High-yield bonds rebound as week begins; Valeant paper fades; Cablevision, Altice climb higher

By Paul A. Harris and Stephanie N. Rotondo

Portland, Ore., Oct. 5 – After weeks of being under pressure, the high-yield bond market rallied in Monday trading.

“Everything was up,” a trader said. “Up, up, up.”

One notable trend-bucker was Valeant Pharmaceuticals International Inc. The company has been sliding since last week when it was reported that Congressional Democrats were seeking to subpoena the company over its drug price increases.

As for gainers, Cablevision Systems Corp.’s recently priced issues were moving up. The company priced $4.8 billion of notes in three tranches on Friday. Proceeds from that offering will be used to pay off existing debt and to fund a merger with Altice SA.

Both Cablevision and Altice saw their older debt also rising.

Also in the telecommunications space, Sprint Corp. “rebounded smartly,” according to a trader.

Bombardier Inc. was another name looking to climb higher during the session. Over the weekend, it was reported that the aircraft manufacturer was looking to Quebec’s public pension managers for a potential investment. Early Monday, Scotiabank put out a report that claimed the company could run out of cash by mid-2016.

In the primary, no deals were priced or announced during Monday's session, the sixth to pass without a dollar-denominated junk deal pricing.

There is just one deal on the active calendar, market sources say.

SunOpta Foods Inc. has been marketing a $330 million offering of senior secured second-lien notes due 2022 (B3/B) during the past week.

The deal, via BMO Securities, Jefferies LLC and Rabobank, is set to price this week.

Outflows on Friday

The dedicated high-yield bond funds saw $418 million of outflows on Friday, the most recent session for which data was available at press time, according to a market source.

Of that amount, $50 million flowed from high-yield exchange-traded fund, the source said.

Valeant struggles

A “big slug” of Valeant Pharmaceuticals’ 6 1/8% notes due 2025 traded on Monday, according to a trader.

Although most of the market was showing improvement, Valeant’s bonds were seen off 1½ points at 96.

Valeant has been in the spotlight recently as lawmakers, as well as consumers, have grown weary of the company’s strategy in regards to drug price increases. Last week, Congressional Democrats were looking to bring the company before a congressional panel to explain its processes.

Cablevision, Altice gain

Cablevision Systems’ $2 billion of 10 7/8% notes due 2025 moved up to 103 7/8, a trader said Monday. That was a gain of over 1½ points, he said.

The $1.8 billion of 10 1/8% notes due 2023 meantime put on nearly 2½ points to close at 103¾.

Cablevision priced the two issues, along with a third tranche of $1 billion 6 5/8% notes due 2025, on Friday in connection with its merger with Altice.

J.P. Morgan Securities LLC, Barclays, BNP Paribas Securities Corp., Credit Agricole CIB, Deutsche Bank Securities Inc., RBC Capital Markets, Scotia Capital, SG CIB and TD Securities were the joint bookrunners.

Leading up to the offering, both Cablevision and Altice saw their existing debt declining. On the heels of the new deal, a trader said the paper was rallying.

For instance, Altice’s 7¾% notes due 2022 rose a point to 91¼, the trader said. Cablevision’s 5 7/8% notes due 2022 gained a deuce, ending at 78 3/8.

Sprint rallies

Elsewhere in the telecommunications realm, Sprint bonds were rebounding, though there was not necessarily any news to act as a catalyst.

A trader saw the 7 7/8% notes due 2023 adding 3¾ points, closing at 84½. The 7 1/8% notes due 2024 were up a similar amount at 80¼.

And the 7% notes due 2020 were deemed “up almost 4 [points]” at 86½.

According to second-quarter figures, the Overland Park, Kan.-based company slid to the fourth-largest domestic mobile carrier. That news prompted market players to suggest that Sprint might need more of an investment from its largest shareholder, SoftBank Group Corp.

However, the cost to insure SoftBank’s bonds has gone up of late, due in part to Sprint and in part to concerns about the economy, particularly in China and Japan.

SoftBank is also a backer of Alibaba Group Holding Ltd., which has seen its growth forecasts diminish as well.

Bombardier flies higher

Bombardier is reportedly looking at ways it can tap the market for cash – which could be a good thing, as Scotiabank, for one, believes cash is running out.

A trader said the 7½% notes due 2023 popped 2½ points, ending at 77¼.

A second market source placed the 7¾% notes due 2020 at 88¼ bid, up 2¾ points.

Reuters recently reported that Montreal-based Bombardier was in talks with Caisse de depot et placement du Quebec, the manager of the province’s public pension plans, about a potential new investment.

The firm is already one of the company’s largest stakeholders, and such an investment could prove quicker and easier than selling off assets.

Bombardier has struggled to get its new CSeries jets up and ready for sale, and while the smaller version is nearly there, more time is needed on the larger version. According to Scotiabank analyst Turan Quettawala, that could mean the company will burn through its available cash by mid-2016.

In a note to clients, Quettawala also noted that one purported sale of a minority stake in the company’s train manufacturing unit would most likely be immaterial.

“As such, we don’t see this as the right course of action,” Quettawala wrote in the note.

High-yield bonds improve

Market indicators were positive to start out the week.

The KDP High Yield Daily index moved up to 65.91 with a 6.92% yield on Monday from 65.55 with a 7.05% yield on Friday

The CDX North American High Yield Series 25 index meantime gained nearly a point, closing at 101.05 bid, 101.15 offered, according to a market source.

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