Junk bonds volatile; Diversey in focus; Carnival under pressure; funds add $10 million

By Paul A. Harris and Abigail W. Adams

Portland, Me., March 9 – The dollar-denominated high-yield primary market remained quiet on Thursday and appeared poised to put up a goose egg for the week, sources said.

Distractions are plentiful, they added.

This week the J.P. Morgan Global High Yield & Leveraged Finance Conference took place in Miami, attracting the participation of as much as 80% of the market, a trader asserted.

Next week begins the 2023 NCAA Division I “March Madness” Men's Basketball Tournament, with participants roundabout the market filling out office pool tournament brackets, and updating them hopefully, as events unfold, sources say.

Altice, a prospective issuer name that hit the high-yield grapevine a week ago, is still expected to show up sooner than later in the primary market, looking to refinance Cablevision debt, a portfolio manager said on Thursday morning.

There continues to be a modicum of activity on the euro-denominated new issue bourse.

Malta-based Media and Games Invest SE (MGI) upsized its offering of four-year senior secured floating-rate notes to a range of €200 million to €225 million, from its previous size of €200 million, and talked the notes at a spread of 725 basis points.

The deal, being led by Pareto, was expected to price Friday.

MGI follows Wednesday's pricing of the Azelis Group NV 5¾% senior notes due 2028 (BB+/BB+), which traded well on Thursday, according to a London-based debt capital markets trader who spotted them at par ½ bid.

The Belgium-based specialty chemicals and food ingredients supplier's €400 million issue came tight to talk, at par.

Swing to green

Meanwhile, it was a volatile day in the secondary space with the market swinging to the green after a low open following the latest U.S. jobless claims numbers, which were higher than anticipated.

The market initially gave a sigh of relief following signs of a weakening labor force and eliminated its 1/8 to ¼ point drop at the open to add as much as ¼ point in intraday activity.

Then came the fallout from the collapse of SVB Financial Group’s stock.

News the financial services company was forced to liquidate its $21 billion portfolio of for-sale securities for a $1.8 billion loss due to dwindling deposits sank the investment grade-rated firm’s stock by more than 60%.

The destruction rattled markets and sparked heavy selling in risk assets.

The portfolio was largely composed of low-coupon Treasuries.

The secondary space gave back all gains as selling took hold of risk assets with the cash bond market ending the day ¼ to 3/8 point lower.

However, Diversey Holdings Ltd.’s 4 5/8% senior notes due 2029 remained the outlier with the notes holding on to the strong gains made the previous session following news of its acquisition.

Carnival Corp.’s senior notes were under pressure in heavy volume with the market’s risk-off sentiment dragging the notes down 1 to 2 points.

Uniti Group LP, Uniti Fiber Holdings Inc., Uniti Group Finance 2019 Inc. and CSL Capital, LLC’s 10½% senior secured notes due 2028 (B2/B/BB+) hit a new all-time low and closed Thursday on a 98-handle.

While the market closed Thursday on a heavy note, high-yield mutual and exchange-traded funds saw a modest inflow over the past week, stemming the tide of outsized outflows.

Funds added $10 million in the week through Wednesday’s close, according to the Refinitiv Lipper Fund Flow report.

Diversey in focus

Diversey’s 4 5/8% senior notes due 2029 continued to dominate activity in the space with the notes continuing to add early in the session but closing the day largely unchanged.

The 4 5/8% notes climbed another 1½ points in early trade.

They were marked at 97½ bid, 98 offered with the market strong early in the session.

However, they came in as selling pressure took hold with the notes closing the day largely unchanged in the 96 to 96¼ context, a source said.

There was $65 million in reported volume.

The notes skyrocketed 14 points on Wednesday following news private-equity firm Solenis would acquire the company in an all-cash transaction valued at $4.6 billion.

The deal is expected to close in the second half of 2023.

Market players were positioning themselves for either a 101 poison put or a par ¼ make-whole call, sources said.

Carnival sinks

Carnival’s senior notes were under pressure on Thursday with several issues dragged 1 to 2 points lower as a risk-off sentiment swept through the markets.

Carnival’s 5¾% senior notes due 2027 (B3/B) were the most actively traded tranche in the debt pile.

The notes closed Thursday 1½ point lower at 81 with a yield of about 11 7/8%, according to a market source.

There was $39 million in reported volume.

Carnival’s 10½% senior notes due 2030 fell 1 5/8 point to close the day at 95 5/8 with the yield 11 3/8%.

There was $23 million in reported volume.

Carnival’s 6% senior notes due 2029 were off 1 point to close the day at 77½ with a yield 11 1/8%.

While Carnival is a highly liquid, high-beta name that tends to move with the market, the company has also seen a spat of negative headlines that could have contributed to the selling pressure, a source said.

The FBI recently filed two search warrants in connection with the death of a passenger aboard a Carnival cruise ship, which the FBI has called suspicious.

Carnival has stated the passenger died of natural causes.

Uniti’s new low

Uniti’s 10½% senior secured notes due 2028 sank to a new low in heavy volume on Thursday as selling pressure took hold of the market.

The 10½% notes fell ½ to ¾ point to close the day on a 98-handle.

They were changing hands in the 98¼ to 98¾ context heading into the market close, according to a market source.

There was $17.5 million in reported volume.

Thursday’s level marked the lowest for the notes since the $2.6 billion issue, which priced at par, broke for trade on Feb. 2.

The notes were strong their initial weeks in the market with the notes largely trading on a 101-handle.

They briefly broke below a 99-handle in mid-February but recouped some loses and were trading on a par-handle until earlier in the week.

The notes fell back to a 99-handle on Tuesday.

Indexes

The KDP High Yield Daily index fell 12 points to close Thursday at 50.87 with the yield now 7.58%.

The index was down 22 points on Wednesday and 19 points on Tuesday after gaining 19 points on Monday.

The ICE BofAML US High Yield index fell 21.6 basis points with the year-to-date return now 2.225%.

The index was down 48.9 bps on Wednesday and 31.7 bps on Tuesday after gaining 33 bps on Monday.

The CDX High Yield 30 index was down 89 bps to close Thursday at 100.80.

The index was down 30 bps on Wednesday and 67 bps on Tuesday after gaining 7 bps on Monday.

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