for new issuance in the market, Herbalife’s $700 million offering in five-year senior secured notes, which is being guided with a yield in the 11% area, was heard to be struggling.

Books were heard to be $600 million early Tuesday with the deal coming to market with $350 million in reverse inquiry.

Market players were “scared” of the deal, a source said.

Many were heeding the warnings of Bill Ackman who famously took a five-year short position against the company, which he finally closed in 2019.

However, Herbalife’s stock cratered more than 30% in February after reporting earnings, which it has not recovered from.

TIH lower

TIH’s 7 1/8% senior secured notes due 2031 were weaker in heavy volume on Tuesday with the notes giving back nearly half the gains made since hitting the secondary space.

The 7 1/8% notes were down 5/8 to 7/8 point to break below a 101-handle.

They were trading in the par 7/8 to 101 1/8 context heading into the market close, a source said.

There was $20 million in reported volume.

The notes have made strong gains since the $3 billion issue priced at par on March 22.

They closed the previous week at a new high of 101 7/8.

CSC guaranteeds below par

CSC Holdings’ 11¾% senior guaranteed notes due 2029 succumbed to the selling pressure in Altice’s capital structure with the notes sinking below par for the first time since pricing.

The 11¾% notes were down about 2 points and were trading in the 97¾ to 98¼ context heading into the market close, a source said.

There was $18 million in reported volume.

CSC Holdings priced a $2.05 billion issue of the 11¾% notes at par on Jan. 18.

While the 11¾% notes have been dragged lower amid the fire sale in Altice’s capital structure, they have held up comparatively well.

The notes are down about 6 points since Altice France’s late March earnings report and announcement that creditors may need to participate in discounted transactions.

Altice France’s 10½% senior notes due 2027 (Ca/CCC-), in comparison, have plunged 34 to 35 points in the same time frame.

The 10½% notes were wrapped around 38½ heading into the market close with the yield about 52 5/8%, according to a market source.

Indexes

The KDP High Yield Daily index was down 12 basis points to close Tuesday at 50.12 with the yield 6.96%.

The index was off 63 basis points on Monday.

The ICE BofAML US High Yield index was down 32.5 bps with the year-to-date return now 0.916%.

The index was down 26 bps on Monday.

The CDX High Yield 30 index was down 26 bps to close Tuesday at 106.72.

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