Secondary HY: DISH in focus; PROG Holdings improves; Kontoor Brands softens

By Paul A. Harris and Abigail W. Adams

Portland, Me., Nov. 12 – The new issue market remained dormant on Friday following Thursday's Veterans Day holiday.

However, issuance is expected to be vigorous in the week ahead, sources said.

Meanwhile, the secondary space was unchanged on Friday with Treasuries steady after a one-day break.

Volume remained muted with new and recent issues accounting for a majority of the tape.

DISH Network Corp. and DISH DBS Corp.’s new secured notes (Ba3/B+) were in focus with both tranches improved after a weak break on Wednesday.

However, DISH’s existing unsecured paper remained under pressure with the new secured notes pushing them further down the capital structure.

PROG Holdings, Inc.’s new 6% senior notes due 2029 (B1/BB-) also improved with the notes rising to a par-handle.

Kontoor Brands, Inc.’s 4 1/8% senior notes due 2029 (Ba3/BB-) were weaker on Friday after a decent break although they continued to trade at a slight premium to their issue price.

DISH in focus

DISH’s new $5.25 billion of secured notes were in focus on Friday with both tranches improved after a weak break.

The 5¼% notes due 2026 were marked at par bid, par ¼ offered heading into Friday’s close. They were 99 5/8 bid, 99 7/8 offered after breaking for trade on Wednesday.

The 5¾% notes due 2028 were trading at a slightly higher level. The 5¾% notes were changing hands in the par 1/8 to par 3/8 context heading into Friday’s close.

The notes were marked at 99 3/8 bid, 99 5/8 offered after breaking for trade.

While DISH’s new secured notes improved in high-volume activity on Friday, the company’s existing unsecured notes remained under pressure.

DISH’s 5 1/8% senior notes due 2029 (B2/B-) closed Friday’s session at 91. The notes are now yielding about 6½%.

The notes have dropped more than 4 points since DISH announced its secured notes offering, which pushed its outstanding unsecured paper further down the capital structure.

DISH priced an upsized $2.75 billion tranche of the 5¼% notes and a $2.5 billion tranche of the 5¾% notes at par on Wednesday.

The 5¼% notes priced in the middle of yield talk in the 5¼% area; the 5¾% notes priced in the middle of yield talk in the 5¾% area.

The deal played to heavy demand with orders heard to be $9.3 billion across both tranches.

The deal size grew to $5.25 billion from the initially announced $4 billion.

The week ahead

The new issue market remained dormant on Friday following Thursday's Veterans Day holiday, with the limited amount of Friday activity suggesting that a lot of participants managed to take Friday off, transforming the Veterans Day holiday into a four-day weekend, a bond trader said.

However, the Monday through Wednesday period was a torrid interval for the high-yield new issue market which saw $13.9 billion clear the space in 16 junk-rated dollar-denominated tranches.

That took the year-to-date issuance total to $470.6 billion, as 2021 issuance continues to notch toward the astonishing $0.5 trillion mark.

Issuance is expected to be vigorous in the week ahead, the trader said, but had neither a number, nor the names of any prospective issuers at hand.

Given that the Nov. 15 week will be followed by the characteristically quiet pre-Thanksgiving week, it may present one of the best windows for issuers keen to get a deal done before the end of the year, the trader said.

Look for the week ahead to be front-loaded, meaning that the Monday session, especially, figures to be a busy one, the source advised.

PROG improves

Back in the secondary, PROG Holdings’ recently issued 6% senior notes due 2029 also improved on Friday after a weak break.

The 6% notes were marked at par 1/8 bid, par 5/8 offered in the early afternoon.

They were 99½ bid after breaking for trade on Wednesday.

PROG Holdings priced a $600 million issue of the 6% notes at par on Wednesday.

Pricing came at the wide end of the 5¾% to 6% yield talk.

Kontoor weakens

While volume in the name was relatively light, Kontoor Brands’ 4 1/8% senior notes due 2029 were giving back some of their gains after a decent break.

The 4 1/8% notes were changing hands in the par 1/8 to par 3/8 context on Friday. They were trading in the par 3/8 to par 6/8 context on Wednesday, despite a soft day for the market.

Kontoor Brands priced a $400 million issue of the 4 1/8% notes at par on Wednesday.

The yield printed at the tight end of yield talk in the 4¼% area.

Fund flows

The cash flows of the two cohorts of dedicated high-yield bond funds, over the previous two sessions – including Wednesday, as well as the Thursday holiday session – were as follows, according to market sources:

• High-yield ETFs sustained $299 million of outflows on Wednesday, and were absolutely flat on Thursday.

• Actively managed high-yield funds saw $35 million of inflows on Wednesday and $45 million of outflows on Thursday.

Those daily fund flow numbers follow a report that the combined funds saw $2.58 billion of net inflows in the week to Wednesday's close, a period that encompassed the $1.47 billion of daily inflows to the high-yield ETFs reported on Friday, Nov. 5, which was their largest daily inflow since March 10.

For the junk funds, three of their largest weekly inflows since April have occurred in the last four weeks.

However, outflows have outnumbered inflows by 25 to 20, so far this year.

Indexes

The KDP High Yield Daily index fell 19 points to close Friday at 69.77 with the yield now 3.85%.

The index was down 9 points on Wednesday after gaining 6 points on Tuesday and 13 points on Monday.

The index was down 9 points on the week.

The CDX High Yield 30 index gained 6 bps to close Friday at 109.27. The index fell 31 points on Wednesday, 13 bps on Tuesday and 7 bps on Monday.

The index dropped 42 bps on the week.

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