High yield: Community Health, Coronado price; ION Trading gains; Bausch under pressure

By Paul A. Harris and Abigail W. Adams

Portland, Me. May 4 – Most of the action in the high-yield primary on Tuesday was tied up in the CHS/Community Health Systems Inc. $1.44 billion single-tranche offering that had a sizeable book in spite of low ratings and a mid-sized coupon.

Meanwhile, the secondary space was slightly softer on Tuesday. However, it was holding up well compared to the sell-off in equities, a source said.

New paper and earnings reports remained the main catalysts for trading activity.

ION Trading Technologies Sarl’s 5¾% senior secured notes due 2028 (B3/B) were in focus with the notes gaining strength as the session progressed.

TKC Holdings, Inc.’s recently priced tranches of senior notes were also putting in strong performances in the aftermarket.

Away from recent names, high yield bonds demonstrated a reasonable amount of resilience in the face of the heaviness which took hold of equities on Tuesday, sources said.

However price movements in the high-yield sectors, to a certain extent, reflected those of their counterparts in the stock market, one trader said, noting that energy, materials and financials were better, while most of the rest were negative, or at least moderately so.

Particularly in focus outside of new paper, Bausch Health Cos. Inc.’s capital structure was under pressure on Tuesday with the company’s leverage expected to increase after a planned spinoff of one of its business units.

Primary

A familiar name on the high-yield bond landscape, CHS/Community Health Systems, showed up Tuesday with a $1.44 billion issue of junior priority secured notes due April 1, 2030 (Caa3//CC) that priced at par to yield 6 1/8%, at the tight end of talk.

The deal was heard to be playing to a $2.5 billion book approaching midday Tuesday, sources said.

Much of the demand was concentrated among a few large accounts including Franklin Templeton Investments and Fidelity Mutual, they added.

The notes traded to a context of par ½ bid, par ¾ offered, an investor said.

Although its credit ratings were far better than those of CHS, Australia-based coal miner Coronado Finance Pty Ltd. came away with a far higher cost of capital, as it priced a $350 million issue of 10¾% five-year senior secured notes (B2/B) at 98.122 to yield 11¼%.

The yield printed at the tight end of the 11¼% to 11½% yield talk. The issue price came in line with discount talk of approximately two points.

The deal underwent structural and covenant changes (see related stories in this issue).

ION Trading gains

ION Trading’s 5¾% senior secured notes due 2028 were putting in a solid performance in the aftermarket with the notes gaining strength as the session progressed.

The 5¾% notes started the day on a par-handle and steadily climbed as market conditions improved.

They were changing hands in the 101¾ to 102 1/8 context heading into the market close, according to a market source.

There was more than $38 million of the bonds on the tape.

ION Trading priced a $450 million issue of the 5¾% notes at par on Monday.

The yield printed in the middle of yield talk in the 5¾% area.

TKC Holdings at a premium

TKC Holdings’ two tranches of senior notes were also putting in a decent or better performance in the aftermarket.

The 6 7/8% senior secured first-lien notes due May 2028 (B1/B) were changing hands in the par ¾ to 101¼ context heading into the market close.

However, volume in the issue was relatively light with only $10 million in reported volume during Tuesday’s session.

TKC Holdings’ 10½% senior notes due 2029 (Caa2/CCC) outperformed their lower-coupon counterparts with the notes trading up to a 101-handle.

The 10½% senior notes were changing hands in the 101 to 101½ context heading into the close.

There was about $24.5 million in reported volume.

TKC Holdings priced an upsized $425 million, from $400 million, tranche of the 6 7/8% notes and a downsized $675 million, from $700 million, tranche of the 10½% notes at par on Monday.

The 6 7/8% notes priced in the middle of the 6¾% to 7% yield talk; the 10½% notes priced at the wide end of the 10¼% to 10½% yield talk.

Bausch Health under pressure

Bausch Health’s capital structure was under pressure on Tuesday after the company reported earnings.

Bausch’s notes were trading down 2 to 3½ points.

The 5¼% senior notes due 2030 (B3/B) and 5¼% senior notes due 2031 (B3/B) were the most active of the capital structure.

Both notes traded off more than 3 points to fall to a 97-handle in the high-volume activity.

There was about $50 million and $40 million in reported volume respectively.

Bausch’s 5% senior notes due 2029 dropped 2¼ points to 99½ with about $12 million in reported volume.

The 6¼% senior notes due 2029 were down 2 points to 103¾ with about $10 million in reported volume.

Bausch notes were under pressure after the company reported earnings and announced the planned spinoff of its eyecare business.

The spinoff would increase Bausch Pharma’s targeted leverage to 6.5x to 6.7x, a 1x increase from the previous target of leverage of mid-5x. (See related article in this issue)

S&P Global Ratings revised its outlook for Bausch to negative following the news.

$789 million Monday inflows

The dedicated high-yield bond funds had $789 million of net daily inflows on Monday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs saw $799 million of inflows on the day.

However actively managed high-yield funds sustained $10 million of outflows on Monday, the source said.

Indexes mixed

Indexes were mixed on Tuesday after a strong start to the week.

The KDP High Yield Daily index rose 1 point to close Tuesday at 69.66 with the yield now 3.89%.

The index was up 3 points on Monday.

The ICE BofAML US High Yield index was down 5.8 bps with the year-to-date return now 2.049%.

The index was up 9.6 bps on Monday.

The CDX High Yield 30 index dropped 15 bps to close Tuesday at 109.77.

The index gained 5 bps on Monday.

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