Primary remains quiet; Mark Andy on the road; Telecom Italia trades down; Mattel gains

By Abigail W. Adams

Portland, Me., May 30 – The domestic and European high-yield primary market remained quiet on Wednesday as markets firmed amid continued uncertainty surrounding political tensions in Italy and Spain.

New issue volume is expected to remain light for the rest of the week as potential issuers remain on the sidelines where they wait to see how markets respond to political developments in Europe.

However, one issuer did step forward to market a deal. MAI Holdings Inc., doing business as Mark Andy, began a roadshow for a $135 million offering of five-year senior secured notes on Wednesday with pricing expected in the middle of the June 11 week, according to a market source.

Meanwhile, the secondary market firmed on Wednesday with on-the-run names up generically about ¼ point early in the session.

Several names recouped their losses from Tuesday with market levels returning to those seen on Friday, a market source said.

The energy and telecommunications sector, in particular, saw gains on Wednesday. California Resources Corp.’s 8% senior notes due 2022 were again in focus and gained 2 points as the barrel price of West Texas intermediate crude oil rebounded.

CenturyLink Inc. and Frontier Communications Corp. junk bonds saw gains of ½ to ¾ point on Wednesday as the broader sector firmed. Sprint Corp.’s 7 5/8% senior notes due 2026 were up about 1 point on Wednesday.

However, the notes remain far below their levels prior to the merger.

While the telecommunications sector was up in general, Telecom Italia’s 6 3/8% senior notes due 2033 were down. The notes lost another point after losing 10 points in a month, which sources attributed to the political instability in Italy.

Mattel, Inc.’s 6¾% senior notes due 2025 (B1/BB-/BB) were up about 1 point in active trading in the secondary space after a recently priced add on.

Too soon

New issue volume is expected to remain light for the remainder of the week as political dramas unfold in Italy and Spain.

While the market did feel better on Wednesday, potential issuers are still hesitant to come forward, a market source said. “We need a couple more days. It’s too early to draw any conclusions,” the source said.

Geopolitical tensions were overshadowing the prospects of new deals coming to the market, but that may change.

“Volatility is a bit elevated at the moment,” a market source said. “Next week is going to be quite telling.”

Mark Andy’s roadshow

Mark Andy began a roadshow for a $135 million offering of five-year senior secured notes on Wednesday with pricing expected in the middle of the June 11 week, according to a market source.

William Blair is the sole placement agent for the Section 4(2) without registration rights offering.

MAI will be on the road in New York on June 4 through 7 and in California during the early part of the June 11 week. The offering is expected to price thereafter.

Energy rebounds

After a drop alongside the price of crude oil on Tuesday, the energy sector was on the rise Wednesday. California Resources 8% senior notes due 2022 were again the most actively traded bonds of the day with the notes climbing 2 points, a market source said.

The 8% notes closed Wednesday at 88½ bid, 89 offered after closing Tuesday at 86½ bid, 87½ offered. About $25 million of the bonds traded during Wednesday’s session.

Wednesday’s gains reversed a downward trend the notes have been on since Friday. The 8% notes were down ¾ point on Tuesday and 2½ point on Friday.

The notes rebounded alongside the price of West Texas intermediate crude oil for July delivery, which was up almost $1.50 to $68.21 on Wednesday. Crude oil settled at $66.81 on Tuesday.

While speculation OPEC countries and Russia would increase production drove the price of crude oil down, crude oil was on the rise Wednesday amid speculation OPEC and allies would maintain its production agreement.

Telecom up

The telecommunications sector was firm on Wednesday with several names seeing gains, market sources said.

CenturyLink’s 7½% senior notes due 2024 were up about ½ point. The 7½% senior notes were trading at 102 but closed Wednesday at 102½ bid, 103 offered, a market source said.

Frontier Communication’s 11% senior notes due 2025 were up about ¾ point. The notes were trading at 79 but closed Wednesday at 79¾ bid, 80¼ offered.

Frontier Communication’s junk bonds have been on the decline since the middle of last week when the company did not accept any bids in the auction of its Florida assets.

The decline in Frontier’s junk bonds previously drove down the telecommunications sector, a market source said.

Sprint’s 7% senior notes due 2026 were up about 1 point on Wednesday. However, the notes have been trading sloppily, a market source said.

While the 7% notes rose to 102½, they were trading at 106 prior to news of Sprint’s merger with T-Mobile, a market source said.

The rise in the telecommunications sector was largely attributed to the firming of equity markets.

While the telecommunications sector was on the rise on Wednesday, “we’re pretty much back to where we were on Friday,” a market source said.

Telecom Italia down

While the telecommunications sector in general was on the rise, Telecom Italia’s 6 3/8% senior notes due 2033 continued their decline.

The 6 3/8% notes were down 2 points to trade at 99, a market source said. The notes were trading at 109 one month ago.

The political crisis in Italy has hit Telecom Italia’s junk bonds hard with the 10 point drop in the 6 3/8% notes in a month a significant decline, a market source said.

Mattel gains

Mattel’s 6¾% senior notes due 2025 were on the rise in active trading on Wednesday. The notes were up about 1 point to trade up to 97 5/8, a market source said.

Mattel priced a $500 million add-on to the 6¾% notes at 96.25 to yield 7.403% on May 23.

While the notes have traded above the reoffer price since the add-on hit the market, the 6¾% notes were down about 2½ point in the run-up to its pricing.

Prior to the add, the notes were trading in the 98 to 99 range. Holders were selling the notes to participate in the lower reoffer price, a market source said.

Indexes gain

Three benchmarks for the high-yield secondary market saw slight gains on Wednesday after some saw dramatic losses on Tuesday.

The KDP High Yield index reversed its four-day streak of losses on Wednesday. The index was up 4 basis points to 70.33 with the yield now 5.93%.

The index was down 10 basis points on Tuesday.

The Merrill Lynch High Yield index was up 10 bps on Wednesday with the negative year-to-date return now 0.353.

The index dropped 18.6 bps on Tuesday.

The index has been in negative territory since May 15.

After a significant decline on Tuesday, the CDX High Yield 30 index saw a significant rebound on Wednesday. However, the index was still unable to recoup its previous losses.

The CDX index was up 46 bps to close Wednesday at 106.32. The index was down 77 bps to close Tuesday at 105.86.

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