High-yield primary, secondary quiet amid market volatility; VMED, Diamond Sports gain

By Abigail W. Adams

Portland, Me., Dec. 3 – It was a quiet day in junkbondland with the primary market again dormant.

While market players were forecasting $15 billion to $25 billion of new supply in December, there is only one deal on the forward calendar – II-VI Inc.’s $990 million offering of eight-year non-call three-year senior notes (B2/B+).

The secondary space was equally quiet on Friday with the new deal pipeline drying up and volatility continuing to roil risk assets.

While the secondary space started the day largely unchanged, it grew weaker as the session progressed as selling resumed in equities following more hawkish comments from Federal Reserve officials.

However, trading activity remained subdued with many accounts attempting to ride out the rest of the year.

“Risk appetite has decreased,” a source said.

However, with the recent weakness in the market, some accounts have been bargain shopping and adding to their positions.

VMED O2 UK Financing I plc’s 4¾% senior secured green bonds due 2031 (Ba3/BB-) were on the rise in active trading.

Diamond Sports Group LLC’s junk bonds were among the major gainers of the day following news the struggling broadcast unit renewed a deal with the National Hockey League.

Crude oil futures remained volatile on Friday with WTI futures logging gains of as much as 3% early in the session but closing the day with minor losses.

However, Occidental Petroleum Corp.’s junk bonds continued to gain following Thursday’s tender offer for up to $2 billion of notes.

Dormant primary

The domestic high-yield primary market remained dormant on Friday with only one deal on the forward calendar and only one offering pricing during the week.

II-VI plans to price a $990 million offering of eight-year non-call three-year senior notes (B2/B+) with initial price talk in the 5½% area, according to a market source.

The deal is expected to price Wednesday.

Starwood Property Trust, Inc.’s $400 million offering of 3¾% senior sustainability-linked notes due 2024 (Ba3/BB+) was the week’s sole offering.

The new paper was in demand during bookbuilding and priced at par at the tight end of the 3¾% to 4% price talk.

However, the notes have been stuck at par in the secondary space since breaking for trade.

While market players projected $15 to $25 billion in new supply before the month draws to a close, only two full weeks remain before accounts begin to close out their books on the year.

The primary market will have to spit out offerings at an active pace over the next two weeks for those projections to be met.

Sources see that as highly unlikely given the recent volatility. Many accounts are intent on waiting out the remainder of the year.

VMED gains

VMED’s 4¾% senior secured green bonds due 2031 were on the rise on Friday.

The notes were changing hands at par ¼ early in the session and gained strength as the session progressed.

They were changing hands in the par ¾ to 101 context heading into the market close.

There was about $11 million in reported volume.

There is speculation that VMED may pursue a public listing of its mobile and broadband unit in 2022, a source said.

VMED was formed through a merger of Virgin Media’s UK operations and Telefonica’s UK mobile unit, which closed in June.

Diamond Sports gains

Diamond Sports’ junk bonds were among the major gainers of Friday’s session following news the struggling sports network had renewed a deal with the National Hockey League.

Diamond Sports’ 5 3/8% senior secured notes due 2026 (Caa1/CCC) rose 1 point to close the day at 50.

There was about $18 million in reported volume.

The 6 5/8% senior notes due 2027 rose more than 3¼ points to close the day at 25¼. There was about $22 million in reported volume.

The notes were on the rise following news that the sports network had resecured its contract with the NHL, including streaming rights.

Diamond Sports is attempting to launch a streaming platform to revitalize its ailing business and is currently in negotiations with the National Basketball Association for digital rights, a source said.

However, Major League Baseball is considering launching its own streaming platform.

Occidental volatile

WTI crude oil futures remained volatile on Friday after Thursday’s wild swing.

While WTI crude oil futures were up as much as 3% early in the session, they settled at $66.39, a decrease of 11 cents or 0.17%.

WTI crude oil futures had wild swings on Thursday with futures dropping as low as $62.43 in intraday activity only to rally and close the day largely unchanged.

Despite the volatility, Occidental Petroleum’s junk bonds continued to gain following Thursday’s launch of a tender offer for up to $2 billion of notes.

The 4.2% senior notes due 2048 rose about ¼ point and were changing hands in the 97¼ to 97½ context in light volume, a source said.

The $2 billion tender offer is a credit positive for the company. However, Occidental has a way to go before it can reclaim investment-grade status, a source said.

Indexes

The KDP High Yield Daily index rose 10 points to close Friday at 67.28 with the yield now 4.2%.

The index gained 2 points on Thursday and 14 points on Wednesday, was down 6 points on Tuesday and up 10 points on Monday.

The index posted a gain of 30 bps on the week.

The CDX High Yield 30 index fell 24 bps to close Friday at 107.53.

The index gained 38 bps on Thursday, 27 bps on Wednesday and was down 48 bps on Tuesday.

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