CURO gains steam; Laredo, Callon pare losses; Endo up on settlement news; primary quiet

By Paul A. Harris and Abigail W. Adams

Portland, Me., July 20 – For the second consecutive session the dollar-denominated high-yield new issue market put up a goose egg on Tuesday

Meanwhile, the secondary space saw a strong rebound with the market up about ¼ point after Monday’s rout.

CURO Group Holdings Corp.’s 7½% senior secured notes due 2028 (B3/B-) remained active with the notes improved alongside the broader market.

Energy names, which bore the brunt of Monday’s sell-off, staged a modest rebound as crude oil futures improved.

Laredo Petroleum, Inc.’s 7¾% senior notes due 2029 (B3/B) pared their losses from the previous session with the notes regaining 2 points.

Callon Petroleum Co.’s 8% senior notes due 2028 (Caa2/CCC+) also attempted a rebound although the notes remained well below their previous level.

Endo Finance LLC’s 6% senior notes due 2028 (Caa2/CCC+) surged on Monday on news about a proposed settlement with Tennessee.

Upcoming

With a quiet backdrop to the start of the week, a sizable trade is set to hit the block Wednesday.

McGraw-Hill Education, Inc. is expected to clear the market with $3,175,000,000 of debt financing backing the buyout of the company by Platinum Equity Partners

Tuesday revisions saw $350 million shifted to the term loan from the bond portion.

The downsized $1,675,000,000 two-part offering of bonds saw pricing on both tranches widen from initial guidance. However, the unsecured tranche underwent a greater amount of widening than the secured notes.

The downsized $950 million tranche (from $1.15 billion) of seven-year senior secured notes (B2/B) is talked to yield in the 5½% area, versus earlier guidance in the low 5% area.

A downsized $725 million tranche (from $875 million) of eight-year senior unsecured notes (Caa2/CCC) is talked to yield in the 7¾% area, versus earlier guidance in the low 7% area.

Part of the widening might be attributed to Monday's sizable sell-off, sources said.

However, a trader noted that Tuesday's rally pretty much zeroed out Monday's sell-off.

The unsecured portion of the deal has engendered investor pushback because of its issuer-friendly covenant package, sources say.

As it stands, covenants preventing the company from incurring additional debt provide weak protection to unsecured lenders, an investor said on Tuesday.

Although there had been no concessions on the covenants from the issuer as of Tuesday's close, there is a decent chance that concessions might still materialize, the investor said.

The secured tranche is pretty well done, the source said.

However there is still some wood to chop, with respect to the unsecured tranche, the investor added.

Dwarfing the McGraw-Hill bond offer is the DirecTV $3.1 billion megadeal, a single tranche of six-year senior secured notes (BB/BBB-) now on the road, and expected to price Thursday.

That deal is doing fine at the initial guidance of 6% to 6½%, a trader said.

Also on Tuesday Carnival Corp. announced that it obtained 85.19% of consents to amend its credit indenture, and that $2,406,791,000 of its 11½% first-priority senior secured notes due 2023 were validly tendered.

The tender deal hinges on new debt financing which is expected to surface soon in the form of a bond deal, a trader said.

CURO improves

CURO’s 7½% senior secured notes due 2028 were gaining steam in active trading on Tuesday.

The recently priced notes rose about 5/8 point as the broader market improved.

The notes jumped to a 101-handle and were changing hands in the 101 to 101½ context heading into the market close, according to a market source.

There was about $36 million in reported volume.

The 7½% notes were changing hands in the par ¾ to 101¼ context after breaking for trade last Friday.

However, they dropped down to a par handle in Monday’s sell-off.

CURO priced a $750 million issue of the 7½% notes at par last Friday.

Energy rebounds

Energy names pared their losses from a brutal session on Monday as crude oil futures improved.

Laredo Petroleum’s 7¾% senior notes due 2029, which sank upwards of 7 points on Monday, staged a modest rebound.

The 7¾% notes were up about 3 points to close Tuesday at 95, according to a market source.

There was $16 million in reported volume.

Laredo’s 7¾% notes have struggled since the oil and gas company priced the $400 million issue at par on July 13.

Callon’s 8% senior notes due 2028 were also attempting to recover their losses from Monday’s session, a source said.

The notes traded as low as 90½ and as high as 93¾ during Tuesday’s session.

However, the majority of prints were in the 91¾ to 92¾ context.

While an improvement from Monday, the notes were still well below their previous level.

They closed last Friday at 96½, a source said.

“They’re still lower but they’re trying to recover,” a source said.

Callon’s 8% notes initially performed well after the energy company priced a $650 million issue of the notes at par on June 21.

However, the notes have been on a downward spiral since last week as investors shed riskier names amid general market weakness.

The notes were above par at the start of last week.

Endo jumps

Endo’s 6% senior notes due 2028 surged in active trading on Tuesday on news about a proposed settlement to the opioid litigation it was facing in Tennessee.

The 6% notes gained almost 6 points in active trading to close the day at 65¾, according to a market source.

There was more than $23 million in reported volume.

News broke on Tuesday that the pharmaceutical company had offered to settle the case against it in Tennessee.

Endo’s junk bonds have been under pressure since early July with the company hard hit by the risk-off sentiment that was beginning to sweep the market.

In April, the Tennessee district court issued a default judgement against the company in its opioid litigation with the trial for damages set to begin on July 26.

ETFs see $972 million Monday outflows

High-yield ETFs sustained large cash outflows of $972 million on Monday, the most recent session for which data was available at press time, according to a market source.

Actively managed high-yield funds, meanwhile, saw solid inflows of $155 million on the day.

The combined funds are tracking $800 million of net outflows in the week that will conclude with Wednesday's close, the market source said.

Indexes

The KDP High Yield Daily index slid 2 points to close Tuesday at 69.87 with the yield now 3.82%.

The index was down 33 points on Monday.

The ICE BofAML US High Yield index rose 19.5 basis points with the year-to-date return now 3.58%.

The index was down 51.5 bps on Monday.

The CDX High Yield 30 index gained 28 bps to close Tuesday at 109.26.

The index sank 53 bps on Monday.

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