Carvana improves; Medline hits new low; Springs Window sinks

By Paul A. Harris and Abigail W. Adams

Portland, Me., May 2 – The high-yield new-issue market remained dormant on Monday.

There was no word on the Bioventus LLC $415 million offering of five-year senior notes (Caa1/CCC+) that ran a roadshow last week and was expected to price before last Friday's close.

The most recent news on the debut offer from the North Carolina-based supplier of pain treatments, restorative therapies and surgical solutions came last Wednesday when the notes were talked to yield 9¾% to 10%, slightly wide to initial guidance in the mid-to-high 9% area.

Meanwhile, the secondary space opened the new month on soft footing with the market flat to down 1/8 point as the 10-year Treasury yield briefly crossed the 3% threshold before coming in to settle at 2.889%.

While the market remained weak, trading activity in the space was muted with many on the sidelines as the Federal Reserve Open Market Committee convenes on Tuesday, sources said.

Carvana Co.’s 10¼% senior notes due 2030 (Caa2/CCC) continued to dominate the tape with the notes slightly improved during Monday’s session despite continued pain for CCC credits.

Medline Industries’ secured and unsecured notes continued to get hammered with both tranches hitting fresh lows.

SWF Escrow Issuer Corp.’s (Springs Window Fashions) 6½% senior notes due 2029 (Caa2/CCC) led losses during Monday’s session with the notes dropping more than 5 points to a new all-time low.

Carvana improves

Carvana’s 10¼% senior notes due 2030 continued to dominate the tape with the notes slightly improved during Monday’s session despite a rough tape for lower quality credits.

The 10¼% senior notes returned to a 97-handle.

They were changing hands in the 97 1/8 to 97 5/8 context heading into the market close, according to a market source.

There was $51 million in reported volume.

The notes have been underwater since the $3.275 billion priced at par on April 27.

They traded as low as 96¾ last Friday.

Medline’s new low

Medline’s secured and unsecured tranches continued to get pummeled with both tranches hitting new all-time lows as investors continue to flee the weaker corners of the junk-bond market.

Medline’s 5¼% senior notes due 2029 (Caa1/B-/B-) were down 1¼ point on Monday.

The notes fell to an 85-handle and were changing hands in the 85 1/8 to 85 5/8 context heading into the market close, according to a market source.

The yield on the notes was now just shy of 8%.

There was $17 million in reported volume.

While less active, the health care supplies company’s 3 7/8% senior secured notes due 2029 (B1/B+/BB-) also hit a new all-time low.

The 3 7/8% notes were down 1 point to change hands in the 86½ to 87 context heading into the market close.

The 3 7/8% notes were now yielding 6.25%.

Medline’s senior notes priced at par in September 2021 as part of the largest leveraged buyout financing package since the global financing pricing.

While both tranches closed 2021 at and above par, they have been on a strong downtrend throughout the year as the secondary space reprices itself amid higher rates.

Springs Window leads losses

Springs Window’s 6½% senior notes due 2029 led losses in the secondary space with the notes dropping more than 5 points to hit a new all-time low.

The 6½% notes were changing hands in the 71½ to 71¾ context heading into the market close, according to a market source.

The yield on the notes was now just shy of 12.5%.

There was about $5 million in reported volume.

The 6½% notes, issued by SWF Escrow Issuer, priced at par in September 2021 to fund Clearlake Capital Group, LP’s buyout of the window covering company.

Fund flows

The dedicated high-yield bond funds sustained $115 million of net outflows on Friday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs saw $75 million of outflows on the day.

Actively managed high-yield funds sustained $40 million of outflows on Friday, the source said.

The combined funds have seen a massive $32 billion of outflows thus far in 2022, according to the market source.

Away from retail cash flows, the Monday financial headlines provided little if any encouragement for prospective issuers that might be contemplating a pass at the new issue market.

With investors braced for an anticipated 50 basis points increase in the Fed Funds rate later this week, the yield of the 10-year Treasury topped 3% for the first time since late 2018, market sources said.

And the composite price of the high-yield index fell to 93.06, the lowest it has been in two years.

However, the present price of junk is starting to get attention from some investors who may be coming around to a view that junk is oversold, a trader said.

Indexes

The KDP High Yield Daily index sank 36 points to close Monday at 58.35 with the yield now 6.52%.

The index posted a cumulative loss of 62 points on the week last week.

The CDX High Yield 30 index rose 24 basis points to close Monday at 101.82.

The index posted a cumulative loss of 117 bps on the week last week.

© 2015 Prospect News.
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