Junk selling subsides; Worldpay better; Civitas hurt by asset purchase; Spirit Aero off

By Paul A. Harris and Abigail W. Adams

Portland, Me., Oct. 4 – The dollar-denominated junk bond primary market remained quiet on Wednesday, and the active forward calendar stood empty at session’s end.

BofA Securities, Inc. is telegraphing $10 billion to $15 billion of October new issue business, a bond trader said, but added that a sizable portion of prospective issuers who liked the way new issue executions went in September are apt to be put off by October’s more forbidding rate environment.

In the euro-denominated primary market Italy-based Guala Closures SpA priced a €350 million issue of Euribor plus 400 basis points senior secured floating-rate notes due June 2029 (B1/B+) at 99, on Wednesday.

The spread came at the tight end of spread talk, while the issue price came on top of price talk.

Meanwhile, the secondary space had some relief from the heavy selling of the previous two sessions with the latest ADP Employment Report reflecting slower job growth than anticipated.

The ADP report painted a different picture of the labor market than Tuesday’s JOLTS report and the markets breathed a sigh of relief with Treasury yields coming in on Wednesday after hitting multi-decade highs.

While the cash bond market succumbed to some selling pressure early in the session, buyers emerged to lift the market into the close, a source said.

While there may have been a relief rally on Wednesday, weaker credits continued to underperform with certain areas of the market suspect as rate and recession risks rear their head, a source said.

While GTCR W-2 Merger Sub LLC’s 7½% senior secured notes due 2031 (Ba3/BB/BBB-) backing the buyout of Worldpay improved alongside the broader market, LifePoint Health Inc.’s 11% senior secured notes due 2030 (B2/B) were largely unchanged.

While the broader market showed signs of improvement, topical news pushed some outstanding issues lower.

Civitas Resources, Inc.’s 8 3/8% senior notes due 2028 and 8¾% senior notes due 2031 (B1/BB-/BB-) were weaker in active trade after the company announced a $2.1 billion asset purchase to be funded with debt and equity.

Spirit AeroSystems Inc.’s senior notes continued to move lower following the resignation of the company’s chief executive officer.

Worldpay up, LifePoint flat

Worldpay’s 7½% senior secured notes due 2031 improved alongside the broader market on Wednesday although they remain under water.

The 7½% notes gained ¼ to ½ point in heavy volume to close the day in the 98¾ to 99 context, a source said.

The $2.18 billion issue is highly liquid and has been moving with the market, a source said.

While the 7½% notes have held at or above their issue price since pricing at par on Sept. 20, they sank 2 points over Monday and Tuesday and closed the previous session on a 98-handle.

While Worldpay improved on Wednesday, LifePoint’s 11% senior secured notes due 2030 were largely unchanged.

The notes were trading in the 98 to 98¼ context with activity in the name beginning to subside.

LifePoint’s 11% notes represented the last deal to clear the primary market with the $1.1 billion issue pricing at par on Sept. 29.

Civitas lower

Civitas’ 8 3/8% senior notes due 2028 and 8¾% senior notes due 2031 were weaker in active trade on Wednesday after the oil and gas company announced a $2.1 billion acquisition of assets in the Permian Basin.

The 8 3/8% senior notes due 2028 sank another ½ point to close the day wrapped around par, according to a market source.

The 8 3/8% notes were trading on a 101-handle on Monday.

The 8¾% notes due 2031 were also off ½ point to close the day in the par ½ to 101 context.

The notes closed September on a 102-handle.

The notes were lower in heavy volume after Civitas announced it would acquire about 44,000 acres in the Permian region from Vencer Energy for 7.3 million shares and $1.55 billion in cash.

The company plans to finance the cash portion of the acquisition with debt and equity.

Civitas priced a $1.35 billion tranche of the 8 3/8% notes and a $1.35 billion tranche of the 8¾% notes at par in June.

Spirit AeroSystems lower

Spirit AeroSystems’ senior notes continued to move lower following the resignation of the company’s chief executive officer after a series of supply mishaps.

The 9 3/8% senior secured first-lien notes due 2029 (Ba2/BB-) were off another ¼ point to trade in the par 3/8 to par 5/8 context heading into the market close, a source said.

The notes fell 1 point the previous session.

The 4.6% senior notes due 2028 (Caa1/CCC+) were also down another ¼ point with the notes trading in the 74¼ to 74¾ context.

The 4.6% notes sank 1½ points the previous session.

Spirit AeroSystems’ capital structure has taken a hit over the past several months with the company responsible for supplying Boeing with non-conforming parts that resulted in delivery delays.

Fund flows

The dedicated high yield-bond funds sustained $816 million of net daily cash outflows on Tuesday, the most recent session for which data was available at press time, according to a market source.

Actively managed high-yield funds had $515 million of outflows on the day, according to the source who added that those outflows were reasonably concentrated.

High-yield ETFs sustained $301 million of outflows on Tuesday.

The combined funds are tracking $1.4 billion of net outflows on the week that concluded with Wednesday’s close, according to the market source.

Indexes

The KDP High Yield Daily index shed 2 bps to close Wednesday at 48.84 with the yield 8.22%.

The index was down 42 bps on Tuesday and 27 bps on Monday.

The ICE BofAML US High Yield index shed 5 bps to with the year-to-date return now 4.499%.

The index sank 83.2 bps and 57.2 bps on Monday.

The CDX High Yield 30 index added 23 bps to close Wednesday at 100.

The index fell 77 bps on Tuesday and 24 bps on Monday.

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