Bausch trades up; Windstream mixed, Uniti gains on bankruptcy filing; Multi-Color jumps on buyout

By Paul A. Harris and Abigail W. Adams

Portland, Me., Feb. 25 – The domestic high-yield primary market was quiet on Monday with no new deals pricing and none joining the forward calendar.

However, the week ahead is expected to be active, sources said.

Meanwhile, the secondary space was strong on Monday with the market up 1/8 to ¼ point on optimism surrounding U.S.-China trade talks.

Bausch Health Cos., Inc.’s newly priced junk bonds were putting in a strong performance in the secondary space with the notes well above their issue price.

Windstream Corp. and Uniti Group Inc. remained in focus in the secondary space.

Windstream’s junk bonds were mixed after the telecommunications company filed for Chapter 11 bankruptcy protection.

However, Uniti Group’s junk bonds were making gains on the news.

Multi-Color Corp.’s 4 7/8% senior notes due 2025 jumped in high-volume activity on news the company would be acquired by a private equity firm.

Primary quiet

The primary market remained quiet on Monday.

However, the new issue market is expected to be active during the February-March crossover week, sources say.

In particular, the JP Morgan Global High Yield & Leveraged Finance Conference, which was scheduled to get underway on Monday in Miami, is expected to generate some primary market business, they add.

Bausch Health trades up

Bausch Health’s recently priced junk bonds were strong in the secondary space.

Bausch’s 5¾% notes due 2027 (Ba2/BB-) were quoted at 101 3/8 bid, 101 7/8 offered, according to a market source.

They were seen changing hands at 101 1/8 in the late afternoon with more than $34.5 million of the bonds on the tape.

Bausch Health Americas Inc.’s add-on to its 8½% senior notes due Jan. 31, 2027 (B3/B-) were also well above their reoffer price.

The 8½% senior notes were quoted at 104 bid, 104½ offered and were changing hands at 104, according to market sources.

More than $45 million of the bonds were on the tape by the late afternoon.

Bausch Health priced $1.5 billion in senior notes in a Friday drive-by.

The deal included $500 million of the 5¾% senior secured notes, which priced at par, and a $1 billion add-on to its 8½% senior unsecured notes, which priced at 103.25 to yield 7.748%.

The yield on the secured notes came tight to talk in the 5 7/8% area. The reoffer price on the add-on also came at the tight end of the 103 to 103.25 price talk.

Windstream mixed

Windstream’s junk bonds remained in focus in the secondary space after the telecommunications company filed for Chapter 11 bankruptcy protection.

The issues were mixed with some posting large gains and others seeing large losses.

The mixed performance was due to where the notes fell in the capital structure and who the issuing agency under the Windstream umbrella was, a market source said.

There will be different assets tied to the notes based on the issuer, the source said.

Windstream’s 10½% senior notes due 2024 rose 6¼ points to 57¾ with more than $12 million of the bonds changing hands.

The 9% senior notes due 2025 rose 4 points to 53¼ with more than $34 million on the tape by the late afternoon.

Windstream’s 8 5/8% senior notes due 2025 rose 3½ points to 90¼ with more than $20 million of the bonds on the tape.

The 10½% senior notes due 2024 and 9% senior notes due 2025 are second-lien senior secured notes issued by Windstream Holdings Inc.

The 8 5/8% notes due 2025 are senior secured first-lien notes that were issued by Windstream Services LLC/Windstream Finance Corp.

Windstream’s 7½% senior notes due 2022 dropped 10¾ points to 17¼.

The 6 3/8% senior notes due 2023 dropped 4 points to 13¾.

The 7½% senior notes due 2022 and 6 3/8% notes due 2023 are unsecured and were issued by Windstream Corp.

While the filing came sooner than expected, Windstream’s junk bonds were trading down for much of last week in anticipation the company would file for bankruptcy.

The bankruptcy filing was due to a federal court judge’s ruling in favor of Aurelius Capital Management.

Aurelius challenged Windstream’s spinoff of its wire and fiber-optic cable business into real estate investment trust Uniti.

The group claimed the subsequent lease-back to Windstream of those assets violated the covenants of Windstream’s 6 3/8% senior notes due 2023 of which Aurelius was a majority owner.

Uniti gains

While Windstream’s junk bonds were mixed on the bankruptcy filing news, Uniti’s junk bonds were making gains in high-volume activity.

Uniti’s 8¼% senior notes due 2023 rose 7 points to 82½ with more than $44 million of the bonds on the tape, according to a market source.

The 7 1/8% senior notes due 2024 rose ¼ point to 73¾ with more than $23 million of the bonds on the tape.

The 6% senior notes due 2023 rose 2¾ points to 91¼ with more than $20 million of the bonds on the tape.

Multi-Color jumps

Multi-Color’s 4 7/8% senior notes due 2025 jumped in active trading on Monday.

The notes were up more than 5¼ point to 101¼, a market source said. The notes were trading on a 95 handle last week.

The 4 7/8% notes traded up to their takeout price on Monday after news broke the label company would be acquired by private equity firm Platinum Equity LLC.

The transaction is valued at $2.5 billion and includes the assumption of $1.5 billion in debt, according to a company news release.

Strong technicals

The technical forces at play in the high-yield market, as February is about to give way to March, should support a vigorous calendar, sources say.

The high yield bond market is off to its strongest start to a calendar year since 2001, having returned 5.91% to last Friday's close, according to a trader.

The cash flows of the high-yield asset class are strongly positive.

The dedicated junk bond funds, both high-yield ETFs and actively managed high-yield funds combined, saw $4.1 billion of net inflows in the month of February to last Friday's close, the source said.

The flows to the combined funds for the year to that point are positive $9.5 billion.

The daily cash flows of the funds were mixed on Friday, the most recent session for which data was available at press time, the trader said.

High-yield ETFs saw $238 million of inflows on the day.

However, actively managed high-yield funds sustained $36 million of outflows on Friday, the source added.

Indexes mixed

Indexes were mixed on Monday after a mixed week last week.

The KDP High Yield Daily index dropped 3 basis points to close Monday at 69.87 with the yield now 6%.

The index saw cumulative gains of 18 bps on the week last week.

The ICE BofAML US High Yield index shot passed 6% returns on Monday.

The index gained 18.3 bps with the year-to-date return now 6.077%.

The index saw a cumulative gain of 33.6 bps on the week.

The index shot past 5% returns on Feb. 12 after sinking below the 5% threshold Feb. 7.

The index initially crossed the 5% threshold on Feb. 5 after surpassing 4% year-to-date returns on Jan. 30.

The CDX High Yield 30 index rose 11 bps to close Monday at 106.39.

The index saw a cumulative drop of 15 bps on the week.

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