Tenet downtrend continues; Carnival on the rise; Weatherford gains pre-earnings

By Paul A. Harris and Abigail W. Adams

Portland, Me., Oct. 24 – The junk primary market is open to issuers that have high single B or better credit ratings, coming with middle-of-fairway deals, sources said Monday.

As evidence they pointed to last week's Carnival deal, asserting that although the price of raising capital by means of issuing speculative grade bonds has gone up dramatically, market technicals presently favor such an issuer receiving a fair or better execution.

Meanwhile, it was a quiet session in the secondary space with the cash bond market either side of unchanged in light volume as market players turn their attention to the deluge of earnings due before the end of the week.

Tenet Healthcare Corp.’s 6 1/8% senior notes due 2028 (B3/B-) remained in focus as they continued their downtrend in the wake of last week’s earnings report.

Carnival Corp.'s recently priced 10 3/8% senior priority notes due 2028 (B2/B+) were gaining upward momentum in heavy volume with the notes brushing against par in heavy volume.

Weatherford International Ltd.’s 8 5/8% senior notes due 2030 (B3/CCC+) continued to gain in active trading as the oilfield services company’s earnings report approaches.

Tenet lower

Tenet’s 6 1/8% senior notes due 2028 continued their downward trend in heavy volume on Monday following disappointing earnings released late last week.

The 6 1/8% notes due 2028 were off another ½ point with the notes changing hands in the 83 to 83½ context throughout the session.

The notes were on an 89-handle before investors dumped the notes in anticipation of weak earnings.

While Tenet’s unsecured notes continued to trend lower, the health care services company’s 6 1/8% senior secured notes due 2030 (B1/BB-) were unchanged to slightly stronger with the notes trading in the 89 to 89½ context heading into the market close.

Weak earnings and disappointing fourth-quarter revenue guidance drove down not only Tenet’s senior notes but the capital structures of its industry peers last Friday.

CHS/Community Health Systems Inc.'s 5¼% senior secured notes due 2030 (B2/B) stabilized after falling 2 points last Friday.

The notes remained on a 64-handle with the hospital chain operator’s earnings report expected on Oct. 27.

Carnival gains

Carnival’s recently priced 10 3/8% senior priority notes due 2028 were gaining upward momentum in heavy volume on Monday with the notes brushing up against par.

The notes rose ¾ to 1 point to change hands in the 99¾ to par context heading into the market close.

The gains come after a ½ to ¾ point gain last Friday reestablished the notes on a 99-handle.

Monday marked the highest level for the 10 3/8% notes since the $2.03 billion issue, which priced at 98.465 to yield 10¾%, broke for trade on Oct. 18.

Weatherford rises

Weatherford’s 8 5/8% senior notes due 2030 continued to gain in active trading on the eve of its earnings report.

The 8 5/8% notes rose ¾ point to reclaim a 92-handle.

They were changing hands in the 92 to 92½ context on Monday with a yield of about 10 1/8%.

Monday’s gains come after a 1½ point gain last Friday.

Investors may be adding to their positions in anticipation of an earnings beat, a source said.

Weatherford is expected to report on Oct. 26.

Junk ETFs see $1.16 billion Friday inflows

The high-yield ETFs saw a big $1.16 million amount of daily cash inflows on Friday, according to a market source.

Actively managed high-yield funds were negative on the day, sustaining $50 million of outflows on Friday, the source said.

The combined funds are tracking $1.68 billion of net inflows for the week that will conclude with Wednesday's close, according to the market source.

Indexes

The KDP High Yield Daily index rose 20 points to close Monday at 50.75 with the yield 7.97%.

The index posted a cumulative loss of 62 bps on the week last week.

The ICE BofAML US High Yield index rose 21.7 basis points with the year-to-date return now negative 13.737%.

The index posted a cumulative gain of 29.2 bps on the week last week.

The CDX High Yield 30 index rose 18 bps to close Monday at 98.53.

The index posted a cumulative gain of 195 bps on the week last week.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.