Evergreen returns some gains; Caesars’ junk bonds still active; Medical Properties falls

By Paul A. Harris and Abigail W. Adams

Portland, Me., Jan. 27 – New business in the junk bond primary market was generally suspended on Friday, likely until Wednesday.

Meanwhile, the secondary space was unchanged to slightly weaker with December’s consumer price expenditure report doing little to move the needle in the cash bond market, a source said.

Trading activity was muted with new issues and topical news the main movers of the market.

Evergreen AcqCo 1 LP/TVI, Inc.’s (Savers Value Village) 9¾% senior secured notes due 2027 (B2/B) were the most actively traded issue of Friday’s session with the notes returning some gains after a strong break, although they continued to trade with a healthy premium to their discounted issue price.

Caesars Entertainment Inc.’s 7% senior secured notes due 2030 (Ba3/B) continued to trade in heavy volume although with little movement in price as the notes leveled off.

Medical Properties Trust Inc.’s senior notes (Ba1/BBB-) were under pressure in active trade after a short-seller report accused the health care real estate investment trust of operating a revenue round-robin scheme.

Now we wait

The primary market remained quiet on Friday, and is apt to remain generally quiet until the conclusion of the Federal Open Market Committee meeting, set to run Jan. 31 through Feb. 1, sources say.

Participants in the Jan. 23 week saw $3.74 billion of junk-rated, dollar-denominated issuance in five tranches, a little more than half the previous week's dollar amount, $6.72 billion in 13 tranches.

It left year-to-date issuance at $15.4 billion in 21 tranches, handily exceeding some of the January forecasts that were proffered as 2022 drew to a close. At that time there were suggestions that following the ultra-lean $11.6 billion seen in the November through December timeframe, a backlog of business might bring as much as $10 billion in the first month of the new year, pending market conditions.

There was news on Friday that Mauser Packaging Solutions Holding Co. accelerated the timing of its $2.75 billion offering of senior first-lien notes due Aug. 15, 2026 (B2/B), with the roadshow now set to run through Monday instead of Wednesday (see related story in this issue).

And NRG Energy, Inc. continues to be expected to appear sooner than later in the primary market, the trader said.

Savers weaker

Savers’ 9¾% senior secured notes due 2027 were weaker on Friday with the notes giving back some of the strong gains made on the break.

However, the notes continued to trade with a strong premium to their discounted issue price.

The 9¾% notes were off ½ to ¾ point on Friday.

They opened the day at 99 5/8 bid, 99 7/8 offered and continued to weaken as the session progressed, sources said.

The notes closed Friday at 99¼ bid, 99½ offered.

There was $35 million in reported volume.

The notes jumped on the break and closed the previous session wrapped around par.

Savers priced an upsized $550 million, from $500 million, issue of the 9¾% notes at 97.986 to yield 10¼% on Thursday.

The yield printed at the tight end of the 10¼% to 10½% yield talk and in line with talk for a 2-point discount.

Caesars active

Caesars’ 7% senior secured notes due 2030 remained active in the secondary space although with little movement in price with the notes appearing to have found their level.

The 7% notes continued to trade in the 102 to 102¼ context in heavy volume on Friday, a source said.

There was $33 million in reported volume.

After a solid upward trajectory since the $2 billion issue priced at par on Monday, the notes have traded in the 102 to 102¼ context for the past two sessions.

Medical Properties falls

Medical Properties’ senior notes were under pressure on Friday with the notes falling 2 to 4 points after a short-seller report sparked doubt in the company’s fundamentals.

The 4 5/8% senior notes due 2029 were the most actively traded notes in the structure.

The notes fell 4 points to close Friday wrapped around 79 with the yield rising to 9%.

There was $15 million in reported volume.

The 6½% senior notes due 2031 were off 2½ points to close the day at 71½ with the yield 8½%.

The 5¼% notes due 2026 were down 2½ points to close the day at 91½ with the yield 8%.

The 5% notes due 2027 were off 2 points to close the day at 85¾ with the yield 8¾%.

The notes were down in active trade after short-seller Viceroy Research released a report that sparked concern about the company’s fundamentals, a source said.

The report alleges that Medical Properties has operated a revenue round-robin scheme and overstated the value of its assets.

The market response seemed to lend the report credibility, a source said.

Fund flows

The daily cash flows of the dedicated high-yield bond funds were mixed and nearly flat on Thursday, with the two cohorts approximately canceling one another out, according to a market source.

The high-yield ETFs had $30 million of inflows on the day, while the actively managed high-yield funds sustained $37 million of outflows on Thursday, the source said.

News of Thursday's daily flows follows a Thursday afternoon report that the combined funds sustained $1.279 billion of net outflows in the week to the Wednesday, Jan. 25 close, according to Refinitiv Lipper.

That left the year-to-date cash flows of the dedicated junk bond funds at negative $771 million, the market source said.

Indexes

The KDP High Yield Daily index was down 2 points to close the day at 53.37 with the yield now 6.88%.

The index gained 11 points on Thursday, was down 5 points on Wednesday and 3 points on Tuesday, and gained 4 points on Monday.

The index posted a cumulative gain of 5 points on the week.

The CDX High Yield 30 index shaved off 6 basis points to close Friday at 102.66.

The index rose 14 bps on Thursday, was down 7 bps on Wednesday, and rose 10 bps on Tuesday and 44 bps on Monday.

The index posted a cumulative gain of 55 bps on the week.

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