Junk: American Airlines edges higher in active trade; Spirit, Forward Air under pressure

By Paul A. Harris and Abigail W. Adams

Portland, Me., Nov. 21 – The junk primary market remained quiet on Tuesday.

A pre-holiday reactivation of the new deal machine, while extremely unlikely, is not absolutely impossible, sources said.

The active forward calendar stood empty on Tuesday and is apt to remain that way until the week ahead, they added.

Meanwhile, the secondary space was quiet on Tuesday with the pre-Thanksgiving slowdown beginning to set in.

“Everyone’s starting to think about turkey,” a source said.

While the cash bond market was unchanged, the tone remained firm with the release of the Federal Open Market Committee minute notes yielding few surprises.

There was no clear theme to the secondary market activity on Tuesday.

However, the session’s most active issue and largest price movements did come from the transportation sector.

American Airlines, Inc.’s new 8½% secured notes due 2029 (Ba2/BB/BB-) continued to see heavy volume with the notes edging higher after the large gains of the previous section.

However, Spirit Airlines Inc.’s 8% senior secured notes due 2025 (B2) were again for sale after the strong gains of the previous session.

Forward Air Corp.’s 9½% senior secured notes due 2031 (Ba3/BB-/BB) were under pressure on Tuesday with the notes sinking further under water as further doubt was cast over the ground transportation company’s acquisition of Omni Logistics LLC, which proceeds from the sale of the notes was to support.

American Airlines edges higher

American Airlines’ new 8½% secured notes due 2029 were up another 1/8 to ¼ point in heavy volume on Tuesday.

They were changing hands in the par ¾ to 101 context heading into the market close, according to a market source.

There was $25 million in reported volume.

The 8½% notes, which priced at par on Nov. 17, saw a flat break.

However, they saw some liftoff on Monday.

Airlines have been in the cross-hairs of investors with industry earnings across the board raising red flags about demand.

However, discount airlines have seen the brunt of the selling pressure.

Spirit Airlines down again

Spirit Airlines 8% senior secured notes due 2025 were again under pressure on Tuesday after the strong gains of the previous session.

The 8% notes sank 3 points with the notes trading in the 71½ to 72 context heading into the market close, according to a market source.

The yield rose to about 28 3/8%.

There was $7 million in reported volume.

The 8% notes shot as high as 75 on Monday in the culmination of a strong week-long rebound sparked by improved market conditions post-CPI.

The strong rebound came after heavy selling earlier in the month as the antitrust trial challenging JetBlue’s acquisition of Spirit Air began.

Spirit’s 8% notes sank 10 points in early November as investors fled the name in anticipation of the merger’s failure.

The 8% notes traded as low as 60 in mid-November.

The notes were on an 88-handle in late October prior to the start of the antitrust trial.

Forward Air under pressure

Forward Air’s 9½% senior secured notes due 2031 fell 1½ points Tuesday.

They were trading in the 94½ to 95 context heading into the market close, a source said.

There was $15 million in reported volume.

The ground transportation company’s 9½% notes have been under pressure since late October when the company announced it may terminate its acquisition of Omni Logistics.

The acquisition saw further pushback recently with one of Forward Air’s top shareholders publishing an open letter in opposition to the acquisition, a source said.

Forward Air priced a $725 million issue of the 9½% notes at 98 to yield 9.865% on Sept. 22 with proceeds to be used to support the acquisition of Omni.

Fund flows

High-yield exchange-traded funds saw $816 million of daily cash inflows on Monday, the most recent session for which data was available at press time, according to a market source.

Actively managed high-yield funds sustained $17 million of outflows on the day, the source said.

The combined funds are tracking $202 million of net outflows for the week that will conclude with Wednesday’s close, according to the market source.

Indexes

The KDP High Yield Daily index fell 46 basis points to close Tuesday at 48.84 with the yield 7.62%.

The index added 11 bps on Monday.

The ICE BofAML US High Yield index inched up 2.9 bps with the year-to-date return now 8.121%.

The index added 27.8 bps on Monday.

The CDX High Yield 30 index slid 1 bps to close Tuesday at 103.59.

The index gained 33 bps on Monday.

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