Primary closed for the year, sources say; QEP gives back some gains; Diamond Sports active

By Paul A. Harris and Abigail W. Adams

Portland, Me., Dec. 22 – The primary market failed to generate any news on Tuesday with liquidity low and market players using the end of the year slowdown as an occasion to use up vacation time.

High-yield issuance has almost certainly run its course for 2020, market sources say.

Meanwhile, the secondary space was equally quiet on Tuesday with activity continuing to wind down as accounts prepare to close the books on 2020.

QEP Resources Inc.’s junk bonds continued to dominate the tape with the notes coming in slightly after their meteoric rise the previous session.

While crude oil futures continued to trade off, Antero Resources Corp.’s recently priced 8 3/8% senior notes due 2026 (B3/B) returned to a 101-handle.

Several other recently priced energy names continued to hold, despite the downturn in crude oil futures.

Outside of some topical activity, trading in the secondary space was largely limited to highly liquid issues.

Diamond Sports Group LLC and Diamond Sports Finance Co.’s 5 3/8% senior secured notes due 2026 were active with the notes making a nominal gain.

QEP in focus

QEP’s junk bonds continued to dominate the tape on Tuesday.

However, the notes were trending lower in high-volume activity after their meteoric rise the previous session.

QEP’s 5 5/8% senior notes due 2026 shaved off 1 point. They were trading in the 109½ to 109¾ context heading into Tuesday’s close, according to a market source.

The notes jumped 20 points to 110-handle on Monday.

While volume was comparatively light, QEP’s 5¼% notes senior notes due 2023 traded down about ½ point to close the day at 104 5/8.

The notes jumped 11 points on Monday.

QEP ‘s junk bonds have been in focus since news broke that Diamondback Energy Inc. would acquire QEP in an all-stock deal that includes debt for an enterprise value of $2.15 billion.

The acquisition is credit positive for QEP with Diamondback Energy a much stronger credit, a source said.

Energy holds

While WTI crude oil futures continued to pull back on Tuesday, several recently priced energy names remained well bid in the secondary space, a source said.

Antero’s recently priced 8 3/8% senior notes due 2026 (B3/B) returned to a 101-handle after dropping below it the previous session.

The notes were up about ¼ point to change hands in the 101¼ to 101½ context.

While volume was light, Talos Energy Inc.’s 12% second-priority senior secured notes due January 2026 (B3/B+/B) continued to trade at a premium to their issue price.

The notes were marked at 94¼ bid on Tuesday, a source said.

Talos Energy priced a $500 million issue of the 12% notes at 91 to yield 14.583% on Dec. 17.

While recently priced energy deals continued to perform well in the aftermarket, WTI crude oil futures continued to pull back from their rally.

Crude oil futures settled at $47.02, a decrease of 95 cents or 1.98%, on Tuesday.

Diamond Sports active

With the primary market closed and accounts preparing to close the books on 2020, trading activity was relegated to large, liquid issues.

Diamond Sports’ 5 3/8% senior secured notes due 2026, a $3 billion issue, saw some action on Tuesday with the notes making nominal gains.

The 5 3/8% notes traded up about ½ point to close the day at 80½.

Diamond Sports’ 6 5/8% senior notes due 2027 were not active on Tuesday with the notes remaining on a 60-handle.

Diamond Sports’ secured and unsecured tranches have staged a remarkable recovery since late October when the secured notes traded down to the low 50s and the unsecured notes hit the low 40s.

The notes were on a downward spiral after Hulu LLC dropped the network and rumors of a restructuring circulated the market.

However, the notes bounced back after Sinclair struck a partnership with casino operator Bally’s Corp. and parent company Sinclair Broadcasting announced plans to offer direct-to-consumer broadcasting.

$144 million Monday inflows

The dedicated high-yield bond funds had $144 million of net inflows on Monday, the most recent session for which data was available at press time, according to a market source.

Actively managed funds saw $165 million of inflows on the day.

However high-yield ETFs were negative, sustaining $309 million of outflows on Monday, the source said.

Indexes mixed

Indexes were mixed on Tuesday with some posting nominal gains and others losses after opening the week in the red.

The KDP High Yield Daily index shaved off 1 point to close the day at 68.59 with the yield now 4.55%.

The index dropped 8 points on Monday.

The ICE BofAML US High Yield index rose 14.6 bps with the year-to-date return now 5.372%.

The index shaved off 29.9 bps on Monday.

The CDX High Yield 30 index dropped 4 bps to close Tuesday at 108.56.

The index was down 47 bps on Monday.

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