New junk deal accelerated, prices early; Tempur Sealy, At Home bounce off lows; DaVita down

By Paul A. Harris and Abigail W. Adams

Portland, Me., April 19 – One new junk bond issuer came to market on Tuesday and priced its new paper a day earlier than expected.

Meanwhile, it was another sideways day in the secondary space with the market flat in thin volume.

However, rate-sensitive names again saw some selling pressure as the rout in Treasuries continued.

The 10-year Treasury yield topped 2.9% on Tuesday for the first time since 2018, settling at 2.941%.

DaVita Inc.’s 4 5/8% senior notes due 2030 (Ba3/B+) continued their downward momentum in active trading on Tuesday after a minor bounce the previous week.

However, Tempur Sealy International, Inc.’s 3 7/8% senior notes due 2031 (Ba2/BB/BB+) were on the rise after hitting an all-time low during the April 11 week.

Ambience Merger Sub, Inc.’s (At Home Group, Inc.) secured and unsecured notes continued to improve on Tuesday after falling the week before.

Early in, early out

Vermilion Energy Inc. priced Tuesday's sole high-yield bond deal, a $400 million issue of 6 7/8% eight-year senior notes (B3/BB-/BB-) that priced at 99.241 to yield 7%.

The yield printed at the wide end of the revised 6 7/8% to 7% yield talk, but tight to earlier talk of 7% to 7¼%. Initial guidance was in the low 7% area.

The order book built to $1.5 billion, a sellside source said.

The execution came on an accelerated timeline. When the offer was announced on Tuesday morning it was expected to remain in the market overnight.

The high-yield new deal machine is expected to continue to generate at least some business in the days ahead, sources say.

Whereas dollar-denominated issuance has slowed to a crawl (just $20 billion since Russia invaded the Ukraine on Feb. 24), the European primary market is frozen, as it has been since slightly before the invasion, a London-based sellside source said on Tuesday.

Year-to-date issuance is €13 billion, compared with €45.2 billion at this time in 2021, the source added.

And no one is looking for the euro-denominated new issue market to reactivate before the end of April, the sellsider said.

DaVita down

DaVita’s 4 5/8% senior notes due 2030 continued their downward momentum on Tuesday after a momentary reprieve the previous week.

The 4 5/8% notes fell about ½ point in active trading.

The notes dropped to a 90-handle and were trading in the 90 to 90½ context heading into the market close.

The yield on the notes was about 6.17%.

There was $13 million in reported volume.

The 4 5/8% notes have been on a steady downtrend since late March as rate-sensitive names again took a hit amid surging Treasury yields.

However, the notes saw a minor reprieve last week with the notes gaining about 1 point to close Thursday’s session wrapped around 91.

While up last week, the notes resumed their downward momentum and erased the previous week’s gains over the past two session.

Tempur Sealy bounces

Tempur Sealy’s 3 7/8% senior notes due 2031 were bouncing off their lows during Tuesday’s session, despite a weak day for rate-sensitive notes.

The 3 7/8% notes gained 1¼ points to close Tuesday at 84¾, according to a market source.

There was $13 million in reported volume.

The 3 7/8% notes have been on a strong downtrend throughout the year alongside other rate-sensitive names.

“They’ve gone in one direction – down,” a source said.

The notes hit an all-time low of 81 7/8 the previous week but have been on the rise since.

The low-coupon, long-duration notes have been under pressure as the market reprices itself for a higher rate environment.

However, the yield on the notes was now above 6%, which was wide of the BB index.

The bedding supplies company is expected to post earnings on April 28.

At Home bounces

At Home’s secured and unsecured tranches were also bouncing off their lows after diving the previous week on earnings-related news.

At Home’s 7 1/8% senior notes due 2029 (Caa1/CCC+) gained about 1 point.

They were changing hands in the 77¾ to 78¾ context throughout Tuesday’s session.

The 4 7/8% senior secured notes due 2028 (B1/B) also rose 1 point to trade in the 85 to 85¼ context heading into the close.

The 7 1/8% and 4 7/8% notes were rebounding after falling 6 and 2 points respectively the previous week.

Fund flows

The daily cash flows of the dedicated high-yield bond funds were flat to slightly negative on Monday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs saw $201 million of inflows on the day.

Actively managed high-yield funds, however, sustained $244 million of outflows on Monday, the source said.

The combined funds are tracking $62 million of net outflows for the week that will conclude with Wednesday's close, according to the market source.

Indexes

The KDP High Yield Daily Index fell 15 points to close Tuesday at 59.75 with the yield now 6.05%.

The index was down 20 points on Monday.

The ICE BofAML US High Yield index fell 12.6 bps with the year-to-date return now 6.631%.

The index fell 18.8 bps on Monday.

The CDX High Yield 30 index shaved off 5 bps to close Tuesday at 103.81.

The index was down 15 bps on Monday.

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