Junk secondary: CHS flat; VistaJet, Ryan above par; Lindblad outperforms; Netflix active

By Paul A. Harris and Abigail W. Adams

Portland, Me., Jan. 21 – The dollar-denominated new issue business that had been slated for Friday was accelerated, and priced during a highly active Thursday session.

Hence the primary market rested on its oars, Friday.

Meanwhile, the tone in the secondary space remained negative on Friday with the cash bond market off another ¼ point.

However, the market continued to hold up well compared to the turmoil in equities with late-day selling again pushing equity benchmarks deep into negative territory.

While the volatility was largely expected by market players as the Federal Reserve withdraws its support, the selling in equities is concerning, a source said.

“Depending on what happens with equities, you could see a real repricing of the market,” the source said.

For the time being, however, the market was holding with the selling that was taking place orderly.

New issues continued to dominate the tape with the majority to come during Thursday’s session holding above par.

CHS/Community Health Systems, Inc.’s 5¼% senior secured notes due 2030 (B2/B/BB-) were lower early in the session but gained to close the day flat.

Ryan Specialty Group Holdings, Inc.’s 4 3/8% senior secured notes due 2030 (B1/BB-) and VistaJet’s 6 3/8% senior notes due 2030 (Caa1/B-/BB-) maintained slight premiums in active trading, despite the heaviness in the market.

Lindblad Expeditions, LLC’s 6¾% senior secured notes due 2027 (B3/B-) outperformed with the notes almost 2 points above their issue price.

Outside of new issues, Netflix Inc.’s senior notes were active although little changed as the company’s stock tanked following fourth-quarter earnings.

Busy week ahead

The week ahead is expected to be a busy one, and some of the deals will likely be big ones, sources say.

Expected issuers include Bausch Health Cos. Inc. with $1 billion of new secured notes as part of a refinancing effort.

Initial guidance is in the mid-5% area, a trader said.

Also athenahealth Inc. is expected to show up with a bond deal backing the buyout of the company Bain Capital and Hellman & Friedman from Veritas Capital and Evergreen Coast Capital, sources say.

Last week the company launched $6.75 billion of term loans, via JPMorgan.

Loan commitments are due Wednesday.

CHS flat

CHS’ 5¼% senior notes due 2030 pared their losses after a weak break and closed the day largely flat.

The 5¼% notes traded as low as 99¼ after breaking for trade and were marked at 99 3/8 bid, 99 7/8 offered early in Friday’s session, sources said.

However, the notes gained steam as the session progressed and stood poised to close the day at par.

Underwriters appeared to be holding up the notes in secondary activity, a source said.

While the notes played to hefty demand during bookbuilding, the enthusiasm did not follow them into the secondary space.

“Most guys got what they needed,” a source said.

CHS priced $1.535 billion of the 5¼% notes in a Thursday drive-by. The yield printed at the tight end of yield talk in the 5 3/8% area.

The deal was heard to be two-times oversubscribed.

Above par

Ryan Specialty’s 4 3/8% senior secured notes due 2030 and VistaJet’s 6 3/8% notes were holding above par in secondary activity on Friday, despite the heaviness in the market.

Ryan’s 4 3/8% notes were marked at par bid, par ½ offered in the late afternoon, a source said.

The insurance broker priced a $400 million issue of the 4 3/8% notes at par on Thursday.

The yield printed tighter than talk for a yield of 4½% to 4¾%.

VistaJet’s 6 3/8% senior notes due 2030 were also trading at a slight premium in high-volume activity.

The notes were marked at par ¼ bid, par ½ offered in the late afternoon.

While not off to the races in the secondary, the notes played to hefty demand during bookbuilding.

The aviation company priced an upsized $1 billion, from $800 million, issue of the 6 3/8% notes at par.

The yield printed tighter than the 6½% to 6¾% yield talk.

The deal played to $4 billion in demand.

Lindblad outperforms

Lindblad’s 6¾% senior secured notes due February 2027 outperformed in the secondary space.

The notes were marked at 101¼ bid, 101¾ offered early in the session and traded as high as 102 in the late afternoon, a source said.

The notes carried a large coupon for a B3 credit and priced cheap relative to the market, a source said.

Lindblad priced an upsized $360 million, from $340 million, issue of the 6¾% notes at par on Thursday.

Netflix active

Netflix’s senior notes were in focus following its fourth-quarter earnings report which sent stock plummeting more than 20%.

While the notes were active, there was little movement in price.

The streaming behemoth’s 5 3/8% senior notes due 2029 continued to trade around 116. There was about $34 million in reported volume.

While unchanged day over day, the notes have fallen about 2 points since the beginning of January.

Netflix’s 4 7/8% senior notes due 2030 continued to trade on a 113-handle with $32 million in reported volume.

The notes have fallen about 3 points in January.

Netflix’s 5 7/8% senior notes due 2028 stood poised to close the day at 117¼ with about $18 million in reported volume.

While Netflix’s junk bonds were holding, the company’s stock fell more than 20% on Friday, dragging down equity benchmarks.

Stock plummeted after reporting slower subscriber growth in the fourth quarter.

Thursday fund flows

The daily cash flows of the dedicated high-yield bond funds were largely flat on Thursday, the most recent session for which data was available at press time, 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 Thursday, the source said.

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.

Year to date the combined funds have sustained $4 billion of net outflows, according to the market source.

Negative sentiment toward risk assets that is implied by those cash outflows notwithstanding, there is still a great deal of institutional money to be put to work in high-yield bonds, a trader said on Friday.

That explains Thursday's tight executions – with deals upsizing and pricing through talk, on accelerated timing – despite the fact that the capital markets backdrop was a volatile one, the source added.

Demand continues to outstrip supply in the high-yield new issue market, presently conferring the upper hand to issuers when it comes to setting rates on junk bonds, the trader said.

Indexes

The KDP High Yield Daily index fell 26 points on Friday with the yield now 4.41%.

The index was unchanged Thursday and Wednesday after falling 34 points on Tuesday.

The index posted a cumulative loss of 60 points on the week.

The CDX High Yield 30 index fell 26 basis points to close Friday at 107.33.

The index was down 27 bps on Thursday, 15 bps on Wednesday and 37 bps on Tuesday for a cumulative loss of 105 bps on the week.

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