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With a backlog of issuers waiting to launch deals after Russia’s invasion of Ukraine shuttered markets late last week, the high yield market reopened this week. But even as Macy’s managed to price tight of talk, issuers are having to adapt to a new pricing paradigm.

Macy’s $850m dual-tranche refi was evidence of positive sentiment among US investors. The deal proved there is still strong demand for high-quality issuers even amid volatility around rates, inflation, and the conflict in Europe, sources told 9fin.

“Macy’s stands out in terms of how their execution went on their refi,” said a buysider. “They priced inside of talk, but that’s really the exception to the rule in this market.” 

Other issuance this week was a mixed bag when it came to deal terms. Protein shake maker BellRing Brands made some concessions when it returned to market, having pulled back amid last week’s turmoil, but chemicals company LSB Industries and battery maker Energizer found success with smaller deals. 

This time around, BellRing reduced the tenor of its deal by two years, ultimately pricing $840m of 7% senior unsecured notes due 2030 in line with talk. Proceeds fund its spinoff from cereal maker Post Holdings. 

Energizer priced an upsized $300m 6.5% 2027 senior unsecured bond at the tight end of talk in the 6.625% area, with proceeds to pay down revolver borrowings. LSB Industries upsized its $200m 6.25% 2028 senior secured add-on by $25m. The deal priced at par, from talk of 99.5-100.    

Elsewhere, semiconductor materials supplier Entegris was able to price the loan portion of its $5.47bn acquisition financing this week—but it has not yet launched the bond component. Proceeds of the deal are slated to fund the company’s acquisition of CMC Materials.

The $2.495bn TLB priced at the wide end of talk (S+300bps, with a 0% floor and a 99.0 OID). On Wednesday, Entegris shifted $600m to its proposed secured notes offering, meaning the bond portion is now split between $1.6bn of secured notes and $800m of unsecured notes. 

The strong price action on Macy’s deal marked it out from the rest of the pack. But the deal also provides further evidence of a new market reality: that the era of rock-bottom refinancings is definitively over.  

The retailer’s two senior unsecured notes were evenly split at $425m and placed at par. Both came tighter than talk, with the 2030s landing at 5.875% (talk was 6%-6.25% area) and the 2032s at 6.125% (from talk of 6.25%-6.50% area).

Macy’s was hit hard at the onset of the pandemic in 2020, losing its investment grade ratings and announcing a plan to shutter 125 stores over three years. But it managed to avoid bankruptcy (unlike its peer JC Penney) and now, it is back on the cusp of investment grade, with BB/Ba1/BBB- ratings.

“It’s really more of a crossover credit now,” said a buysider familiar with the issuer.


The company’s latest earnings report exceeded analysts’ expectations, showing the fruits of its “Polaris” strategy (focused on stabilizing profitability and cash flow) and reinvestment in private-label brands to reduce reliance on third-party products. And strong earnings from Nordstrom the day before Macy’s launched its bond offering helped boost demand, sources said. 

With this latest trade, Macy’s is clearing out its maturity runway by redeeming its 2.875% and 4.375% senior unsecured notes due 2023, its 6.65% second lien notes due 2024, and 3.625% and 6.65% senior unsecured notes due in 2024.

The new notes may be more expensive than some of the bonds being retired, but in this rising rate environment the company—and many of its peers in the high yield market—may not see a pathway back to sub-3% pricing in the coming years, sources noted. 

“Those coupons from last year, they're not coming back,” said a banker. “Issuers are going to be funding themselves at new higher levels for the foreseeable future, and in fact, those levels could continue to go higher.”

The loan market has so far been more resilient in terms of pricing, but this week the drift began to take hold.

For example, New Zealand-based Voyage priced its NZ$1.35bn-equivalent recap loan (split into USD$510m and NZD$600m tranches) at S+450, wide of price talk at S+400-425. The original issue discount also came in at 98.5 from talk of 99–99.5.

Faced with the rising cost of borrowing, some opportunistic borrowers are choosing to walk away: Callaway Golf this week announced it was placing its $950m loan refi on hold. Sources told 9fin there was a book for the deal, but that Callaway decided to hold out in hope of better terms. 

The deal would have taken out debt related to last year’s Topgolf acquisition, and consolidated the two borrowing entities under one facility. Callaway Golf did not respond to a request for comment and lead arranger BofA declined to comment. 

“I think that if a high-quality issuer wants to come to market, they could get a deal done, absolutely,” said a banker, noting that some borrowers are still adjusting to the new normal of wider pricing. 

“It's just that folks have gotten so used to grinding out that extra eighth, that when you're talking about backing up by 50bp-75bp, that's a big shock,” the banker said. “I think it's going to take issuers some time to get comfortable with that.”

Two other loan deals were pulled this week: a dividend financing for higher education provider Laureate Education and a near-term refi for oil and gas service provider Goodnight Midstream (Moody’s later withdrew its rating for the company, citing its failure to complete the deal).

Meanwhile, Colibri got a more favorable outcome. The professional education company managed to upsize its term loan B by $25m, to a final size of $670m. 

Along with a privately placed $180m second lien, proceeds of the loan fund Colibri’s acquisition of Becker Professional Education and OnCourse Learning. The extra proceeds from the upsize will add cash to the company’s balance sheet.

The TLB priced in line with talk, at S+ 500bps, with a CSA, a 75bps floor, and a 99 OID. A source familiar with the syndication said the bookbuild was barely impacted by the conflict in Ukraine, which erupted shortly after the deal was launched. 

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Macy’s shows US investors hungry for quality as cost of issuance rises

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