Primary, secondary junk quiet; Bombardier in focus, gains; CareTrust, Videotron at a premium

By Paul A. Harris and Abigail W. Adams

Portland, Me., June 4 – The domestic high-yield primary market closed out an active week quietly with no deals clearing the market.

While the forward calendar is currently empty, the coming week is expected to be an active one, sources said.

While the domestic high-yield primary market was quiet, the European market saw one deal price – David Lloyd Leisure’s two-tranche, dual-currency offering of senior secured notes.

Meanwhile, the secondary space was equally quiet although with an improved tone.

While most issues continued to trade sidewise, the market was becoming more defined for some issues that were previously only all bids or all offers, a source said.

New paper remained in focus with the deals to price during Thursday’s session putting in strong performances.

Bombardier Inc.’s new 7 1/8% senior notes due 2026 (Caa2/CCC) were the most actively traded issue in the secondary space with the notes steadily climbing higher throughout Friday’s session.

Videotron’s 3 5/8% senior notes due 2029 (BB+) and CareTrust REIT, Inc.’s 3 7/8% senior notes due 2028 (Ba2/BB+/BB+) were also putting in strong performances despite their tight pricing.

Friday’s primary

On the heels of a moderately active, abbreviated post-Memorial Day week the new issue market went quiet on Friday.

In Europe, David Lloyd Leisure priced two tranches of six-year senior secured notes (B3//B+): £645 million of 5½% fixed-rate notes and €300 million Euribor plus 475 basis points floating-rate notes during the Friday London afternoon.

Both came at par, tight to talk (see related story in this issue).

New issue activity should pick up, at least incrementally, in the week ahead, a market source said.

Heading into the Friday close dealers professed visibility on around $10 billion of business slated to come during the June 7 week, the source added.

Bombardier in focus

Bombardier’s 7 1/8% senior notes due 2026 were in focus on Friday with the notes steadily climbing higher after a solid break.

The notes opened the day on a par handle. They were marked at par ½ bid early in the session, which quickly climbed to par ¾ bid.

The notes rose to a 101-handle by the late afternoon and were marked at 101¼ bid, 101½ offered, a source said.

The business jet manufacturer priced an upsized $1.2 billion, from $1 billion, issue of the 7 1/8% notes at par on Thursday.

The yield printed tighter than the 7¼% to 7½% yield talk.

While sources were expecting a larger upsize given demand, the company seemed to opt for tight pricing, a source said.

The company will have to return to the primary market sooner rather than later and elected not to “stuff” investors with tightly priced paper and instead printed a bond that would trade well, the source said.

101-handle

The two other deals to clear the primary market on Thursday were putting in strong performances in the secondary space, despite coming on 3-handles and with longer durations.

Both issues were trading on 101-handles.

CareTrust REIT’s 3 7/8% senior notes due 2028 were marked at 101¼ bid, 101½ offered in the late afternoon.

The health care REIT has a solid business model, a source said. However, the source opted not to play the name due to the tight pricing of the notes.

CareTrust priced a $400 million issue of the 3 7/8% notes at par on Thursday.

Initial guidance was in the low 4% area.

Videotron’s 3 5/8% senior notes due 2029 also traded up to a 101-handle on Friday.

The 3 5/8% notes were marked at 101 bid, 101¼ offered in the late afternoon, a source said.

The Quebec-based telecommunications company priced a $500 million tranche of the 3 5/8% notes at par on Thursday as part of a dual-currency offering.

The 3 5/8% notes priced at the tight end of yield talk in the 3¾% area.

The deal also included a C$750 million tranche of 3 5/8% notes due 2028, which priced at par.

Thursday fund flows

The daily cash flows of the dedicated high-yield bond funds were moderate and mixed on Thursday, according to a market source.

For the second consecutive daily session actively managed high-yield funds were positive, posting $55 million of inflows on the day.

Prior to Wednesday, the actively managed funds had sustained 13 back-to-back outflows in their worst run of outflows since March 2020.

Assets under management for the dedicated US high-yield mutual fund base presently stands at $367 billion, according to the market source, who added that that total was as high as $374 billion in February.

High-yield ETFs were in the red on Thursday, sustaining $13 million of outflows on the day.

News of Thursday's daily flows trails a Thursday report that the combined funds saw $385 million of net outflows in the week to the Wednesday, June 2 close, according to the Refinitiv Lipper Fund Flow Report Newsline.

It was the fifth consecutive weekly outflow from the dedicated high-yield funds, but the lightest of the series.

Indexes gain

Indexes were on the rise on Friday.

The KDP High Yield Daily index rose 4 points to close the day at 69.67 with the yield now 3.83%.

The index rose 1 point on Thursday, 5 points on Wednesday and 4 points on Tuesday.

The index was up 14 points on the week.

The CDX High Yield 30 index rose 21 bps to close Friday at 109.88.

The index shaved off 17 bps on Thursday after gaining 5 bps on Wednesday and 10 bps on Tuesday.

The index was up 24 bps on the week.

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