Bread Financial, Morgan Automotive add on; Stena, Global Auto join calendar; Spirit Aero under pressure

By Paul A. Harris and Abigail W. Adams

Portland, Me., Jan. 8 – The domestic high-yield market was off to a strong start on Monday with two add-on deals pricing and a substantial build-up in the forward calendar.

Morgan Automotive priced an upsized $350 million add-on to the LCM Investments Holdings II, LLC 8¼% senior notes due Aug. 1, 2031 (B2/B+), and Bread Financial Holdings, Inc. priced an upsized $300 million add-on to its 9¾% senior notes due March 15, 2029 (Ba3/BB-/BB-) in drive-by action.

Stena International also announced a $400 million offering of seven-year senior secured notes (Ba2/BB+), which is expected to price Tuesday, and Global Auto Holdings Ltd. started a roadshow for a $1.05 billion two-part offering of senior notes.

The shadow calendar also continued to fill in with DirecTV telegraphing a secured debt offering as part of a refinancing package for its term loan.

Meanwhile, it was a strong day in the secondary space with buyers returning to the market after a rough start to the year.

The cash bond market was lifted ¼ to 3/8 point with optimism returning ahead of the Thursday release of the Consumer Price Index report, sources said.

While the broader market was strong, topical news continued to drag down outstanding issues with Spirit AeroSystems, Inc. again in the spotlight.

The beleaguered aero-parts manufacturer’s senior notes sank 2 to 6 points in heavy volume after news of its involvement in the door that blew off an Alaska Airlines 737 Max 9 plane mid-flight last Friday.

Medical Properties Trust Inc.’s senior notes (Ba2/BB-) were on the mend on Monday with the notes paring their losses from the heavy selling of the previous session.

Spirit Aero under pressure

Spirit AeroSystems’ senior notes saw heavy selling pressure on Monday after news of the parts supplier’s role in the Alaska Airlines’ door that blew off mid-flight last Friday.

The 9¾% senior secured second-lien notes due 2030 (B3/B-) fell 2 points to a 104-handle.

They were trading in the 104¼ to 104¾ context heading into the market close, a source said.

The yield was about 8½%.

There was $52 million in reported volume with the notes among the most actively traded in the secondary space.

Spirit AeroSystems’ 4.6% senior notes due 2028 (Caa1/CCC+) crashed as much as 6 points in intraday activity before recouping some losses into the close.

The notes sank as low as an 81-handle in early trade but were in the 83 to 84 context heading into the close, a source said.

There was $15 million in reported volume.

Spirit AeroSystems’ involvement in the door that failed on Alaska Airlines’ recently purchased Boeing 737 Max 9 plane sparked heavy selling in its capital structure.

The beleaguered aero-parts manufacturer and supplier has been plagued with quality control issues over the past several months.

The company announced in April and August that it was responsible for non-conforming parts on Boeing’s 737 Max jets that resulted in delivery delays.

Medical Properties pares losses

Medical Properties’ senior notes were on the mend on Monday after heavy selling the previous session.

The REIT’s 5% senior notes due 2027 were lifted 2 points after a nearly 5 point decline the previous trading session.

The notes were trading in the 76½ to 77½ context heading into the market close, a source said.

The 4 5/8% senior notes due 2029 gained 1 to 1½ points with the notes trading in the 69 to 69½ context heading into the market close.

The yield was about 12 3/8%.

There was $12 million in reported volume.

Medical Properties’ 5¼% senior notes due 2026 stabilized with the notes largely unchanged in heavy volume.

They were trading in the 84¾ to 85¼ context heading into the market close with the yield about 12¼%.

There was $12 million in reported volume.

Medical Properties’ notes sank 2 to 5 points last Friday after the REIT gave an update on unpaid rent from its largest tenant, Steward Health Care System.

The company announced it anticipates a $225 million write-off in the fourth quarter of 2023 as a result of the situation.

Fund flows

The dedicated high-yield bond funds sustained $451 million of net daily cash outflows on Friday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs saw $447 million of outflows on the day.

Actively managed high-yield funds were essentially flat on Friday, sustaining $4 million of outflows on the day, according to the market source.

Indexes

The KDP High Yield Daily index gained 11 basis points to close Monday at 50.48 with the yield 6.9%.

The ICE BofAML US High Yield index was off 31 bps with the year-to-date return now negative 0.798%.

The CDX High Yield 30 index added 51 bps to close Friday at 105.67.

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