American Axle gives back gains; Uber down; Coty gains; HY funds add $532 million

By Paul A. Harris and Abigail W. Adams

Portland, Me., Aug. 26 – While the primary market was again dormant on Thursday, market participants got an inkling of post-Labor Day activity.

Ahern Rentals, Inc. announced plans to price an offering to refinance its 2023 senior secured notes.

While the primary market is expected to remain quiet until after Labor Day, there may be some scattered activity before the new issue market resumes in full force, sources said.

Meanwhile, there was a soft tone to the secondary space on Thursday as the market awaits an announcement from the Federal Reserve regarding its bond tapering program on Friday, a source said.

However, with trading volume thin amid late August illiquidity, the market remained at a standstill.

Large liquid issues and recent deals were the focus of the trading activity that took place on Thursday.

Earnings-related news also pushed some off-the-run names back into the spotlight.

American Axle & Manufacturing, Inc.’s recently priced 5% senior notes due 2029 (B2/B+) gave back much of their gains from the previous session amid weak market conditions.

Uber Technologies, Inc.’s 4½% senior notes due 2029 (B3/B-) fell more than 1 point in active trading.

However, Coty Inc.’s 6½% senior notes due 2026 gained more than 1 point following better-than-expected earnings.

Meanwhile, high-yield mutual and exchange-traded funds added $532 million in the week through Wednesday’s close, according to the Refinitiv Lipper Fund Flow Report Newsline.

Eyeing the calendar

The Thursday primary market session provided an inkling of post-Labor Day activity as Ahern Rentals disclosed that it expects to sell bonds during September in order to refinance $550 million of its 7 3/8% second-priority senior secured notes due 2023 (see related story in this issue).

While the new issue market is expected to remain quiet during the six full sessions remaining before the Labor Day weekend gets underway, there could still be a modicum of activity such as Wednesday's Stagwell Inc. $50 million add-on to its 5 5/8% senior notes due August 2029 (B3/B) which was heard to have been a “clubby” trade, with all or most of the add-on paper going to existing holders, according to a bond trader.

Low late-summer liquidity, thin trading volumes, a pending Fed announcement with possible portents on rates and a global pandemic have had little success in pushing junk bonds wider, sources say.

Although the metric is apt to have been overtaken by events, with Thursday's stock market weakness, the Merrill Lynch index closed inside of 4% for the first time in over three weeks on Wednesday, a trader noted.

The index's 3.99% yield to worst at Wednesday's close represented the first time the index dropped below 4% since August 2, the trader noted.

American Axle gives back gains

After broaching par the previous session, American Axle’s recently priced 5% senior notes due 2029 gave back much of their gains in active trading.

The 5% senior notes dropped ¼ point amid weakness in the secondary space.

They were changing hands in the 99½ to 99¾ context heading into the market close, according to a market source.

With more than $23 million in reported volume, the notes were the most active in the secondary space on Thursday.

The notes have largely traded in the 99¼ to 99¾ context since breaking for trade on Aug. 16. However, they traded up to par the previous session amid thin liquidity and strong market conditions.

Uber skids

Uber’s 4½% senior notes due 2029 fell more than 1 point in active trading on Thursday.

The notes fell to a 98-handle and stood poised to close the day at 98½, according to a market source.

There was $13 million in reported volume.

The ride sharing company’s notes were trading off as stock also skidded more than 2% with growth stocks under pressure ahead of the Federal Reserve announcement on Friday.

The notes have been stuck on a 99-handle since Uber priced the $1.5 billion issue at par on Aug. 9.

Coty gains

Coty’s 6½% senior notes due 2026 were on the rise following better-than-expected earnings, despite a soft day for the secondary space.

The 6½% notes were up 1¾ points to close the day at 101¼, according to a market source.

There was more than $6 million in reported volume.

The beauty products company beat revenue and EBITDA expectations and provided upbeat guidance that also exceeded expectations, a source said.

Fund flows

The dedicated high-yield bond funds saw $341 million of net daily inflows on Wednesday, the most recent session for which data was available at press time, a market source said.

High-yield ETFs saw $289 million of inflows on the day.

Actively managed high-yield funds saw $52 million of inflows on Wednesday, according to the market source.

News of Wednesday's daily flows was followed by a report that the dedicated junk bond funds saw $532 million of net inflows during the week to Wednesday's close, according to information posted on the Internet by the Refinitiv Lipper Fund Flow Report Newsline.

Indexes

The KDP High Yield Daily index climbed 4 basis points to close Thursday at 70 with the yield now 3.71%.

The index rose 7 bps on Wednesday, 9 bps on Tuesday and 4 bps on Monday.

The CDX High Yield 30 index fell 19 bps to close Thursday at 109.36.

The index was up 11 bps on Wednesday, 5 bps on Tuesday and 32 bps on Monday.

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