Junk bonds rebound; Signature Bank active; FXI up on exchange; Univar jumps on acquisition

By Abigail W. Adams and Paul A. Harris

Portland, Me., March 14 – The junk bond secondary space had a strong rebound on Tuesday with the stabilization of the banking sector and February’s Consumer Price Index report lifting market sentiment.

With banking regulators taking extraordinary measures to backstop all deposits at Silicon Valley Bank and Signature Bank and prevent further contagion in the banking sector and the CPI print largely in line with expectations, the ‘Fed Put’ was in full effect, sources said.

After a nearly 100 basis points blowout in credit spreads since Wednesday, March 8, opportunistic buyers returned to the space to take advantage of some cheapness.

The cash bond market shot up ½ to 1 point during Tuesday’s session.

“Yesterday, people were hiding under their desks,” a source said.

Signature Bank’s senior notes were trading in heavy volume with the once investment-grade notes plummeting to distressed territory after the bank was placed in F.D.I.C. receivership on Sunday.

FXI Holdings Inc.’s 12¼% senior secured notes due 2026 (Caa2/CCC+) made large gains in active trade after the company launched an exchange offer for its 7 7/8% senior notes due Nov. 1, 2024.

Univar Solutions Inc.’s 5 1/8% senior notes due 2027 (B1/BB) made large gains after Apollo announced it would buy the company in a deal with an enterprise value of $8.1 billion.

Primary horizon

The primary market expectedly remained shuttered on Tuesday, with no dollar-denominated deals having priced in nearly two weeks.

However, the dealers have not gone fishing, a market source in London said, adding that there are a few issuer names in the pipeline – all of them well-known – that can be ready to come when circumstances merit.

The same might be said for their counterparts in the United States, a trader said, but added that the regeneration of the dollar-denominated primary market will almost certainly wait until a firmer outlook on rates takes hold among investors.

The 10-year Treasury bond yielded 3.69% after Tuesday's morning, up from below 3.44% on Monday.

Ten-year governments began the month yielding above 4.07%, a trader noted.

Signature active

Signature’s senior notes were moving in heavy volume on Tuesday after the company’s ratings were slashed to the lowest junk tier before they were withdrawn.

The notes were squarely in distressed territory with market players eyeing their recovery potential.

Signature’s 4% senior notes due 2030 were wrapped around 19½ heading into the market close on Tuesday.

There was $70 million in reported volume.

Signature’s 4 1/8% senior notes due 2029 closed Tuesday at 22½.

There was $46 million in reported volume.

Activity in SVB Financial Group’s senior notes tempered on Tuesday after dominating the tape.

However, the capital structure was marked higher in early trade after closing Monday in the 44 to 46 context.

Some tranches were marked at 49 bid, 51 offered early Tuesday, a level sources found head-scratching given their impending liquidation.

FXI’s exchange

FXI’s 12¼% senior secured notes due 2026 made large gains in active trade after the company launched an exchange for its 7 7/8% senior notes due Nov. 1, 2024.

The 7 7/8% notes jumped 6 points to 95¼ on the offer.

Holders of the 7 7/8% notes were offered new 12¼% senior secured notes at 94 in the exchange, according to a market source.

The news lifted the 12¼% senior secured notes.

The notes jumped 4 points to close Tuesday at 92 3/8, a source said.

There was $18 million in reported volume.

The 12¼% notes were trading on an 88-handle prior to Tuesday’s news.

Univar’s buyout

Univar’s 5 1/8% senior notes due 2027 made large gains in heavy volume following news Apollo would take over the company in a deal with an enterprise value of $8.1 billion.

The 5 1/8% notes jumped almost 5 points to close Tuesday’s session at par, a source said.

There was $32 million in reported volume.

The notes will be taken out in a leveraged buyout deal with Apollo securing $4 billion in financing from nine banks to back the deal.

However, it is unclear if the company will tender for the notes or repurchase them at the 101 poison put, a source said.

Fund flows

The dedicated high-yield bond funds sustained $270 million of net daily cash outflows on Monday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs had $210 million of outflows on the day.

Actively managed high-yield funds sustained $60 million of outflows on Monday, the source said.

The combined funds are tracking $1.05 billion of net outflows on the week that will conclude with Wednesday's close, according to the market source.

Indexes

The KDP High Yield Daily index gained 16 points to close Monday at 50.85 with the yield 7.56%.

The index was down 7 points on Monday.

The ICE BofAML US High Yield index gained 42.2 bps with the year-to-date return now 1.97%.

The index was down 36.5 bps.

The CDX High Yield 30 index gained 85 bps to close Tuesday at 99.6.

The index sank 133 bps on Monday.

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