Secondary space ‘almost dead’; Charter drops; KIK improves; energy names in focus

By Paul A. Harris and Abigail W. Adams

Portland, Me., Dec. 23 – The high-yield primary market was shuttered and the secondary space was “almost dead,” on Wednesday with end-of-year illiquidity reaching a peak.

While volume was light with few names on the tape, the market was firm, a source said.

KIK Consumer Products’ recently priced 7% senior notes due 2027 (Caa2/CCC) returned to a 103-handle after falling below amid the soft market conditions earlier in the week.

Charter Communications, Inc.’s 3.7% senior notes due 2051 were active and trading down.

Several energy names were on the tape as WTI crude oil futures surged on Wednesday.

Occidental Petroleum Corp.’s senior notes were trading up.

However, PBF Holding Co. LLC/PBF Finance Corp.’s 9¼% senior secured notes due 2025 (Ba3/BB/BB) dropped below par.

KIK improves

KIK’s 7% senior notes due 2027 remained active on Wednesday with the notes returning to a 103-handle after dropping below amid the market weakness earlier in the week.

The 7% notes were seen changing hands at 103 5/8 in the late afternoon.

With $10 million in reported volume, the notes were among the most actively traded in the secondary space.

The recently priced notes traded up to a 103-handle shortly after breaking for trade. However, they dropped to a 102-handle on Monday amid weak market conditions.

Charter trades off

Charter’s 3.7% senior notes due 2051 were active on Wednesday with the notes trading off.

The notes were off about 1 point and were changing hands in the 101¾ to 101 7/8 context in the late afternoon, a source said.

The notes were on a 103-handle on Tuesday.

There was no news that prompted the drop in the notes with the price movement most likely the result of the illiquidity in the space.

Energy in focus

Energy remained in focus on Wednesday with several names trading as crude oil futures gained.

Occidental Petroleum’s junk bonds were active with several notes in the capital structure making gains.

Occidental’s 6 5/8% senior notes due 2030 gained 1½ points and traded up to 107¾.

The 4 5/8% senior notes due 2045 and 6.95% senior notes due 2024 were also up about 1½ points to trade up to 87 and 109 respectively.

Occidental’s 3.4% senior notes due 2026 were the most active in the capital structure. However, the notes were largely unchanged at 93 7/8.

PBF’s 9¼% senior secured notes due 2025 saw some action on Wednesday.

The notes, which had been trading at a premium to their reoffer price, dropped below par.

They were changing hands at 99 5/8 in the late afternoon.

PBF recently priced a $250 million add-on to the 9¼% notes at 100.25 to yield 9.175%.

The notes were trading at a premium to their add-on last week but have slowly come in as market conditions have weakened.

The notes were wrapped around par the previous session.

While the notes in the energy sector were moving in different directions, crude oil futures resumed their upward momentum on Wednesday.

WTI crude oil futures settled at $48.12, an increase of $1.10 or 2.34%, on Wednesday.

While soft on Tuesday, crude oil futures again rallied following a report that U.S. inventories were down more than expected.

Indexes gain

Indexes were on the rise on Wednesday.

The KDP High Yield Daily index rose 3 points to close Wednesday at 68.62 with the yield now 4.53%.

The index shaved off 1 point on Tuesday and dropped 8 points on Monday.

The ICE BofAML US High Yield index rose 12.1 bps with the year-to-date return now 5.493%.

The index was up 14.6 bps on Tuesday after shaving off 29.9 bps on Monday.

The CDX High Yield 30 index gained 36 bps to close Wednesday at 108.92.

The index was down 4 bps on Tuesday after a 47 bps on Monday.

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