Raising Cane’s joins junk calendar; CommScope, First Quantum plunge

By Abigail W. Adams

Portland, Me., Oct. 30 – While high-grade issuers stampeded to capital markets on Monday, the high-yield primary market was quiet but not dormant.

Raising Cane’s Restaurants LLC joined the calendar with a $500 million offering of long five-year senior notes (B3).

Additional activity is expected with Ineos Quattro further telegraphing its intention to price an €800 million equivalent offering of dollar- and euro-denominated secured notes as its term loan kicks off.

However, high-yield primary market activity is expected to be relatively light as the market awaits greater clarity on the future rate environment from the Federal Open Market Committee’s Wednesday announcement.

Meanwhile, the secondary space launched the day on firm footing but gave back its early gains and ended the day unchanged as Treasury yields continued to widen with the 10-year closing the session up 4.8 basis points at 4.889%.

However, buyers were returning to the space with bids-wanted-in-competition lists outnumbering offers-wanted-in-competition.

While buyers were interested in certain credits, CommScope Holding Co., Inc. and First Quantum Minerals Ltd. were not among them.

CommScope’s senior notes plunged 2 to 15 points in heavy volume with an earnings warning and market chatter about a large holder liquidating their position sparking a fire-sale in the capital structure.

First Quantum’s senior notes also tanked on Monday as the operation of the company’s embattled Panamanian cooper mine faces a new challenge.

Primary market eyed

The primary market was quiet but not dormant on Monday with one new deal joining the forward calendar.

Raising Cane’s Restaurants plans to price a $500 million offering of long five-year senior notes (B3) with early whispers for a yield in the high 9% to 10% area.

Pricing is expected on Wednesday.

Ineos Quattro is also expected to surface shortly with its €800 million equivalent offering of dollar- and euro-denominated secured notes.

The London-based chemical company further telegraphed its intention to price the junk rated tranches as it kicked off a lender call for a €2 billion equivalent term loan B.

CommScope for sale

There was a fire-sale in CommScope’s senior notes on Monday after the company slashed its guidance and market chatter swirled about a large holder liquidating their position in the credit.

CommScope’s 6% senior notes due 2025 (Caa1/CCC+) were the hardest hit, plunging 15 points.

The 6% notes were changing hands in the 74 to 75 context heading into the market close with the yield rising to 26¾%, a source said.

There was $72 million in reported volume with the notes the most actively traded during Monday’s session.

The 8¼% senior notes due 2027 also saw outsized losses. They were down 8 points to close the day at 53 with the yield rising to 32¼%.

There was $14 million in reported volume.

Holders were reducing their positions in the network infrastructure’s unsecured notes following its earnings warning, a source said.

However, market chatter about a holder with a large position in the company that is looking to exit the name sparked heavy selling across the capital structure.

CommScope’s 6% senior secured notes due 2026 (B1/B) fell 5 points to close the day at 83 3/8 with the yield rising to 14 5/8%.

There was $26 million in reported volume.

The 4¾% senior secured notes due 2029 fell 2 points to close the day at 66¼ with the yield about 13¼%.

There was $17 million in reported volume.

The fire-sale began when CommScope issued an earnings warning with revenue to come in far below and net losses far wider than previously forecast.

The company also slashed its 2023 EBITDA guidance to $1 billion to $1.05 billion from $1.15 billion to $1.25 billion.

First Quantum under pressure

First Quantum’s capital structure was also under pressure as the company’s Panamanian copper mine faced a fresh challenge.

First Quantum’s 8 5/8% senior notes due 2030 (//B+) 8 5/8% senior notes sank 7 points in heavy volume as the Panamanian Government called for a vote on First Quantum’s mining contract with the country.

The 8 5/8% notes were trading in the 85¾ to 86¾ context in heavy volume, a source said.

The yield rose to about 11 3/8%.

There was $52 million on the tape.

The 6 7/8% senior notes due 2027 sank 8 points to close the day at 85 with the yield 11¾%.

There was $27 million in reported volume.

The 6 7/8% senior notes due 2027 fell 6 points to 88¾ with the yield 12½%.

There was $18 million in reported volume.

The 7½% senior notes due 2025 fell 3½ points to close the day at 95¼ with the yield 11¼%.

There was $20 million in reported volume.

First Quantum’s Panamanian mine is its largest asset.

The mine was forced to shut down in February due to failed contract negotiations with the government.

The Panamanian president signed off on a new 20-year contract with First Quantum earlier in the month.

However, there have been widespread protests since the contract renewal.

To appease protestors, the Panamanian president announced on Monday the contract would be put to a citizens’ vote, which is scheduled to take place on Dec. 17.

Indexes

The KDP High Yield Daily index shaved off 5 bps to close Monday at 47.95 with the yield 8.29%.

The index posted a cumulative loss of 29 bps on the week last week.

The ICE BofAML US High Yield index was down 3.5 bps with the year-to-date return now 4.362%.

The CDX High Yield 30 index closed Monday at 99.09.

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