BellRing returns in junkland; rate-sensitive names up; Endo drops, New Fortress improves

By Paul A. Harris and Abigail W. Adams

Portland, Me., March 1 – The domestic high-yield primary market had one deal clear amid another volatile session.

BellRing Distribution, LLC returned less than one week after postponing a deal and priced a restructured $840 million issue of eight-year senior notes (B3/B).

Meanwhile, selling pressure returned to the secondary space on Tuesday as Russia intensified the military offensive against Kyiv.

The overall market was down ¼ to ½ point as investors again shed risk with geopolitical uncertainty high, sources said.

However, rate-sensitive names and energy credits outperformed on Tuesday as Treasuries continued to rally and crude oil futures surged past $100.

The 10-year Treasury yield closed Tuesday at 1.725%, a head-spinning move with the 10-year Treasury yield above 2% just last week, a source said.

However, the move firmed up rate-sensitive names which continued to be better bid on Tuesday.

Kraft Heinz Co.’s split-rated 4 3/8% senior notes due 2046 (Baa3/BB+) and Netflix Inc.’s 5 7/8% senior notes due 2028 continued to improve.

Topical and earnings-related news remained a main driver of trading activity.

Endo International plc’s junk bonds sank in high-volume activity after the company reported earnings.

However, New Fortress Energy Inc.’s junk bonds were among the major gainers of Tuesday’s session following an earnings beat.

BellRing returns

The high-yield new deal machine coughed to life on Tuesday.

Less than a week after it postponed an offering of unsecured notes because of market volatility BellRing Distribution returned to price an $840 million issue of eight-year senior notes (B3/B) at par to yield 7%.

The yield printed on top of both initial talk and official talk.

The tenor decreased from the 10-year maturity on the original offer.

At the close of books the revived deal, supporting the Post's spinoff of BellRing, was playing to a $2 billion order book, a trader said.

The notes were trading at 101 1/8 bid, 101 5/8 offered at the Tuesday close, the source added.

Market sources had no easy time attempting to explain why the Tuesday session – attended as it was by news of a Russian invasion force bearing down upon Ukraine's capital city, and with the Dow Jones industrial average down just under 600 points on the day – qualified as being any less volatile than last Thursday, when BellRing pulled the deal.

But there were differences, a trader asserted.

The high-yield market, which has in general been orderly during this late February period of geopolitical volatility, ended better on Monday, enjoying a 24 basis points advance in the year-to-date return of the index on the day (which, nonetheless, opened Tuesday's session well into the red, at negative-3.62%).

Also, the most recent reported daily cash flows imply that there remains at least a modicum of positive sentiment in the speculative-grade bond market, the source said (see below).

However, it remains to be seen whether there will be any follow-on activity in the new issue market, the trader said, adding that given the present macro landscape it's rather astonishing that anyone would try to get a deal done.

Rate-sensitive names improve

Despite the overall weakness in the market, rate-sensitive names remained better bid as the market dialed back its rate increase projections amid the conflict in the Ukraine.

Kraft Heinz’s 4 3/8% senior notes due 2046 climbed to a 103-handle on Tuesday closing the day at 103.5, according to a market source.

The notes were active with $15 million in reported volume.

The notes have gained more than 2 points since last Thursday.

Netflix’s 5 7/8% senior notes due 2028 also added ¼ point to close the day at 113½.

There was $12 million in reported volume.

Pressure in rate-sensitive names drove Netflix’s notes to a 111-handle in mid-February, their lowest level since 2020.

Endo drops

Endo’s junk bonds were in focus on Tuesday as the pharmaceutical company’s capital structure sank post-earnings.

Endo’s 6% senior notes due 2028 (Caa3/CCC-) fell 4 points to close the day at 62½, according to a market source.

There was $17 million in reported volume.

The 9½% senior secured notes due 2027 (Caa2/CCC-) were down 1½ points to close the day at 96.

There was $21 million in reported volume.

The 9½% notes were holding up better than the 6% notes because of their higher coupon, shorter duration and better credit rating, a source said.

Endo’s junk bonds and stock tanked on Tuesday following earnings.

The pharmaceutical company beat revenue expectations in its fourth-quarter earnings report, but forward guidance was weak.

New Fortress gains

New Fortress Energy’s junk bonds were among the outperformers of Tuesday’s session with the notes gaining 1½ to 2½ points following better-than-expected earnings.

The 6¾% senior notes due 2025 rose 2½ points to close the day at 98¾.

There was about $10 million in reported volume.

The 6½% senior notes due 2026 rose 1½ points to close the day at 97 5/8, according to a market source.

There was $11 million in reported volume.

The notes jumped on better-than-expected earnings with revenue of $648 million smashing expectations for revenue of $464 million, a source said.

Solid Monday inflows

The dedicated high-yield bond funds saw solid daily net inflows of $729 million on Monday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs had $689 million of inflows on the day.

Actively managed high-yield funds had $140 million of inflows on Monday.

Indexes

The KDP High Yield Daily index gained 7 points to close Tuesday at 62.84 with the yield 5.05%.

The index was up 18 points on Monday.

The CDX High Yield 30 index sank 67 bps to close Tuesday at 104.89.

The index was down 29 bps on Monday.

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