Junk surges, closes week with strong gains; Ford hits 101-handle; DISH recoups losses

By Paul A. Harris and Abigail W. Adams

Portland, Me., Jan. 6 – While the junk bond primary market was quiet Friday, the secondary space ripped to close the first week of the new year with strong gains.

The decrease in wage growth reflected in the latest U.S. non-farm payroll report sparked a buying frenzy in risk assets.

While some accounts were selling into the rally to unload or lighten some unwanted positions, ETF-buying was bidding up the overall market, a source said.

The cash bond market closed Friday up 1 point with the weekly returns of the ICE BofAML US High Yield index 2.27%.

Ford Motor Credit Co. LLC’s recently priced tranches (Ba2/BB+/BB+) jumped alongside the broader market to trade up to a 101-handle.

DISH Network Corp.’s 11¾% senior secured notes due 2027 (Ba3/B+) recouped their losses from the previous session and hit a new all-time high in heavy volume.

Meanwhile, Bausch Health Cos. Inc.’s capital structure was mixed in heavy volume on Friday as bankruptcy news mounts in the distressed debt space.

Looking ahead

With Friday putting up a goose egg, the first week of the year had a single issuer price $2.75 billion of junk in three tranches, as Ford Motor Credit became 2023's debut high-yield issuer, pricing its three-part unsecured deal – two fixed-rate tranches and a floating-rate note (Ba2/BB+/BB+) – in an execution that came on the investment-grade desk.

Later in the abbreviated post-holiday week the market learned of the Regal Rexnord Corp. $4 billion four-part offering of split-rated senior notes (Baa3/BB+/BBB-), primarily a play for crossover and investment grade accounts, although some high-yield investors are expected to take part, sources say.

The deal, which was being pre-marketed late in the past week, is expected to come in tranches of notes with tenors of three, five, seven and ten years, according to a high-yield portfolio manager who will decline to get involved in the offer.

Initial pricing conversations were coming high-grade-style, in the mid-to-high 200 basis points area, the investor said, calculating that such a spread would result in yields in the mid-6% area based on Friday morning's Treasury yields.

The week ahead figures to be at least somewhat active, according to a bond trader who added that month of January figures to see a modest $10 billion of new issuance, the volume in question being less than half of January 2022's $24 billion.

No new deal announcements were heard on Friday.

Ford jumps

Ford’s recently priced tranches jumped alongside the broader market on Friday with its fixed-rate notes hitting a 101-handle.

Ford’s 6.95% senior notes due 2026 gained 1 point to trade in the 101 to 101½ context on Friday.

There was $33 million in reported volume.

Ford’s 7.35% senior notes due 2030 also rose 1 point with the notes trading in the 101 3/8 to 101 5/8 context heading into the close, a source said.

There was $45 million in reported volume.

The recently priced Ford deal was a $2.75 billion three-tranche offering which included a $1.3 billion tranche of the 6.95% notes and a $1.15 billion tranche of the 7.35% notes.

The 6.95% notes priced at 99.873 to yield 7%.

The 7.35% notes priced at 99.877 to yield 7 3/8%.

DISH hits new heights

DISH’s 11¾% senior secured notes due 2027 recouped their losses from the previous session and hit new heights on Friday.

The 11¾% notes jumped 1¼ points to return to a 104-handle.

They were changing hands in the 104½ to 104¾ context heading into the market close with the yield about 10¼%, a source said.

There was $20.5 million in reported volume.

The notes flirted with a 104-handle earlier in the week but returned to a 103-handle on Thursday amid some softness in the market.

Bausch active

Bausch’s junk bonds were mixed in active trading on Friday as bankruptcy news mounts in the distressed debt space.

The pharmaceutical company is a front-liner on default watch lists.

While the company’s unsecured notes were flat to weaker, its secured notes added in active trade.

Bausch’s 5¼% senior notes due 2031 (Ca/CCC) were flat in heavy volume with the notes closing Friday at 50½ with a yield of 16½%, according to a market source.

The 5¼% notes due 2030 were also flat at 49 with the yield about 18½%.

The 5% notes due 2028 were about ¼ point weaker to close the day at 49 with a yield of 22 3/8%. \

However, Bausch’s 11% first-lien secured notes due 2028 (Caa1/B-) rose about 7/8 point to close the day at 80¼ with a yield of about 16½%.

There was $9 million in reported volume.

The 14% second-lien secured notes due 2030 (Caa3/CCC) were wrapped around 61 with the yield 85 7/8%.

The 6 1/8% senior secured notes due 2027 gained 3 points to climb to 73 with the yield 15¼%.

Bausch issued the 11% and 14% notes in a distressed debt exchange in August.

Notes issued as part of distressed debt exchanges led defaults in 2022.

Fund flows

The dedicated high-yield bond funds had $121 million of net daily cash inflows on Thursday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs had $106 billion of inflows on the day.

Actively managed high-yield funds saw $15 million of inflows on Thursday, the source said.

Indexes

The KDP High Yield Daily index jumped 52 points to close Friday at 52.74 with the yield 7.12%.

The index shaved off 1 point on Thursday after rising 24 points on Wednesday and 34 points on Tuesday.

The ICE BofAML US High Yield index jumped 110 bps on Friday with the year-to-date return now 2.278%.

The index was flat on Thursday after rising 60.3 bps on Wednesday and 57 bps on Tuesday.

The CDX High Yield 30 index jumped 99 bps to close Friday at 101.96.

The index fell 20 bps on Thursday and rose 32 bps on Wednesday.

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