Junk: Hilton prices; Stena at a premium; DISH tanks; EchoStar gains; Tenneco hits new height

By Paul A. Harris and Abigail W. Adams

Portland, Me., Jan. 10 – Hilton was in the spotlight on Wednesday in the junk bond primary market, with one deal still on the calendar before the weekend.

Meanwhile, it was a firm day in the secondary space as the market awaits the Thursday release of the Consumer Price Index report.

While the market is widely in consensus that rate cuts will begin in 2024, the question that remains is when, sources say.

The cash bond market added 1/8 to ¼ point with the market cautiously optimistic about the pending CPI print.

With markets firmly focused on Thursday’s macro data, topical news was the driving force of secondary market activity on Wednesday with DISH Network Corp. the name of the day.

DISH’s senior unsecured notes issued by DISH DBS Corp. tanked in heavy volume after the company announced an asset shuffle that placed the company’s unencumbered wireless spectrum licenses outside of the reach of the credit.

However, DISH Network’s 11¾% senior secured notes due 2027 (B2/B) held up well amid the slaughter while its soon-to-mature 5 7/8% senior notes due Nov. 15, 2024 gained.

The news was also a boon to EchoStar Corp.’s 6 5/8% senior notes due 2026 (B2/CCC+) which rose following the announcement.

New and recent deals also continued to put in strong aftermarket performances with Stena International’s 7¼% senior secured notes due 2031 (Ba2/BB+) continuing to rise after a strong break.

Tenneco Inc.’s 8% senior secured notes due 2028 (B1/B) also continued their strong upward momentum with the notes hitting new heights in heavy volume.

Primary

Hilton Grand Vacations Inc. priced Wednesday’s sole deal in the dollar-denominated primary market, a $900 million issue of Hilton Grand Vacations Borrower Escrow LLC eight-year senior secured notes (Ba2/BB+/BB+) that came at par to yield 6 5/8%, on the tight end of talk.

It was heard to be playing to $2.4 billion of demand at 6¾% earlier on Wednesday, a trader said.

In its wake one dollar deal remained as business expected to clear ahead of the coming weekend.

Privately held Global Auto Holdings Ltd., a debut issuer, is on the high-yield road with a $1.05 billion two-part offering of senior notes (B2/B+).

The deal has been marketed with a $525 million tranche of five-year notes, initial talk 8 1/8% to 8 3/8%, and a $525 million tranche of eight-year notes, initial talk 8½% to 8¾%.

However, books have been slow to build, sources say.

The word, Wednesday afternoon, was that the combined $1.05 billion offering was playing to just $450 million of demand across both tranches, and alternatives are being weighed, a trader said.

One of those alternatives would see the elimination of one tranche of bonds, to be replaced by a leveraged loan, the source added.

DISH tanks

In secondary trading, DISH’s senior unsecured notes issued by DISH DBS tanked after the company announced an asset reshuffle.

DISH’s 7¾% senior notes due 2026 (Caa2/B-) were off as much as 10 points to trade as low as 60 early in the session, a source said.

They pared some losses as the session progressed to close the day on a 63-handle with the notes trading in the 63½ to 63¾ context.

The yield was about 29½%.

With $75 million in reported volume, the notes were the most actively traded in the secondary space.

DISH’s 5¼% senior secured notes due 2026 (B2/B) traded as low as a 78-handle early in the session.

However, they also trimmed their losses to close the day down about 5 points with the notes trading in the 80½ to 81½ context.

There was $42 million in reported volume.

DISH’s 5 1/8% senior notes due 2029 closed the day down 7 points at 43 5/8 with the yield rising to about 24½%.

There was $36 million in reported volume.

DISH’s 7 3/8% senior notes due 2028 tumbled 8 points to close the day at 50 with the yield 27½%.

There was $22 million in reported volume.

However, DISH’s soon-to-mature 5 7/8% senior notes due Nov. 15, 2024 improved following the news.

The notes were trading in the 94½ to 95 context heading into the close with the yield about 12¼%.

The notes have made large gains on the DISH/EchoStar merger with the market widely anticipating they will be covered at maturity, a source said.

DISH Network’s 11¾% senior secured notes due 2027 also held up well amid the slaughter in the capital structure.

The notes were off a comparatively light 1 point to close the day in the 102½ to 103 context.

There was $50 million in reported volume.

DISH sank after the company announced that it was transferring encumbered wireless spectrum licenses to the newly formed subsidiary EchoStar Wireless Holding LLC.

DISH’s asset reshuffle also involved moving payments on an intercompany loan from DISH DBS to a newly formed subsidiary.

The moves “pulled the rug out from one area of the capital structure,” a source said.

It transferred assets out of the reach of creditors in the heavily indebted company.

EchoStar gains

While DISH’s senior notes tanked on the asset reshuffle, EchoStar’s 6 5/8% senior notes due 2026 (B2/CCC+) logged strong gains.

The notes gained 2 points with the transfer of assets a boon to EchoStar’s part of the capital structure, a source said.

The 6 5/8% notes were trading in the 74½ to 75½ context heading into the market close.

There was $19 million in reported volume.

Stena adds

From recent deals, Stena’s new 7¼% senior secured notes due 2031 continued to add after a strong break the previous session.

The 7¼% notes were up 3/8 to ½ point in active trade.

They were changing hands in the par ½ to 101 context throughout the session and were wrapped around par 5/8 heading into the close.

There was $44 million in reported volume.

Stena priced an upsized $700 million, from $400 million, issue of the 7¼% notes at par on Tuesday.

The yield printed at the tight end of the 7¼% to 7½% yield talk.

Tenneco’s new heights

Tenneco’s 8% senior secured notes due 2028 continued to emerge from the abyss on Wednesday with the notes hitting a fresh high.

The 8% notes jumped another ¾ to 1 point after logging robust gains over the past week.

They were trading in the 87½ to 88 context heading into the market close, a source said.

There was $29 million in reported volume.

The 8% notes have been underwater since the $1.9 billion issue priced at 85 in August 2023.

However, the late-year rally pushed them back to their discounted issue price with the notes now trading with a premium after the strong buying interest of the past few sessions.

Fund flows

High-yield ETFs sustained $341 million of daily cash outflows on Tuesday, the most recent session for which data was available at press time, according to a market source.

Actively managed high-yield funds had $30 million of inflows on the day.

With only Wednesday’s daily fund flow numbers remaining to go into the tally, the combined funds are tracking $641 million of net inflows on the week to Wednesday’s close, according to the market source.

Indexes

The KDP High Yield Daily index gained 14 basis points to close Wednesday at 50.72 with the yield 6.8%.

The index was up 10 bps on Tuesday and 11 bps on Monday.

The ICE BofAML US High Yield index was up 22.6 with the year-to-date return now negative 0.427%.

The index added 14.5 bps on Tuesday and 31 bps on Monday.

The CDX High Yield 30 index was up 24 bps to close Wednesday at 105.91.

The index added 24 bps on Tuesday and 51 bps on Monday.

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