Entegris flat on break; fear descends; returns hit negative 13%; HY funds out $5.7 billion

By Abigail W. Adams

Portland, Me., June 16 – Thursday marked a brutal day for risk assets with equities plummeting and credit spreads blowing out as the market further digested the Federal Reserve’s aggressive rate-hike schedule amid an increasingly ominous economic forecast.

While market conditions were dire on Thursday, the domestic high-yield primary market saw one drive-by offering clear the market.

Entegris Inc. priced $895 million eight-year non-call-three senior notes (Ba2/BB/BB). The deal came with a deep discount, a growing phenomenon in high-yield primary market activity.

The new paper was holding amid a red tape and closed the day flat.

Iris Holdings Inc. priced $400 million 10% senior notes due Dec. 15, 2028 (Caa2/CCC+) on Wednesday with one of the deepest discounts some sources have seen.

However, the deep discount did not stop the notes from leaking with the notes quoted below their issue price on Thursday.

The rally after the Federal Reserve’s Wednesday announcement, which drove the market up ½ to 5/8 point gave way to panicked selling on Thursday with ETFs and real money accounts offloading positions, sources said.

The cash bond market fell more than 1 point with returns breaking past negative-13% and the CDX index again closed at a new low.

Previous sell-offs in the secondary space have been orderly. However, panic was taking hold on Thursday.

“The wheels came off today,” a source said. “There’s some real fear in the market.”

Travel and leisure names were particularly hard hit with several cruise lines lower as the reopening trade collapsed.

Univision Communications Inc.’s 7 3/8% senior notes due 2030 (B1/B+) became the latest recent issue to sink underwater with the notes falling below their discounted issue price.

Cleveland-Cliffs Inc.’s 4 7/8% senior notes due 2031 (Ba3) continued to see heavy volume with the notes giving back some of their gains from a three-day rally.

High-yield mutual and exchange-traded funds saw the largest outflow of the year $5.705 billion leaving the space in the week through Wednesday’s close, according to the Refinitiv Lipper US Fund Flows report.

Entegris prices, flat on break

Entegris priced $895 million eight-year non-call-three senior notes (Ba2/BB/BB) with a coupon of 5.95% and a discounted offer price of 90.832 to yield 7½%, according to a market source.

Pricing came in the middle of official talk for a yield in the 7½% area.

Pricing was in line with initial guidance for a 5.95% coupon and in the middle of initial guidance for a discounted offer price of 90.1 to 91.5.

The discounted offer price is a growing phenomenon in primary market activity with three of the eight deals to price in the last two weeks coming with discounts.

With large swaths of the high-yield market trading in the 70 to 90 range, any bonds near par tend to sell, a source said.

“Accounts are tired of buying par issues and losing money,” a source said.

Entegris’ new notes were holding at issue price despite the heaviness of the market.

The notes were marked at 90½ bid, 91¼ offered heading into the market close, a source said.

Intertape quiet

Iris Holdings priced $400 million 6.5-year senior notes (Caa2/CCC+) backing the buyout of Intertape Polymer Group on Wednesday with a coupon of 10% and an initial offer price of 82 to yield 14.361%.

Pricing came in line with coupon talk and wide of official talk for an issue price of 83 to 85 with a yield of 13½% to 14%.

Original guidance was for an offer price in the low 90s for a yield in the high-11% to low-12% area.

The discounted offer price was among the largest sources could remember seeing.

However, that did not stop the notes from moving lower.

The 10% senior notes due 2028 did not trade during Thursday’s session.

However, they were marked at 79 bid, 80 offered at the close, a source said.

Univision below issue price

Univision’s 7 3/8% senior notes due 2030 sank below their discounted issue price in active trading on Thursday.

The 7 3/8% notes were down 1 point to close the day at 98½, according to a market source.

There was $20 million in reported volume.

Univision priced a $500 million issue of the 7 3/8% notes at 99.255 to yield 7½% on June 9.

Reopening trade

There was no place to hide on Thursday as panicked selling took hold of the market.

The reopening trade was “out the window,” a source said, as losses mounted for several travel and leisure names.

Carnival Corp.’s 5¾% senior notes due 2027 (B2/B) fell 2¾ points to close Thursday at 79¼ with a yield of 11½%, according to a market source.

There was $8 million in reported volume.

Royal Caribbean Group’s 5½/% senior notes due 2026 sank 2 7/8 points to close Thursday just shy of 77 for a yield of about 12¾%, according to a market source.

Cleveland-Cliffs active

Cleveland-Cliffs’ 4 7/8% senior notes due 2031 continued to see heavy volume with the notes giving back some gains after rallying the past three session.

The 4 7/8% notes fell 1 1/8 points to close Thursday at 92 7/8 with the yield now 5.935%, according to a market source.

The notes saw heavy volume with $38 million on the tape heading into the market close.

While less active, the mining company’s 4 5/8% senior notes due 2029 fell 2 points to close the day wrapped around 92 with the yield now 6%.

The tranches have made strong gains over the past three sessions after bottoming out on Monday.

The tranches hit their lowest levels since pricing in February 2021 on Monday with the 4 5/8% notes down to an 87-handle and the 4 7/8% notes down to an 88-handle.

Indexes

The KDP High Yield Daily index sank 55 points to close Thursday at 54.65 with the yield now 7.61%.

The index gained 45 points on Wednesday after falling 18 points on Tuesday and 143 points on Monday.

The ICE BofAML US High Yield index fell 91.6 basis points with the year-to-date return plummeting to 13.126%.

The index rose 73 bps on Wednesday, fell 54.47 bps on Tuesday and plummeted 212 bps on Monday.

The CDX High Yield 30 index sank 156 bps to close Thursday at 96.57.

The index rose 95 bps on Wednesday, inched up 1 bp on Tuesday and sank 162 bps on Monday.

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