Tenet Healthcare on the rise; Albertsons gains; WeWork comes in

By Paul A. Harris and Abigail W. Adams

Portland, Me., Aug. 16 – The domestic high-yield primary market was again dormant on Friday, as it has been for much of the week.

However, with encouraging economic data, the domestic high-yield primary market may see a deal come to market before the month is through, sources said.

Meanwhile, the secondary space closed out a choppy week on strong footing although volume was light and the future direction of the market remains uncertain, sources said.

Tenet Healthcare Corp.’s newly priced tranches of senior notes (Ba3/BB-) were again gaining ground on Friday alongside the broader market with each tranche reaching its highest level since pricing.

Albertsons Cos. Inc’s recently priced 5 7/8% senior notes due 2028 (B3/BB-) were also on the rise after coming in during the previous session.

After trading up to their highest level since pricing a little more than one year ago, WeWork Cos. Inc.’s 7 7/8% senior notes due 2025 were weakening on Friday.

However, the notes still made substantial gains on the week.

Quiet summer Friday

The new issue market failed to generate news on Friday with market sources continuing to profess the expectation that summer 2019 issuance may have run its course.

However, the U.S. capital markets backdrop was firm on Friday, kindled by some upbeat economic metrics including unexpected upticks in housing permits and consumer spending, a trader noted.

These numbers appear to depict a U.S. economy holding its own, the source said.

If Friday's stock market rallies lead to some stability, opportunistic issuers might be tempted to make a pass at the market during the run-up to Labor Day in spite of the diminishing liquidity that is a late summer tradition in the high-yield bond market.

Tenet on the rise

Tenet’s recently priced tranches of senior notes reached their highest levels since pricing on Friday as markets closed out a choppy week on strong footing.

Tenet’s 4 7/8% senior notes due 2026 rose ¾ point to close Friday at 101¼, according to a market source.

The 5 1/8% senior notes due 2027 also climbed ¾ point to close the day at 101½.

Tenet’s 4 5/8% senior notes due 2024 worked their way up 5/8 point to close at 102.

The tranches have been volatile since breaking for trade on Monday and have largely moved in line with the broader market.

The notes have gained on strong days for the secondary space, most notably Tuesday, but lost ground on soft days, such as the dramatic sell-off on Wednesday.

Friday marked the highest level for the tranches since they priced, a market source said.

Tenet priced all three tranches at par in a $4.2 billion mega-refinancing deal.

The Monday drive-by was the sole new deal of the week.

Albertsons gains

After coming in over the past few sessions, Albertsons’ recently priced 5 7/8% senior notes due 2028 were again on the rise on Friday.

The notes were up almost 1 point to close the day at 103, although volume was light.

The notes dropped ½ point to 102 during Thursday’s session.

Albertsons 5 7/8% notes have staged an impressive rebound in secondary trading.

The notes, which priced at par on Aug. 1, were initially lagging their issue price in secondary trading.

However, they have steadily climbed over the past two weeks with Friday marking their highest level since breaking for trade.

WeWork weakens

WeWork’s 7 7/8% senior notes due 2025 were coming in on Friday after a two-day streak of substantial gains.

The notes dropped 1 point to close the day at 104¼, according to a market source. They traded as high as 105¼ during Thursday’s session.

The 7 7/8% notes have been in focus and on the rise since the company filed for its initial public offering on Wednesday.

The notes began the week on a 97 handle.

However, they skyrocketed on news of the IPO and speculation the IPO would be followed by a new debt offering that would take out the 2025 notes.

Big Thursday outflows

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

High-yield ETFs saw a very hefty $722 million of outflows on the day.

Actively managed high-yield funds saw $225 million of outflows on Thursday, the source said.

News of Thursday's outflows followed a Thursday afternoon report that the combined high-yield funds saw $346 million of inflows in the week to Wednesday's close.

Parsing that inflow, high-yield ETFs saw $565 million of inflows on the week, while actively managed funds sustained $219 million of outflows, according to the market source.

In any case, the $346 million of net inflows for the week to Wednesday's close appears altogether modest compared to the previous week's $4.07 billion of net outflows, the eighth largest weekly outflow on record, the source said.

Drawing back from the day-to-day and week-to-week cash flows of the junk funds, 2019 continues to look like a banner year for flows.

Year-to-date the combined funds have seen $11.9 billion of net inflows.

During the same time period of 2018 the funds had seen $23.6 billion of net outflows, the market source said.

Indexes gain

Indexes closed out the week with gains although they were mixed on the week.

The KDP High Yield Daily index rose 2 basis points to close Friday at 70.94 with the yield now 5.71%.

The index was down 9 bps on Thursday, dropped 13 bps on Wednesday, rose 18 bps on Tuesday and was up 11 bps on Monday.

The index saw a cumulative gain of 9 bps on the week.

The ICE BofAML US High Yield index rose 18.9 bps on Friday with the year-to-date return now 9.767%.

The index gained 2 bps on Thursday, dropped 52.7 bps on Wednesday, was up 20.7 bps on Tuesday and shaved off 5.3 bps on Monday.

The index saw a cumulative loss of 16.4 bps on the week.

After climbing above 10% returns on Tuesday, the index again sank below the 10% threshold on Wednesday.

The index initially slid below the 10% return threshold amid the market sell-off on Aug. 5.

The CDX High Yield 30 index gained 58 bps to close Friday at 105.99.

The index climbed 20 bps on Thursday, sank 102 bps on Wednesday, rose 85 bps on Tuesday, and sank 56 bps on Monday.

The index saw a modest gain of 5 bps on the week.

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