Venture Global drives by junkland; Transocean at a premium; Medline rally pauses

By Paul A. Harris and Abigail W. Adams

Portland, Me., Jan. 10 – There was drive-by action in the high-yield bond primary market for the second consecutive day, on Tuesday. Venture Global Calcasieu Pass, LLC utilized market conditions for a pass.

Meanwhile, the lift-a-thon in the secondary space took a breather with the cash bond market flat after the strong new-year gains from the market upping its bets on a relaxation in the Federal Reserve’s rate hike schedule.

The market is now pricing in a 25 basis points rate hike at the February meeting but it’s “hanging its hat on inflation easing,” a source said.

The current market rally largely hinges on the December consumer price index report, which is set for release on Thursday.

Market chatter has the report coming in lower than expectations, a source said.

However, volatility is in store if the report surprises to either the upside or the downside.

While the CPI report on Thursday will largely determine the staying power of the rally, the cash bond market was unchanged on Tuesday.

New paper was in focus with Transocean Titan Financing Ltd.’s 8 3/8% amortizing senior secured notes due 2028 (B2/B-) dominating the tape and trading at a strong premium to the issue price.

Medline Industries Inc.’s junk bonds remained active but were unchanged after a strong rally since the start of the year.

Coinbase Global, Inc.’s junk bonds (Ba2/BB) were on the rise in heavy volume as the crypto exchange enacted fresh cost-cutting measures, including the elimination of 20% of staff.

Venture Global

Once again the drive-by action in the primary market emanated from the energy sector.

Venture Global Calcasieu Pass, LLC priced a $1 billion issue of seven-year senior bullet notes (B2/BB+) at par to yield 6¼%.

The yield printed at the tight end of yield talk in the 6 3/8% area. Initial guidance was in the 6 5/8% area.

The deal was five-times oversubscribed at 1 p.m. ET Tuesday, a sellside source said, adding that there was price sensitivity among investors, some of whom dropped out when talk went below 6 3/8%.

Reverse inquiry was 1.5-times deal-size, a trader said.

The Venture Global deal came on the heels of a Monday drive-by that saw Transocean Titan Financing Ltd. price a $525 million issue of 8 3/8% amortizing five-year senior secured notes (B2/B-).

Looking to the Wednesday session, Rakuten Group, Inc. talked a $500 million add-on to its 10¼% senior notes due Nov. 30, 2024 (BB) at an original issue discount of 97 to 98, in line with initial guidance.

Books close at 10 a.m. ET on Wednesday, and the notes are expected to price thereafter.

W&T Offshore Inc. is also on the active forward calendar with a $275 million offering of three-year senior second-lien secured notes (Caa1/B-), initial guidance 12% area.

That deal is also expected to price before the end of the week.

Transocean at a premium

Transocean’s 8 3/8% amortizing senior secured notes due 2028 dominated the tape on Tuesday with the notes trading at a strong premium to their issue price.

The 8 3/8% notes were marked at 101¾ bid, 102 offered heading into the market close, a source said.

There was $94 million in reported volume.

Transocean priced the upsized $525 million, from $500 million, issue at par to yield 8 3/8% in a Monday drive-by.

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

The deal was heard to be multiple times oversubscribed and priced tighter than the B index, which has been trading with an 8½% yield, a source said.

“It was good pricing and it’s trading like everything else in the market, very well,” a source said.

The offshore drilling contractor has always been a troubled credit and was on the verge of bankruptcy a few years back when oil slumped.

The issue will be an interesting one to watch, especially with the volatility in energy markets, the source said.

There is talk of crude oil futures again running up to $100.

Medline rally pauses

While the notes remained active, the strong rally in Medline’s junk bonds paused on Tuesday.

Medline’s 3 7/8% senior secured notes due 2029 (B1/B+/BB-) remained on an 85-handle.

They were changing hands in the 85 to 85¼ context heading into the market close with a yield of about 6 7/8%, according to a market source.

There was $22 million in reported volume.

The notes have risen 3 points since the new year.

Medline’s 5¼% senior notes due 2029 (Caa1/B-/B-) continued to trade in the 82 7/8 to 83 1/8 context heading into the market close with the yield 8 5/8%.

There was $27 million in reported volume.

The notes have also added about 3 points since last week.

Coinbase gains

Coinbase’s junk bonds were on the rise on Tuesday after the company announced a variety of cost-saving measures which included mass layoffs.

Coinbase’s 3 3/8% notes due 2028 gained 2 points to close Tuesday on a 58-handle.

The notes were changing hands in the 58 to 58¼ context heading into the market close with the yield 14 3/8%, according to a market source.

The notes traded in heavy volume with $14 million on the tape.

The notes have climbed 4 points over the past two sessions.

The crypto exchange’s 3 5/8% senior notes due 2031 rose 1 point to close Tuesday wrapped around 52 with the yield just shy of 13%.

The notes have climbed 2 points over the past two sessions.

Coinbase was again in focus on Tuesday after the crypto exchange announced a variety of cost-savings measures, which included laying off 20% of its staff.

The cost-savings measures will reduce the company’s operating expenses by 25%, the company said in an Securities and Exchange Commission filing.

Coinbase was under pressure last week as bankruptcy news continued to swirl around the industry in the wake of crypto exchange FTX’s spectacular collapse in November.

Crypto lender Genesis Global Trading Inc. announced last week it was considering filing for bankruptcy protection.

Fund flows

Actively managed high-yield funds had $142 million of daily cash inflows on Monday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs were negative on the day, sustaining $264 million of inflows on Monday, the source said.

The combined funds are tracking $1.9 billion of net inflows for the week that will conclude with Wednesday's close, according to the market source.

Indexes

The KDP High Yield Daily index shaved off 5 points to close Tuesday at 53 with the yield 7.01%.

The index gained 31 points on Monday.

The ICE BofAML US High Yield index was down 3.8 bps with the year-to-date return now 2.904%.

The index rose 66.4 bps on Monday.

The CDX High Yield 30 index slipped 2 bps to close Tuesday at 101.88.

The index fell 6 bps on Monday.

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