High-Yield Bond Supply Expected to Stay Muted Through Next Week; Lack of New Issues Drives Repricings to Slash Margins by At Least Around 50 bps

Reporting: Jihye Hwang

Not a single borrower tapped the high-yield bond primary this week, with market participants expecting supply to remain subdued again next week. A steady stream of leveraged buyout related loan deals were present, though, while high quality names continued to slash pricing on their term loan Bs by around 50 bps.

According to sources, it will continue to be very quiet until the first week of March in terms of new bond supply. JPMorgan credit analysts also wrote that the second half of February tends to be slower historically, with an average weekly volume of roughly €0.7 billion bond prints.

“We’re waiting for the year-end numbers [from companies] so bond issues will likely continue to be a bit slower,” said a banker, who added that there is no bond deal in his pipeline that is penciled in for next week.

Earnings indeed have kept investors busy, with some companies, such as Iceland reporting better-than-expected results. “Hedge funds have been burnt from their short positions a lot this year from that type of names,” commented a buy-sider.

Leveraged loan supply, meanwhile, remained active, with some market participants anticipating it to stay busy through March. “I feel like it’s always busy with refinancings so I’m yet to let my hopes rise,” another buysider noted. One banker said, though, that he has only about two repricing trades prepared for next week.

While repricing and refinancing transactions accounting for the majority of the new loan issues is no news, the tight pricing levels were a surprise to many. French veterinary pharmaceutical firm Ceva Sante, for example, shaved off 50 bps from existing margins to land a €2.12 billion repricing and add-on deal at Euribor+300 bps. It is the tightest B2/B (Moody’s/S&P) rated name the market has seen since 2021, according to a source close to the matter.

Irish telecommunications company Eircom also slashed 75 bps from existing margins as it repriced a €600 million TLB due 2029 at E+275 bps on Feb. 7. “I’ve covered Eircom since I started my career and was just quite shocked that it got such a cut, but if you have quality and a decent market position in your competitive business, you can come to the market now and cut 50 bps fairly easily,” pointed out a third buysider.

Though not a repricing transaction, German fire protection provider Minimax priced its €1.7 billion-equivalent TLB at extremely tight levels, landing the €700 million portion at E+250 bps and a $1.05 billion tranche at S+225 bps, both at par. Investors liked Minimax’s strong revenue growth, market-leading position and proven track record of cash generation. Read the primary preview on Minimax HERE.

Other new money issues also emerged as unitranche financing continued to cross over to the broadly syndicated loan market. Swiss-headquartered dental care provider Colosseum Dental is marketing a €1.05 billion TLB at E+375-400 bps with 99.5 OID. The company’s broad geographical reach and large scale largely offset concerns around high staff churn and troubling history of a peer, investors said. Read the primary preview on Colosseum Dental HERE.

High-yield funds recorded inflows for the fifth straight week, ending on Feb. 19, according to Bank of America credit strategists. The inflow was the largest in 18 weeks. High-yield exchange traded funds also saw inflows for the fourth week in a row. Regionally, all domiciles saw strong inflows in the high-yield space. Global-focused funds posted the strongest inflow, followed by the U.S. and then by euro-focused high-yield funds.

Coverage of Ceva Sante is HERE, Eircom HERE, Minimax HERE and Colosseum Dental HERE.

To see the covenant analysis of any primary deals or to talk to one of our legal analysts contact us at [email protected] or [email protected].