AMC Networks soars; Atlas Air falls to 96-handle; AA, Wynn junk bonds under pressure

By Paul A. Harris and Abigail W. Adams

Portland, Me., Feb. 17 – As inflationary data piled up in the middle of February, for the first time in 2023 the Feb. 13 week saw the dollar-denominated high-yield new issue market skunked.

No deals were priced and none were announced.

The dollar-denominated new issue bourse does not figure to be a lot busier in the week ahead, a syndicate banker said, adding that there is visibility on $2 billion of possible issuance in the holiday-abbreviated week beginning Tuesday, pending market conditions.

Meanwhile, the secondary space had another volatile session on Friday with the market opening with deep losses but buyers lifting the market into the close.

“It was awful in the morning but it got less awful,” a source said.

The cash bond market was off ½ point at the open but saw losses narrow to ¼ to 3/8 point by the close.

The CDX index swung from a ¼ point drop to positive territory.

However, the heaviness in the market continued to take a toll on recent issues with several of the deals to price the previous week now well below par.

Rand Parent, LLC’s 8½% first-lien senior secured notes due 2030 (Ba1/BB/BB+), backing the buyout of Atlas Air, continued their strong downtrend with the notes falling to a 96-handle in heavy volume.

American Airlines, Inc.’s 7¼% first-lien senior secured notes due 2028 (Ba3/B-) also continued to fall with the notes breaking below a 98-handle.

Heaviness returned to Wynn Resorts, Ltd.’s 7 1/8% senior notes due 2031 (B2/B+), which again sank below par in heavy volume on Friday.

While the overall market remained heavy, topical news continued to send outstanding issues soaring with AMC Networks Inc.’s junk bonds (Ba3/BB-) the major gainers of the session.

AMC Networks’ junk bonds jumped 4 to 8 points in active trade after a surprise earnings beat.

Atlas Air’s downfall

Atlas Air’s 8½% first-lien senior secured notes due 2030 continued their way downward on Friday with the notes falling more than 1 point to a 96-handle.

The notes were changing hands in the 96¼ to 96¾ context heading into the market close, a source said.

The yield climbed to 9 1/8%.

With $21 million in reported volume, the notes were among the most actively traded issues in the secondary space.

The notes, which priced at par on Feb. 9, sank 3 points over the past week.

Under pressure

Several other recent deals continued to struggle on Friday with American Airlines’ 7¼% first-lien senior secured notes due 2028 off ¾ to 1 point.

American Airlines’ 7¼% notes broke below a 98-handle with the notes trading down to 97 5/8 in intraday activity, a source said.

However, the notes pared their losses with the broader market and were wrapped around 98¼ heading into the market close.

There was $17 million in reported volume.

The 7¼% notes priced at par on Feb. 8.

Wynn Resorts’ 7 1/8% notes due 2031 fell ½ to ¾ point on Friday with the notes, which had been clinging to par, now trading on a 99-handle.

The 7 1/8% notes were changing hands in the 99 to 99½ context throughout the session.

There was $17 million in reported volume.

The 7 1/8% notes priced at par on Feb. 9.

AMC Networks earnings

AMC Networks’ junk bonds were the major gainers of Friday’s session with the notes jumping 4 to 8 points after a large earnings beat.

AMC Networks 4¼% senior notes due 2029 jumped 8 points to close the day at 72 with the yield 10¾%, according to a market source.

There was $18 million in reported volume.

The 4¾% senior notes due 2025 jumped 5 points to 91 with the yield 8 7/8%.

There was $8 million in reported volume.

AMC Networks’ capital structure soared after a large earnings beat with stock also rising 32% on Friday.

The New York-based entertainment company trounced expectations with earnings-per-share of $2.52 versus the $1.02 expected.

Revenue was $965 million versus the $934 million expected.

Fund flows

High-yield ETFs sustained a massive $2.29 billion of daily cash outflows on Thursday, according to a market source.

A trader referred to it as a record daily outflow for the ETFs.

News of those daily outflows trails a Thursday afternoon report that the dedicated high-yield bond funds had $2.817 billion of net outflows during the week to the Wednesday, Feb. 15 close, according to fund-tracker Refinitiv Lipper.

The high-yield ETFs far and away sustained the biggest portion of those weekly outflows: negative-$2.5 billion on the week, according to the market source.

Actively managed high-yield funds also posted daily outflows of $195 million on Thursday, the market source said.

Indexes

The KDP High Yield Daily index fell 17 points to close Friday at 52.08 with the yield 7.47%.

The index was down 14 points on Thursday, 11 points on Wednesday, 18 points on Tuesday and 9 points on Monday.

The index posted a cumulative decline of 69 points on the week.

The ICE BofAML US High Yield index was off 34.5 basis points with the year-to-date return now 2.196%.

The index fell 35.4 bps on Thursday, 17.1 bps on Wednesday and 16 bps on Tuesday after inching up 9.3 bps on Monday.

The index posted a cumulative loss of 93.7 bps on the week.

The CDX High Yield 30 index gained 10 bps to close Friday at 102.1.

The index sank 52 bps on Thursday, shaved off 2 bps on Wednesday and 8 bps on Tuesday after gaining 36 bps on Monday.

The index posted a cumulative loss of 16 bps on the week.

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