SPX wraps; secondary junk ends volatile week up; Telesat in focus; Crown Americas gains

By Paul A. Harris and Abigail W. Adams

Portland, Me., March 18 – The domestic high-yield primary market managed one sale of new paper during Friday’s session.

SPX Flow, Inc. sold a downsized $500 million issue of eight-senior senior notes (Caa2/CCC+) with a large discount.

While new deal activity has been light amid volatile market conditions, there is hope for the week ahead with one deal on the forward calendar.

Owens & Minor, Inc. is in the market with a $500 million offering of eight-year senior notes (B2/B/BB-).

Meanwhile, it was a mixed bag in the secondary space on Friday after a dramatic week filled with more head spinning volatility.

Credit spreads blew out and year-to-date returns for the ICE BofAML US High Yield index plummeted past negative 6% on Monday.

However, the market snapped back to not only erase its losses from Monday’s session but close with a weekly gain, sources said.

The steady stream of outflows reversed course with Thursday seeing an inflow of $1.82 billion.

While the secondary space closed the week on firm footing, it is trading rich compared to other markets, which indicate it should be about 50 basis points wider than current levels, according to a BofA Global Research report.

With the high-yield primary market quiet throughout the week, topical news remained the primary driver of trading activity in the space.

Telesat Corp.’s junk bonds were in focus on Friday with the notes seeing outsized gains following a better-than-expected earnings report.

Crown Americas LLC’s recently priced 5¼% senior notes due 2030 (Ba3/BB-) continued their upward momentum in the secondary space after a lackluster break.

SPX smaller, but higher

A struggling unsecured notes offer backing the buyout of SPX Flow by Lone Star Funds priced at a big discount on Friday, but not as big a discount as price talk indicated early in the day.

The deal crossed the finish line as a downsized $500 million issue of 8¾% eight-senior senior notes (Caa2/CCC+) at 95.183 to yield 9 5/8%.

The issue size decreased from $500 million.

The coupon came on top of launch talk, the price came at the rich end of the 93.865 to 95.183 launch price talk and the yield came tight to the 9 5/8% to 9 7/8% launch yield talk.

Official price talk, which surfaced earlier Friday, specified an 8¾% coupon with a discount of 91.933 to 93.216, to yield 10% to 10¼%.

A partially syndicated $570 million bridge loan backing the bonds was capped at 8¾%, leaving the dealer and the bridge participants on the hook to cover the discount, sources say (see related story in this issue).

Also on Friday, Owens & Minor kicked off a $500 million offering of eight-year senior notes (B2/B/BB-) with initial guidance in the 7% area.

That deal is scheduled to price in the week ahead.

Telesat outperforms

Telesat’s junk bonds outperformed the market on Friday with the notes jumping more than 6 points in active trading following positive earnings.

The 6½% senior notes due 2027 (Caa1/B) gained 6½ points to trade at 51 heading into the market close, according to a market source.

There was $23 million in reported volume.

Telesat’s 4 7/8% senior notes due 2027 (B1/BB-) gained 6¼ points to close the day at 75¼.

The satellite communications company’s senior notes jumped in response to earnings, a source said.

Crown Americas gains

Crown Americas’ recently priced 5¼% senior notes due 2030 (Ba3/BB-) continued their upward momentum in active trading on Friday.

The notes rose another ¾ point to break 102.

They were changing hands at 102 1/8 heading into the market close, according to a market source.

There was $12 million in reported volume.

Prior to SPX, the notes were the last new deal to clear the primary market.

The metal container manufacturer priced a $500 million issue of the 5¼% notes at par on March 14 amid heavy market conditions.

While the notes were flat on the break, they caught a bid as market conditions improved.

$1.82 billion Thursday inflows!

The high-yield ETFs saw a whopping $1.82 billion of daily cash inflows on Thursday, the most recent session for which data was available at press time, according to a market source.

Actively managed high-yield funds, on the other hand, sustained $140 million of outflows on Thursday, continuing a run of consecutive, substantially negative daily flows stretching back to last Friday (March 11).

News of Thursday's daily flows follows a Thursday afternoon report that the combined dedicated high-yield bond funds sustained $1.65 billion of net outflows in the week the Wednesday, March 16 close, according to Refinitiv Lipper.

It caps a 10-week run of consecutive outflows totaling $21.5 billion, according to the market source who added that eight of those ten outflows were greater than $1 billion.

That's a new record, in terms of the cumulative total, surpassing the $19.4 billion of cumulative outflows during the 10-week period that ended on March 25, 2020, the source said.

Year to date the combined funds have now seen $23.9 billion of net outflows, according to the market source.

Indexes

The KDP High Yield Daily index gained 4 points to close Friday at 61.65 with the yield now 5.46%.

The index was up 43 points on Thursday and 40 points on Wednesday after losing 1 point on Tuesday and 61 points on Monday.

The index posted a cumulative gain of 25 points on the week.

The KDP High Yield Daily index inched up 3 bps to close Friday at 105.77.

The index was up 43 bps on Thursday, 111 bps on Wednesday and 45 bps on Tuesday after dropping 28 bps on Monday.

The index posted a gain of 174 bps on the week.

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