Avient prices; secondary surges post-Fed; cross-over credits in demand; Teva gains on settlement

By Paul A. Harris and Abigail W. Adams

Portland, Me., July 27 – In a high-yield new-issue market nearly shuttered by risk aversion the Wednesday session saw a blowout acquisition financing deal clear the market in a tight execution on an accelerated timeline

Avient Corp. priced a $725 million issue of eight-year senior notes (Ba3/BB-) at par to yield 7 1/8% on Wednesday.

The yield printed 12.5 basis points inside of the 7¼% to 7½% yield talk. Initial talk was in the 7½% area. The deal was pre-marketed in the high-7% area.

It was a total blowout, sources said.

The $725 million offer played to reverse inquiry that was 1.5-times deal-size, with the order book five-times oversubscribed on Wednesday morning, sources said.

Timing was accelerated.

When it was announced on Tuesday the deal, which came in support of Avient's acquisition of Royal DSM’s Dyneema protective materials business, had been expected to remain in the market until Friday.

In the wake of Wednesday's Avient deal only one offer remained on the active forward calendar.

Patagonia Holdco LLC was scheduled to wrap up a roadshow for its $500 million offering of seven-year senior secured first lien notes (B1/B+) on Tuesday.

There have been no updates since on the offer since the beginning of the week, a market source said.

The deal comes in support of the buyout of Lumen Technologies' Latin American operations by Stonepeak.

Emerging markets bond accounts comprise the most conspicuous presence in the Patagonia order book, the market source added.

It was risk-on in the secondary space on Wednesday following the Federal Reserve’s 75 basis point rate increase with the cash bond market ending the day up ½ to ¾ points.

Chair Jerome Powell again assuaged the market’s fear of an overly aggressive Fed tipping the economy into a recession at his press conference.

While Wednesday was a strong day for the secondary space, trading volume remained thin with new paper from Avient dominating the tape.

High-quality and cross-over credits also played to heavy demand as the market dialed back its rate hike predictions yet remained wary of an elevated default risk.

Centene Corp.’s split-rated senior notes (Ba1/BBB-/BB+) were making strong gains in active trading.

T-Mobile US, Inc.’s senior notes (Baa3/BB+/BBB-) improved in high-volume activity as the rising stars change hands.

While the overall market made large gains on Wednesday, Teva Pharmaceutical Industries Ltd.’s dollar-denominated bonds (Ba2/BB-) were the biggest winners of the day with the pharmaceutical company’s capital structure rising 3 to 5 points following an opioid settlement.

Cross-over credits in demand

Higher-quality and cross-over credits were in demand on Wednesday as the market dialed back its rate hike predictions yet remained wary of an elevated default risk in weaker credits.

Centene’s split-rated senior notes made strong gains on Wednesday.

The 2½% senior notes due 2031 gained 1¾ point to close the day at 84¼ with the yield about 4¾%, according to a market source.

There was $17 million in reported volume.

The 2.625% senior notes due 2031 rose 1 7/8 points to close the day at 84¾ with the yield also about 4¾%.

While the managed care company reported a large earnings beat on Tuesday, Centene’s capital structure was unmoved following the results, a source said.

However, shifting macro forecasts helped catapult the notes higher.

T-Mobile’s senior notes were also on the rise in active trading with the notes recently achieving investment grade status.

T-Mobile’s 3½% senior notes due 2031 gained 5/8 point to close Wednesday at 91 3/8 with $28 million in reported volume.

The 3 3/8% senior notes due 2029 were also up 5/8 point to close the day at 92½ with $19 million in reported volume.

The notes were trading with a yield of 4.7%.

T-Mobile’s notes have been active since achieving rising star status late last week.

Teva outperforms

While a strong day for risk assets, Teva’s senior notes outperformed after the pharmaceutical company announced a $4 billion opioid settlement.

Teva’s 3.15% senior notes due 2026 gained 4 points in high-volume activity.

They were changing hands in the 88¾ to 89 context heading into the market close with a yield of about 6 1/8%.

There was $22 million in reported volume.

The 5 1/8% senior notes due 2029 jumped 5 point to close the day at 91 with the yield 6 7/8%.

There was $12 million in reported volume.

The 4.1% senior notes due 2046 gained 4½ points to close the day at 69¾ with a yield of 6 5/8%

. There was $10 million in reported volume.

The 6¾% senior notes due 2028 gained 3¾ points to close the day at 99½ with the yield 6 7/8%.

Teva’s capital structure surged following news that it reached a $4 billion settlement for pending opioid legislation.

The agreement with the National Prescription Opiate Litigation Plaintiffs Executive Committee includes $650 million in funds earmarked for settled cases and $3 billion in abatement funds for a nationwide settlement, according to a press release.

“They’re capping their liability,” a source said.

Indexes

The KDP High Yield Daily index rose 17 points to close Wednesday at 56.62 with the yield 6.75%.

The index fell 17 points on Tuesday after rising 2 points on Monday.

The ICE BofAML US High Yield index gained 26.3 bps with the year-to-date return now negative 10.185%.

The index fell 31 bps on Tuesday after gaining 3.6 bps on Monday.

The CDX High Yield 30 index gained 90 bps to close Wednesday at 100.53.

The index sank 50 bps on Tuesday after gaining 13 bps on Monday.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.