Secondary firms as primary idles; Medline, athenahealth lifted; cruise lines under pressure

By Paul A. Harris and Abigail W. Adams

Portland, Me., May 23 – The high-yield new-issue market stood idle on Monday, and the active forward calendar remained empty.

There was no clear indication that the becalmed primary market will reactivate ahead of the coming Memorial Day holiday weekend, sources said.

Meanwhile, it was a quiet yet firm start to the week in the secondary space.

While volume remained light on Monday, buyers were returning to the space with several badly battered credits lifted.

Medline Industries’ 5¼% senior notes due October 2029 (Caa1/B-/B-) were on the rise after closing the previous week at a new all-time low.

athenahealth Group Inc.’s 6½% senior notes due 2030 (Caa2/CCC/CCC+) also made strong gains on Monday after closing the previous week at an all-time low.

While the overall market was firm on Monday, cruise line operators were under pressure with travel and leisure companies the laggards of the session.

Carnival Corp.’s recently priced 10½% senior notes due 2030 (B2/B) remained under water during Monday’s session with the company’s 5¾% senior notes due 2027 also lower in active trading.

Royal Caribbean Cruises Ltd. and Norwegian Cruise Line Holdings Ltd.’s notes were also trading down during Monday’s session.

Dead cat bounce?

Medline’s 5¼% senior notes due October 2029 and athenahealth’s 6½% senior notes due 2030 were on the rise in active trading on Monday after both issues hit an all-time low on Friday.

Medline’s 5¼% senior notes climbed 1¾ points in heavy volume.

They were changing hands in the 81¾ to 82¼ context heading into the market close, a source said.

The yield on the notes was 8.6%.

There was $26 million in reported volume.

The 5¼% notes traded down to an 80-handle last Friday, the lowest level for the notes since the $2.5 billion tranche priced at par in September 2021, a source said.

athenahealth’s 6½% senior notes due 2030 were also bouncing off an all-time low on Monday.

The 6½% notes gained 1 point on Monday. They were changing hands in the 86 to 86½ context heading into the market close.

The yield on the notes was 8.9%.

There was $12 million in reported volume.

The 6½% notes traded down to an 85-handle last Friday, the lowest level for the notes since the $2.35 billion issue priced at par in January 2022.

Both Medline’s and athenahealth’s senior notes priced as part of leveraged buyout financing deals.

LBOs, in general, have struggled in the current risk-averse market environment.

The bounce in the notes could be an indication that they have found their bottom, or it could be a dead cat bounce with further losses in store.

The notes were still trading tight to the CCC index which is currently yields about 13.25%, a market source said.

Cruises under pressure

While it was a firm day for the overall market, travel and leisure companies were among the worst performers.

Cruise line operators were hard hit on Monday with Carnival, Royal Caribbean and Norwegian Cruise Line’s senior notes among the biggest losers of the session.

Carnival’s recently priced 10½% senior notes due 2030 remained under water on Monday after an attempted rally the previous session.

The 10½% notes were down about ½ point to a 99-handle.

They were trading in the 99 3/8 to 99 5/8 context heading into the market close.

There was $17 million in reported volume.

Carnival’s 5¾% senior notes due 2027 were also down ½ point.

The notes closed Monday at 84¾ with the yield now 9.875%.

There was $24 million in reported volume.

Royal Caribbean’s senior notes were among the largest losers of Monday’s session with the cruise line operator’s senior notes down 1 to 2 points.

The 5½% senior notes due 2026 sank 2 points to close the day at 85 3/8 with a yield of 9.78%, according to a market source.

The 5½% senior notes due 2028 also fell 2 points to close at 81½ with a yield of 9.72%.

There was $10 million in reported volume.

The 5 3/8% senior notes due 2027 were down 1 point to close the day at 81½ with a yield of 10%.

There was $7 million in reported volume.

There were several bids-wanted-in-competition lists circulating the market for Royal Caribbean on Monday, a source said.

While volume in the name was light, Norwegian Cruise’s 7¾% senior notes due 2029 and 5 7/8% senior notes due 2026 were also under pressure.

The 7¾% notes were down 2 points to 85½ with a yield of 10.84%, according to a market source.

The 5 7/8% senior notes due 2026 fell 1 point to 85 with the yield 10.8%.

Both tranches saw $3 million in reported volume.

Fund flows

The daily cash flows of the dedicated high-yield bond funds were nearly flat on Friday, according to a market source.

High-yield ETFs saw $226 million of inflows on the day.

However actively managed high-yield bond funds were negative on the day, sustaining $229 million of outflows on Friday, the source said.

The combined funds saw $36.4 billion of net outflows in the year to the end of last week, according to the market source who added that $16.1 billion of those outflows were sustained by the high-yield ETFs.

Indexes

The KDP High Yield Daily index jumped 57 points to close Monday at 56.82 with the yield now 6.86%.

The index posted a cumulative loss of 95 points on the week last week.

The ICE BofAML US High Yield index gained 17.5 basis points with the year-to-date return now negative 10.602%.

The index posted a cumulative loss of 61.4 bps on the week last week.

The CDX High Yield 30 index rose 69 bps to close Monday at 99.76.

The index posted a cumulative loss of 158 bps on the week last week.

© 2015 Prospect News.
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