Primary quiet; Ford in focus; Jeld-Wen trades up; Gap at a premium; Spirit AeroSystems improves

By Paul A. Harris and Abigail W. Adams

Portland, Me., April 28 – The domestic high-yield primary market took a breather on Tuesday with no deals pricing and none on the forward calendar.

However, the primary market has already generated more than $33 billion in new deal volume this month, which does not include the investment grade paper that priced off the high-yield desk.

Meanwhile, the secondary space saw a volatile session with the cash bond market opening the day with gains but closing largely flat, a market source said.

With the primary market quieting down, trading activity around recent issues was also petering off.

However, several recent megadeals remained in focus.

Ford Motor Co.’s three tranches of senior notes (Ba2/BB+/BBB-) were active although little changed in the run up to the company’s first-quarter earnings report with the notes still underwater.

After initially struggling in the aftermarket, Gap, Inc.’s three tranches of senior secured notes (Ba2/BB) gained on Tuesday with all tranches now trading at a premium to their issue price.

While the notes were improved on Tuesday, Spirit AeroSystems, Inc.’s 7½% senior notes due 2025 (Ba2/BB-) were still languishing below par.

While volume was light, Jeld-Wen, Inc. recently priced 6¼% senior secured notes due May 2025 (Ba2/BB+) were trading with a steep premium in the secondary space.

New deal volume

The torrid high-yield primary market, which is already posting its biggest April in half a decade, took a breather on Tuesday.

With two sessions remaining in the month the quarantined primary market has generated $33.42 billion of issuance in 49 junk-rated, dollar-denominated tranches.

Despite a global pandemic wreaking historical damage on credits in high-yield sectors including automotive, energy, gaming and transport, April 2020 is the biggest April for dollar amount of issuance and deal volume issuance since April 2015, which saw $41.13 billion in 64 tranches.

And April 2020 has been novel in that apart from the $33.42 billion of straight-out junk issuance, the new-issue market has seen brisk business in distressed investment-grade companies, crossover credits and fallen angels coming with deals done in high yield-style executions and involving the participation of high-yield syndicates.

These include Kohl's Corp., Delta Air Lines, Inc., Expedia Group Inc., Howmet Aerospace Inc., Hyatt Hotel Corp., Marriott International Inc., Ford Motor Co. and Carnival Corp.

Jeld-Wen trades up

While volume was light, Jeld-Wen’s newly priced 6¼% senior secured notes due May 2025 were trading at a premium in the aftermarket.

The notes were largely wrapped around 101, a market source said.

Jeld-Wen priced a $250 million issue of the 6¼% notes at par in a Tuesday drive-by.

Pricing came in the middle of talk for a yield in the 6¼% area.

Ford in focus

Ford’s recently priced three tranches of senior notes continued to see high-volume activity on Tuesday although the notes were little changed in the run up to the car manufacturer’s first-quarter earnings report, sources said.

Ford’s 8½% senior notes due 2023 continued to trade on a 98-handle on Tuesday – a level reached shortly after the notes hit the secondary space.

The notes were the most actively traded of the tranches with $52 million in reported volume.

The 9% senior notes due 2025 continued to trade on a 96-handle, closing the day at 96 5/8, a source said.

The notes saw more than $44 million in reported volume during Tuesday’s session.

The 9 5/8% senior notes due 2030 traded up ¼ point to close Tuesday at 98, a source said.

Ford priced a $3.5 billion tranche of the 8½% notes, a $3.5 billion tranche of the 9% notes, and a $1 billion tranche of the 9 5/8% notes at par on April 17.

The notes have struggled since hitting the aftermarket with each tranche sinking firmly below par.

Ford announced first-quarter results after the close of equity markets on Tuesday.

The car manufacturer announced losses per share of 23 cents and cash burn of $2.2 billion in the first quarter.

However, the company announced that it had enough liquidity to sustain its operations through the third quarter with no vehicle production, due, in part, to its $8 billion capital raise in the junk bond market, CNBC reported.

Gap improved

After an initial lackluster reception in the secondary space, Gap’s three tranches of senior notes were markedly improved on Tuesday with all trading at a premium to their issue price.

Gap’s 8 3/8% senior notes due 2023 were up 1 point to close Tuesday at 101¾, according to a market source.

The 8 5/8% senior notes due 2025 gained 1¼ point to close Tuesday at 101¼.

The notes were the most active of the tranches with $27 million in reported volume during the session.

The 8 7/8% senior notes due 2027 continued to trade with a par-handle, closing the day at par 5/8.

Gap priced a $500 million tranche of the 8 3/8% notes, a $750 million tranche of the 8 5/8% notes and a $1 billion tranche of the 8 7/8% notes at par on April 23.

Spirit AeroSystems improves

Spirit AeroSystems’ 7½% senior notes due 2025 were making gains in active trading on Tuesday. However, the notes were still trading with a deep discount.

The 7½% notes gained 1 point to close the day at 96½ with more than $22 million in reported volume.

The notes have been volatile since the manufacturer of components for Boeing aircrafts priced the $1.2 billion issue at par on April 14.

The 7½% notes initially skyrocketed in the aftermarket, trading as high as 103 soon after breaking.

However, the notes quickly came in and were hovering around par only to later fight their way back to a 101-handle in the first week of trading.

The 7½% notes have steadily traded off since last week and were on a 95-handle during Monday’s session.

The company was rumored to be a takeover target. However, the board of directors recently adopted a rights agreement for stockholders in an effort to stave off a takeover attempt, a source said.

$48 million Monday inflows

The dedicated high-yield bond funds saw $48 million of net inflows on Monday, the most recent session for which data was available at press time, a market source said.

High-yield ETFs saw $248 million of inflows on the day.

However actively managed high-yield funds sustained $200 million of outflows on Monday, according to the source.

The combined funds are tracking $480 million of net inflows for the week that will conclude with Wednesday's close, the market source added.

Indexes mixed

Indexes were again mixed on Tuesday.

The KDP High Yield Daily index saw a slight decrease of 3 basis points to close the day at 62.46 with the yield now 7.5%.

The index was up 2 bps on Monday.

The ICE BofAML US High Yield index gained 11.4 bps with the year-to-date return now negative 10.503%.

The index was down 7 bps on Monday.

The CDX High Yield 30 index gained 15 bps to close Tuesday at 93.51. The index gained 40 bps on Monday.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.