Junk marks busiest week of year; calendar eyed; Bausch + Lomb, Freedom Mortgage outperform

By Paul A. Harris and Abigail W. Adams

Portland, Me., Sept. 15 – The primary market remained quiet on Friday as 2023’s biggest issuance week to date came to its conclusion.

The new issue bourse generated a $9.5 billion face amount of freshly minted speculative-grade bonds during the Sept. 11 week, eclipsing the $8.5 billion that priced during the week of Feb. 6.

In fact, the Sept. 11 week was the biggest in nearly two years, according to Prospect News data.

The active pace of new issuance is expected to continue in the week ahead.

In addition to the $3.5 billion on the active forward calendar, Worldpay is expected to announce a $4 billion equivalent dual-currency deal and JPMorgan is heard to have four additional deals up its sleeve with one of those offerings expected to come from EquipmentShare.com Inc.

Meanwhile, a firm open in the secondary space gave way to a soft close with the cash bond market up 1/8 point early in the session but down 1/8 point by the session’s end.

While the broader market was either side of unchanged, the deals to clear the market on Thursday were putting in strong aftermarket performances.

While the deals to price in the torrent of new issuance have all remained above water, few have risen above a par-handle.

However, Bausch + Lomb Corp.’s 8 3/8% senior secured notes due 2028 (B1/B-/BB) maintained the 101-handle gained on the break in heavy volume on Friday.

And, Freedom Mortgage Corp.’s two tranches of senior notes (B2/B/B+) outperformed with the notes trading 2 points above their discounted issue price.

Outside of recent issues, Altice France Holding SA’s secured notes notched strong gains in heavy volume as the company preps asset sales to address its debt loads.

Biggest week of the year

Locating a week that generated a greater amount of dollar-denominated new issue volume than the Sept. 11 week requires turning back the calendar pages to the week that got underway on Nov. 15, 2021, which had $11.9 billion.

Conceding that it was a big week in the new issue market, a high-yield portfolio manager remarked that the market appears to be taking its burst of new bonds in stride.

“Nothing appears to be trading higher by an enormous amount,” the investor said, but added that nearly everything that priced seems to be holding at or just above issue prices.

Calendar eyed

Look for new issue pace to remain vigorous in the week ahead, market sources advise.

In addition to the $3.5 billion of business already stationed on the active forward calendar, watch for Worldpay to show up with $4 billion equivalent of secured notes in dollars and euros, a deal that had been expected during the Sept. 11 week, but will show up in the week ahead, the portfolio manager said.

The Worldpay $3.4 billion seven-year first-lien term loan B and $1 billion euro equivalent tranche kicked off earlier in the Sept. 11 week. Commitments are due Thursday.

In addition to its involvement in Worldpay, JPMorgan will have another four junk deals in the Sept. 18 week, the manager said.

One of those deals could come from Missouri-based construction equipment and technologies provider EquipmentShare.com Inc., according to a sellside source who added that aside from the expectation that JPMorgan will have the books no information was available on the deal, on Friday afternoon.

Of the deals in the market that will carry over the weekend, the biggest is the Star Parent, Inc. (Syneos Health Inc.) $1.7 billion offering of seven-year senior secured notes (B1/B) backing the buyout of Syneos by Elliott Investment Management, Patient Square Capital and Veritas Capital.

Initial guidance is in the 9% area, but look for it to come tighter, sources say.

As the week came to a close the Syneos bond was playing to $3.7 billion of demand, according to the sellsider who added that the orders for the concurrent $2 billion term loan are $4.3 billion.

The Syneos bonds are set to be in roadshow mode through Tuesday.

Bausch + Lomb holds gains

While unchanged day over day, Bausch + Lomb’s new senior secured notes due 2028 held on to the strong gains made on the break.

The notes continued to trade on a 101-handle and were changing hands in the 101 to 101¼ context heading into the market close, according to a market source.

There was $55 million in reported volume.

In a heavily oversubscribed offering, Bausch + Lomb priced a $1.4 billion issue of the 8 3/8% notes at par on Thursday.

The yield printed at the tight end of yield talk in the 8½% area.

The deal played to $3.5 billion of demand across 115 accounts, a source said.

Freedom Mortgage outperforms

Freedom Mortgage’s two tranches of senior notes were the outperformers of the deals to price over the course of the week with the notes trading 2 to 2½ points above their discounted issue price.

Freedom Mortgage’s 12¼% senior notes due 2030 were changing hands in the par ½ to par ¾ context heading into the market close.

The 12% senior notes due 2028 were slightly stronger and trading in the par 5/8 to par 7/8 context heading into the market close.

Freedom Mortgage priced an upsized $800 million, from $600 million, tranche of the 12% senior notes and a $500 million tranche of the 12¼% senior notes at 98 on Thursday.

Both tranches were heavily oversubscribed, a source said.

Altice France secureds up

Altice France’s secured notes were on the rise in heavy volume with the notes attracting buyers as the company preps asset sales to address its debt burden.

Altice France’s 5¾% senior secured notes due 2029 (B3/B) rose ½ point to close the day at 83½ with the yield 9½%, according to a market source.

There was $20 million in reported volume.

Altice France’s 8 1/8% senior secured notes due 2027 (B2/B-) were also up about ½ point to close the day at 89 7/8, a source said.

There was $16.5 million in reported volume.

Fund flows

High-yield ETFs sustained substantial daily cash outflows of $227 million on Thursday, the most recent session for which data was available at press time, according to a market source.

Actively managed high-yield funds had $24 million of inflows on the day, the source said.

News of Thursday’s daily cash flows follow a Thursday afternoon report that the combined high-yield funds had $81 million of net inflows for the week to the Wednesday, Sept. 13 close, according to fund-tracker Refinitiv Lipper.

It was the third consecutive positive weekly flow for the junk funds which had inflows totaling $1.5 billion during that interval, according to the market source who spotted the year-to-date cash flows of the dedicated high-yield bond funds at negative-$11.7 billion.

Indexes

The KDP High Yield Daily index was down 9 basis points to close Friday at 50.24 with the yield now 7.58%.

The index added 6 bps on Thursday, 2 bps on Wednesday, fell 5 bps on Tuesday and added 2 bps on Monday.

The index was down 4 bps on the week.

The ICE BofAML US High Yield index was down 14.4 bps with the year-to-date return now 7.099%.

The index gained 17.7 bps on Thursday and 9.6 bps on Wednesday, was off 4.6 bps on Tuesday and gained 13.1 bps on Monday.

The index was up 21.4 bps on the week.

The CDX High Yield 30 index was down 13 bps to close the day at 102.87.

The index added 18 bps on Thursday and 15 bps on Wednesday, was down 16 bps on Tuesday and was up 20 bps on Monday.

The index added 24 bps on the week.

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