Junk trading firms, CCC credits lifted; Carvana revs up; McAfee bounces back; Uber lifts

By Paul A. Harris and Abigail W. Adams

Portland, Me., May 3 – While the domestic high-yield primary market remained dormant on Tuesday, the European primary market generated some news with Kepler SpA marketing a €345 million offering of seven-year senior secured floating-rate notes (B3/B-).

Meanwhile, after more than one week of selling pressure, the secondary space firmed with the cash bond market up ¼ point as the market prepares for the Federal Reserve’s Wednesday announcement.

While a 50 basis points rate increase has already been priced into the market, chair Jerome Powell’s press conference will be closely watched as market players attempt to assess if the Federal Reserve’s path forward will hurtle the economy into a recession.

Recession jitters fueled selling in the market for the past week; however, buyers were stepping in during Tuesday’s session.

Exchange-traded funds, who had been a driving force of the selling pressure, were buyers on Tuesday and circulating several offers-wanted-in-competition lists, a source said.

Several badly battered CCC credits were lifted as the market firmed.

Carvana Co.’s 10¼% senior notes due May 2030 (Caa2/CCC) continued to improve in high-volume activity with the notes climbing to a 98-handle.

Condor Merger Sub, Inc.’s (McAfee Corp.) 7 3/8% senior notes due 2030 (Caa2/CCC+) saw a minor reprieve with the notes up more than 1 point after hitting an all-time low on Monday.

Uber Technologies, Inc.’s 4½% senior notes due 2029 (B3/B-) were also on the rise ahead of the ride sharing company’s earnings report.

Tuesday’s primary

In Tuesday's primary market session, Kepler SpA began shopping a €345 million offering of seven-year senior secured floating-rate notes (B3/B-).

The deal, which comes in support of the buyout of Italian supplements supplier Biofarma SpA by Ardian SAS from White Bridge Investments, is expected to price before the end of the week (see related story in this issue).

Kepler is the second deal in as many weeks in the European new issue market after it had been “frozen” for more than 10 weeks, sources say.

The long chill ended last Friday when Miller Homes priced £815 million equivalent of senior secured notes (B1/B+/BB-).

In the dollar-denominated new issue bourse Bioventus LLC cited market conditions as it withdrew the $415 million offering of five-year senior notes (Caa1/CCC+), which were talked a week ago to yield 9¾% to 10%, slightly wide to initial guidance in the mid-to-high 9% area.

It was to be the Durham, N.C.-based orthobiologics supplier's debut high-yield bond offering.

The threat of runaway inflation is impeding a more vigorous buildup to the new issue calendar, even though there is a considerable amount of cash on the sidelines looking for a home in high yield, the source added.

Although the price of the high-yield index has been descending, there are not bonds for sale because investors are reticent to lock in losses.

Hence the most obvious cure is a more robust calendar, the trader said.

The reticence of issuers to try raising cash by floating a junk bond is understandable, the source added.

Double-B bonds had a yield to worst of just under 6% at Monday's close, the trader said. Single-B bonds were 7.38% and triple-Cs were 10.56%.

The composite yield to worst was 7.31% at Monday's close, up from 6.01% on March 31.

Carvana improves

Carvana’s 10¼% senior notes due 2030 continued to improve in high-volume activity on Tuesday with the notes returning to a 96-handle.

The 10¼% notes were changing hands in the 98¼ to 98¾ context heading into Tuesday’s close.

There was $45 million in reported volume.

The notes have struggled since the $3.275 billion deal priced at par on April 27.

They broke below a 97-handle last Friday but have improved over the past two sessions.

The used car e-commerce company is an iffy credit and the notes priced as selling pressure in CCC credits intensified the previous week, sources said.

McAfee rebounds

McAfee’s 7 3/8% senior notes due 2030 were bouncing off their lows during Tuesday’s session.

The 7 3/8% notes gained more than 1 point in active trading.

They were changing hands in the 89½ to 90½ context.

The notes closed Tuesday with a yield of 9¼%., according to a market source.

There was $13 million in reported volume.

The notes were stronger alongside the broader CCC space as opportunistic buyers eye some badly battered credits.

The 7 3/8% notes hit their lowest level since pricing on Monday, closing the previous session at 88½.

The notes have struggled since the $2.02 billion issue, which priced at par, hit the secondary space on Feb. 3.

The deal was the second largest issue of 2022 to price as part of a leveraged buyout financing package.

LBO deals have been particularly hard hit by the risk-off sentiment pervading the market.

Uber gets a lift

Uber’s 4½% senior notes due 2029 were on the rise in active trading on Tuesday with topical news lifting the notes ahead of earnings.

The 4½% notes rose 1 1/8 points to close Tuesday at 86¾ with a yield of 6.84%.

There was $13 million in reported volume.

Uber announced on Tuesday that it had expanded its Uber Eats grocery delivery partnership with Albertsons Cos. Inc. to 2,000 additional locations.

The company also announced a new Uber Eats grocery delivery partnership with Tesco plc, the largest grocery retailer in the United Kingdom.

The news comes on the eve of Uber’s earnings report, which is scheduled to be released after the close of U.S. equity markets on Wednesday.

Uber’s delivery segment is widely regarded as a vehicle for the ride-sharing company’s future growth, a source said.

$444 million Monday inflows

High-yield ETFs saw $444 million of daily cash inflows on Monday, according to a market source.

However actively managed high-yield funds were negative, sustaining $125 million of outflows on the day.

The combined funds are tracking $722 million of net outflows for the week that will conclude with Wednesday's close, the market source said.

Indexes

The KDP High Yield Daily index rose 13 points to close Tuesday at 58.48 with the yield now 6.47%.

The index sank 36 points on Monday.

The ICE BofAML US High Yield index rose 28.2 bps with the year-to-date return now 8.306%.

The index fell 58.5 bps on Monday.

The CDX High Yield 30 index returned to a 102-handle on Tuesday.

The index rose 50 bps to close the session at 102.33.

The index gained 24 bps on Monday.

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