Junk liquidity at a trickle; telecom notes in focus; NexStar, CCO Holdings tumble

By Paul A. Harris and Abigail W. Adams

Portland, Me., Sept. 1 – Liquidity in the junk bond secondary space slowed to a trickle on Friday with large swaths of the market sitting out the session, as expected, leading into the Labor Day weekend in the United States.

While trading activity was muted, the market continued to cheer on macro data that supported the soft-landing narrative the Federal Reserve has espoused and the market has been skeptical of since the outset of the Fed’s rate-hike campaign.

The latest U.S. nonfarm payroll report was largely regarded as the goldilocks report the Fed had hoped for with the labor market cooling but not enough to raise recession concerns.

However, as has been the trend for much of the week, the market was strong following the report’s release, but selling set in midsession with the market closing the day well off the highs, a source said.

While trading activity was light, telecoms were in focus following news of more carriage disputes in the industry.

Charter Communications, Inc. subsidiary CCO Holdings, LLC’s senior notes (B1/BB-) fell 1 to 2 points following news that Disney was blocking Charter’s Spectrum customers from certain channels over a fee dispute.

Nexstar Media Group Inc.’s 4¾% senior notes due 2028 (B2/BB+) were among the largest losers of the session with the notes tumbling 2 points to give back all gains made over the past few sessions and close the week largely unchanged.

September

The new issue market remained idle on Friday, as players eyed the post-Labor Day week and a potentially busy month of September ahead.

The investment banks look for as much as $2 billion to $3 billion during the abbreviated post-Labor Day week, and for September monthly issuance in the context of $20 billion, according to a high-yield syndicate official who specified that such volume hinges on market conditions, which have been supportive through the late summer, remaining so in the early fall.

Should September issuance come in at $20 billion it would be well below the $31 billion average for September issuance, going back to and including 2010, according to Prospect News data.

Only two Septembers during that time came in below $20 billion: Septembers 2011 and 2022, at $6.8 billion, apiece.

September tends to be a month for vigorous high yield-issuance. Thus far in the 21st Century it is the busiest month, by a nose. The second busiest month across that timeframe is March.

September issuance brushed up against the $50 billion market in 2020, which had $49.3 billion.

Going back to and including 2010, September new issue volume topped $40 billion five times. It did so three years in a row: 2012, 2013 and 2014.

Potential autumn issuer names surfaced during the pre-Labor Day week.

Names include Syneos Health Inc. with an expected $1.7 billion of high-yield notes to support the buyout by Elliott Investment Management, Patient Square Capital and Veritas Capital. The deal was pre-marketed by Goldman Sachs in mid-August. Pricing discussions took place in the 9% area.

Worldpay could show up with junk bonds backing GTCR’s buyout of a majority stake in the company from Fidelity National Information Services Inc. (FIS). Debt financing includes $8.4 billion of funded debt and a $1 billion revolver. JPMorgan, Goldman Sachs, Citigroup, Wells Fargo, Deutsche Bank and UBS are the committed banks.

And Bausch + Lomb Corp. could come with $1.75 billion of new debt financing to support its acquisitions of Xiidra, libvatrep and AcuStream from Novartis. The debt commitment is from JPMorgan.

Other names include Abercrombie & Fitch Co., Caesars Holdings, Inc., expected to address the CRC Escrow Issuer, LLC/CRC Finco, Inc. 5¼% senior notes due October 2025, and NCR Corp. which plans to spin off its ATM and digital commerce businesses during the fourth quarter.

CCO tumbles

CCO’s senior notes fell 1 to 2 points on Friday on news that Disney was blocking parent company Charter’s Spectrum customers from viewing certain channels due to carriage disputes.

CCO’s 7 3/8% senior notes due 2031 sank 2 points to close the day at 98 1/8 with the yield about 7 5/8%, a source said.

There was $13 million in reported volume.

CCO’s 4½% senior notes due 2033 fell 1¾ points to close the day at 77 3/8 with the yield 7 7/8%.

There was $4 million in reported volume.

Charter’s 4¼% senior notes due 2034 fell 1½ points to close the day at 75½ with yield 7¾%.

There was $3 million in volume.

While other channels were involved, the dispute between Charter and Disney largely centered on ESPN which does not have its own streaming service and is an important part of Charter’s business model.

Nexstar falls

The high-profile carriage dispute between Charter and Disney spilled over into the greater telecom sector, which was under pressure on Friday.

Nexstar’s 4¾% senior notes due 2028 were among the largest losers of the session with the notes tumbling 2 points.

While down on Friday, the notes erased its gains in the market rally over the past week and closed the day largely unchanged.

The 4¾% notes returned to the 85 to 86 context that they had traded in entering into the week, a source said.

With $16 million in reported volume, the notes were the most actively traded issue of the session.

Fund flows

The dedicated high-yield bond funds had $172 million of net daily cash inflows on Thursday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs had $102 million of inflows on the day. It was the fifth consecutive strong positive flow for the ETFs, all five greater than $100 million. The biggest of the series was the $502 million inflow on Friday, Aug. 25.

Actively managed high-yield funds had $70 million of inflows on Thursday, the source said.

News of Thursday’s daily cash flows follows a Thursday afternoon report that the combined funds had $1.214 billion of net inflows in the week to the Wednesday, Aug. 29 close, according to fund-tracker Refinitiv Lipper.

The most recent figures left the year-to-date cash flows of the dedicated junk funds at negative-$11.7 billion, according to the market source.

Indexes

The KDP High Yield Daily index shed 2 basis points to close Friday at 50.54 with the yield now 7.44%.

The index rose 6 bps on Thursday, 15 bps on Wednesday, 20 bps on Tuesday and 8 bps on Monday.

The index added 47 bps on the week.

The CDX High Yield 30 index added 12 bps to close Friday at 102.95.

The index shed 17 bps on Thursday, gained 10 bps on Wednesday, 29 bps on Tuesday and 27 bps on Monday.

The index added 61 bps on the week.

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