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Published on 1/12/2023 in the Prospect News High Yield Daily.

W&T Offshore prices with double-digit yield; AA soars; Ford adds point; Tegna pressured

By Paul A. Harris and Abigail W. Adams

Portland, Me., Jan. 12 – Thursday’s junk bond primary market brought W&T Offshore Inc.’s offering with a Caa1 rating on one side of the split.

Meanwhile, the secondary space continued to rally on the heels of December’s consumer price index report, which wielded few surprises.

The report came in line with expectations and continued to fuel bets for the Federal Reserve to lift rates by 25 basis points as opposed to 50 bps on Feb. 1, despite the continued strength of the labor market.

The cash bond market added another ½ point to the strong gains made since the start of the year.

With the CPI report now in rear-view, the market’s attention was shifting to earnings with market players on high alert for recession indicators.

However, few were found on Thursday with American Airlines, Inc.’s junk bonds on the rise after the company lifted forward guidance ahead of earnings.

Ford Motor Credit Co. LLC’s recently priced 7.35% senior notes due 2030 (Ba2/BB+/BB+) resumed their strong uptrend with the notes adding another 1 point in heavy volume.

While the “lift-a-thon” continued in the secondary space, Tegna Inc.’s junk bonds were under pressure as political opposition to Standard General’s acquisition of the broadcaster mounts.

Double digits

W&T Offshore cleared the active forward calendar on Thursday as it priced a $275 million issue of three-year senior second-lien notes (Caa1/B-) at par to yield 11¾%.

The yield printed at the tight end of the 11¾% to 12% yield talk.

Early guidance was in the 12% area, a trader said, asserting that the paper was cheap at that price.

The company is doing well, and has indicated its intention of paying down debt, rendering it a candidate for a credit rating upgrade, the trader added.

The W&T Offshore deal was heard to have been half done in reverse inquiry, and was playing to $400 million of demand an hour before close of books on Thursday morning, according to a sellside source.

The bonds were in the context of 101½ bid, 102 offered, after they broke for trading on Thursday afternoon, the source added.

American’s guidance

American Airlines’ junk bonds were on the rise in heavy volume on Thursday after the company lifted its fourth-quarter guidance ahead of next week’s earnings report.

The 11¾% senior notes due 2025 (Ba3/B) gained about 1 point to close Thursday at 110 7/8, according to a market source.

The yield was just shy of 7%.

There was $27 million in reported volume.

American Airlines, Inc./AAdvantage Loyalty IP Ltd.’s 5¾% senior notes due 2029 (Ba2) jumped 1 5/8 points to close Thursday at 95¾ with the yield now 6¾%, a source said.

There was $24 million in reported volume.

The airline now projects revenue growth of 16% to 17% from the previous 11% to 13%.

The company is scheduled to release earnings on Jan. 18.

Ford gains continue

Ford’s recently priced 7.35% senior notes due 2030 were moving higher on Thursday with the notes climbing another 1 point to close the day on a 104-handle.

The 7.35% notes were changing hands in the 104 to 104½ context heading into the market close.

There was $22 million in reported volume.

While Ford’s 7.35% notes were on the rise, its 6.95% senior notes due 2026 were largely unchanged on a 102-handle.

The notes were changing hands in the 102¼ to 102¾ context in heavy volume.

There was $23 million on the tape.

Ford’s recently priced tranches have performed well since pricing on Jan. 3.

The notes have risen with the broader market with BB credits making strong gains as concerns about rate risk moves to the backburner.

Tegna under pressure

While it was another strong day for the secondary space, Tegna’s notes were under pressure as political opposition to its acquisition grows.

Tegna’s 5% senior notes due 2029 (Ba3/BB) fell 1 point to close Thursday at 96, a source said.

There was $14 million in reported volume.

The 4 5/8% senior notes due 2028 were also down about 1 point to close the day at 95 7/8.

There was $10 million in reported volume.

The notes were under pressure after Senator Elizabeth Warren, Democrat of Massachusetts, urged the Federal Communications Commission to block Standard General’s acquisition of the company, a source said.

The deal was expected to close in the fourth-quarter of 2022 but has come under scrutiny from regulators.

Indexes

The KDP High Yield Daily index rose 27 points to close Thursday at 53.47 with the yield now 6.83%.

The index was up 20 points on Wednesday, shaved off 5 points on Tuesday and gained 31 points on Monday.

The ICE BofAML US High Yield index rose 52.3 bps with the year-to-date return now 3.864%.

The index gained 43.7 bps on Wednesday, fell 3.8 bps on Tuesday, and gained 66.4 bps on Monday.

The CDX High Yield 30 index rose 46 bps to close Thursday at 102.97.

The index gained 63 bps on Wednesday after sliding 2 bps on Tuesday and 6 bps on Monday.


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