Junk secondary volatile; DaVita lower; Moss Creek under pressure; cruise lines submerged

By Abigail W. Adams

Portland, Me., June 22 – The domestic high-yield bond primary market remained dormant on Wednesday with little visibility on prospective deals as volatility continued to roil capital markets.

There was little indication there would be a reprieve from the volatility on Wednesday as investors’ assessments of the likelihood and the severity of an economic recession caused several asset classes to ping pong between gains and losses.

The high-yield secondary space opened Wednesday in the red with ETF selling pressure again driving the market down ¼ to ½ point.

However, the market firmed as the session progressed with the 10-year Treasury yield continuing to come in from its peak.

The rally in rates helped lift the market which inched into the green midway through the session, a source said.

However, selling pressure again took hold into the close with the market closing the day back in the red.

While volatile, activity in the secondary space remained muted with few market players making moves.

Topical news and liquidity trades were the driving force of activity in the space on Wednesday.

DaVita Inc.’s 4 5/8% senior notes due 2030 (Ba3/B+) continued to move lower in heavy volume after the dialysis service provider lost a Supreme Court case.

Moss Creek Resources Holdings, Inc.'s senior notes were lower in active trading with the energy sector, in general, under pressure as crude oil futures tumbled.

While volume was light, Laredo Petroleum, Inc.’s 7¾% senior notes due July 2029 (B3/B) led losses in the secondary space with the notes diving more than 4 points.

Cruise line operators were also under pressure with Carnival Corp.’s and Royal Caribbean Group’s senior notes lower in active trading.

DaVita lower

DaVita’s 4 5/8% notes due 2030 continued to fall in heavy volume following a Supreme Court ruling that threatens the kidney dialysis service provider’s future margins.

The notes fell 1 point early in the session to change hands in the 74 to 74½ context, a source said.

However, the notes pared their losses as the session progressed although they remained on a 74-handle.

The notes closed the day down ½ point. They were trading in the 74 3/8 to 74 5/8 context heading into the market close.

The notes dominated activity in the secondary space with $30 million in reported volume.

DaVita’s 4 5/8% notes have fallen 4½ points since Tuesday when the dialysis service provider lost its Supreme Court case.

The Supreme Court on Tuesday rejected DaVita’s claim that the reimbursement rate of an Ohio hospital’s health plan for patients with end-stage kidney disease was discriminatory.

The ruling is expected to open the door to other health plans removing dialysis services from their coverage.

Moss Creek under pressure

Moss Creek’s senior notes were lower in active trading with the energy sector in general under pressure as crude oil futures tumbled.

The oil and gas company’s 7½% senior notes due 2026 (B3/B) sank 1¾ points to close Wednesday at 90½ with a yield of 10¾%, according to a market source.

There was $20 million in reported volume.

The company’s 10½% senior notes due 2027 fell to 96½ with the yield just shy of 11½%.

There was $14 million in reported volume.

While volume was light, Laredo Petroleum’s 7¾% senior notes due 2029 led losses in the secondary space with the notes down more than 4 points.

The notes sank to a 92-handle in thin volume with a round lot print of 92 5/8.

The notes are now carrying a yield north of 9%.

The notes closed the previous session at 96¾.

Crude oil futures fell on Wednesday, settling at $104.30, a decrease of $5.22 or 4.77%, with recession fears driving the commodity lower.

Cruises sink lower

Cruise line operators were also lower in active trading.

Royal Caribbean’s 5½% notes due 2028 sank 2 points to close the day at 73½ with the yield now just shy of 12%.

There was $12 million in reported volume.

Royal Caribbean’s 5 3/8% senior notes due 2027 continued to sit near their all-time low.

The notes have been trading on a 75-handle for the past several sessions with the yield about 12 1/8%.

Royal Caribbean priced a $1 billion issue of the 5 3/8% notes at par on Jan. 4.

The notes rank as one of the worst performing deals of 2022.

Carnival’s 5¾% senior notes due 2027 (B2/B) also fell 2 points to close the day at 77¾, according to a market source.

The move down also pushed the yield on the notes to about 12 1/8%.

Indexes

The KDP High Yield Daily index fell 20 points to close the day at 54.64 with the yield now 7.61%.

The index was up 4 points on Tuesday.

The ICE BofAML US High Yield index fell 38 basis points with year-to-date returns once again crossing the negative 13% threshold.

Returns are now negative 13.0057%.

The index rose 29 basis points on Tuesday.

The CDX High Yield 30 index fell 7 bps to close Wednesday at 97.47.

The index rose 48 bps on Tuesday.

© 2015 Prospect News.
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