Primary quiet; secondary soft on rate risk; LifePoint deflates; Worldpay below par; Shelf Drilling falls

By Abigail W. Adams

Portland, Me., Oct. 2 – The domestic high-yield bond primary market was quiet early Monday after capping the busiest month of the year in September with $22.38 billion pricing in 30 deals.

The torrent of activity came amid a dramatic widening in spreads, which have pushed out about 35 basis points since the Fed’s Sept. 20 announcement.

The higher-for-longer narrative was continuing to weigh on risk sentiment as Treasury yields resumed their climb to recent heights with the aversion of a government shutdown doing little to provide relief to the market.

The secondary space was off to a weak start on Monday with the cash bond market down 1/8 point.

Selling accelerated as the session progressed with the market closing the day down 3/8 to ½ point.

ETF selling was dragging down the broader market bids-wanted-in-competition lists outnumbering offers-wanted-in-competition lists nearly 6 to 1, a source said.

The majority of issuance in September has performed well in the aftermarket despite the widening of spreads and with most deals trading at or above their issue price.

However, cracks were beginning to show in the aftermarket performance of several recent deals.

“The air is escaping,” a source said.

LifePoint Health Inc.’s new 11% senior secured notes due 2030 (B2/B) launched the day strong but closed below par.

GTCR W-2 Merger Sub LLC’s 7½% senior secured notes due 2031 (Ba3/BB/BBB-) backing the buyout of Worldpay again broke below par with the notes closing the day on a 99-handle.

Shelf Drilling Holdings Ltd. 9 5/8% senior secured notes due 2029 (B3/B-/B) were also under pressure with the notes giving back all gains since pricing and closing the day wrapped around their discounted issue price.

LifePoint weakens

LifePoint’s new 11% senior secured notes due 2030 gave back all gains from a strong break to close Monday’s session below par.

The 11% notes were off ½ to ¾ point in heavy volume.

The notes opened the day wrapped around par ½ but quickly lost steam and were trading in the 99 7/8 to par 1/8 context as the session progressed, a source said.

They continued to move lower with the notes closing the session in the 99 ¾ to par context.

There was $53 million in reported volume.

LifePoint was the last issuer to tap the market in September and priced a $1.1 billion issue of the 11% notes at par in a Friday drive-by.

Pricing came on top of talk for a yield of 11%.

Worldpay on a 99-handle

Worldpay’s 7½% senior secured notes due 2031 again broke below par under Monday’s heavy market conditions, closing the day on a 99-handle.

The 7½% notes were off ½ to ¾ point to close the day in the 99½ to 99¾ context, a source said.

There was $34 million in reported volume.

The $2.18 billion issue, which priced at par on Sept. 20, also broke below par last Thursday.

However, it recouped its losses to close last Friday in the par to par ½ context.

Shelf Drilling gives back gains

Shelf Drilling’s 9 5/8% senior secured notes due 2029 were under pressure on Monday, giving back all gains made since pricing to close the day wrapped around their discounted issue price.

The 9 5/8% notes sank 1 point in heavy volume to close the day in the 97 7/8 to 98 1/8 context.

The yield was about 10 1/8%.

There was $26 million in reported volume.

Shelf Drilling priced a $1.095 billion issue of the 9 5/8% notes at 98.184 to yield 10 1/8% last Thursday.

The notes saw a strong start in the aftermarket and closed last Friday wrapped around 99.

Indexes

The KDP High Yield Daily index was down 27 bps to close Monday at 49.28 with the yield 8.02%.

The index was down 24 bps on the week last week.

The ICE BofAML US High Yield index fell 57.2 bps with the year-to-date return now 5.382%.

The CDX High Yield 30 index fell 24 bps to close Monday at 100.54.

The index fell 127 bps on the week last week.

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