Morning Commentary: Heaviness persists in junk; new Lindblad 6¾% notes outperform

By Paul A. Harris

Portland, Ore., Jan. 21 – The junk bond market opened heavier on Friday, with the high-yield index off 1/8 point and cash bonds tending to be down ¼ point to 3/8 of a point, according to a bond trader working from home in the New York area.

Bonds have been lower in 13 of the past 15 days, the trader noted, adding that in the best performing day of the past week the market was unchanged.

Bonds priced Thursday by Lindblad Expeditions, LLC were outperforming on Friday morning, the trader said.

The new Lindblad 6¾% senior secured notes due February 2027 (B3/B-) were 101¼ bid, 101¾ offered “in a market that feels kind of crappy,” the trader said.

The upsized $360 million deal (from $340 million) priced at par, tight to talk on Thursday, its timing accelerated as it had been expected to remain in the market until Friday.

Elsewhere among Thursday’s deals the new VistaJet 6 3/8% senior notes due February 2030 (Caa1/B-/BB-) were holding in above new issue price on Friday morning at par ¼ bid, par ½ offered, the trader said.

The upsized $1 billion issue (from $800 million) priced at par, through talk, also on accelerated timing, heard to have been playing to $4 billion of orders.

The deal was also heard to be completely circled up in reverse inquiry at its original $800 million size, sources said.

Thursday’s underperformer came from CHS/Community Health Systems, Inc., which priced $1.535 billion of 5¼% senior secured notes due May 2030 (B2/B/BB-) at par.

Those bonds were 99 3/8 bid, 99 7/8 offered on Friday morning, the trader said, noting that they immediately broke below par on Thursday.

Thursday’s executions tended to be sharp: Two of five deals upsized, two priced through talk (one of which, VistaJet, was also upsized), and three deals priced on accelerated timing.

There was a positive sentiment in the market when the Thursday session got underway, the trader recounted. With the stock indexes in positive territory dealers stepped forward with new issue business, doing drive-by executions while accelerating timing on deals that had been expected to remain in the market until the end of the week.

By the time market sentiment turned, and stocks began to fall in earnest on Thursday afternoon, most if not all of the order books for Thursday's deals were closed, and investors were more or less locked in at prices hammered out in the morning, the trader said.

The post-break trading of Thursday’s issues reflected that shift in market sentiment, the trader said.

Thursday fund flows

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

High-yield ETFs sustained $11 million of outflows on the day.

Actively managed high-yield funds were essentially flat on the day.

News of Thursday’s daily flows follows a Thursday afternoon report that the combined funds sustained $2.14 billion of net outflows in the week to the Wednesday, Jan. 19 close, according to Refnitiv Lipper.

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