Morning Commentary: Rakuten upsizes notes add-on to $450 million; junk funds see inflows

By Paul A. Harris

Portland, Ore., Jan. 11 – The high-yield bond market opened unchanged to perhaps 1/8 of a point higher on Wednesday as the U.S. stock indexes were posting modest gains, according to market sources.

With the S&P 500 stock index up 0.39% at mid-morning, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was up 0.42%, or 32 cents, at $76.03.

The Venture Global Calcasieu Pass, LLC 6¼% senior bullet notes due January 2030 (Ba2/BB+) opened at par ½ bid, par ¾ offered on Wednesday morning, according to a sellside source.

The $1 billion issue – the most recent to clear the market – priced in a Tuesday drive-by at par, tight to talk in a deal heard to be five-times oversubscribed.

The Transocean Titan Financing Ltd. 8 3/8% senior secured notes due February 2028 (B2/B-) were 101¾ bid, 102 offered at the Wednesday open.

The upsized $525 million issue (from $500 million) priced Monday at par, also in a heavily oversubscribed drive-by deal.

In the new issue market, Tokyo-based Rakuten Group, Inc. upsized an add-on to its 10¼% senior notes due Nov. 30, 2024 (S&P: expected BB) to $450 million from $200 million and launched the deal at 97.5.

The launch price comes in the middle of the 97 to 98 price talk and in line with initial guidance that had the deal pricing with 2 points to 3 points of OID to yield 11½% to 12%.

The deal is set to price later on Wednesday.

Meanwhile, W&T Offshore Inc. is expected to end a roadshow for its $275 million offering of three-year second-lien senior secured notes (Caa1/B-) on Wednesday, the sellside source said.

Pending official price talk, the deal is in the market with initial guidance in the 12% area and is expected to price before the end of the week.

As a basic indicator of risk aversion in the high-yield new issue market, the W&T Offshore offering is only the second deal to feature a triple-C rating on either side of the split since the beginning of the second half of 2022, according to Prospect News data.

Fund flows

The dedicated high-yield bond funds saw $388 million of daily cash inflows on Tuesday, according to a market source.

High-yield ETFs saw $243 million of inflows on the day.

Actively managed high-yield funds saw $145 million of inflows on Tuesday, the source said.

The combined funds are tracking $2.3 billion of net inflows for the week that will conclude with Wednesday's close, according to the market source.

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