Norwegian sinks in heavy market; Medline hits new low; Lumen, Goodyear down post-earnings

By Abigail W. Adams

Portland, Me., Feb. 14 – The domestic high-yield primary market remained dormant on Monday as volatility continued to roil risk assets.

However, there is $5 billion to $7 billion in deals waiting in the wings if markets stabilize.

Losses continued to mount for the secondary space as geopolitical uncertainty surrounding the Ukraine and continued hawkish comments from St. Louis Fed President James Bullard rattled investors.

While the market ended the day off its lows, it still closed down about 1/8 point, marking the third consecutive day of losses for the space, sources said.

Selling pressure continued to stem from exchange-traded funds as outsized outflows continued.

Norwegian Cruise Line Holdings Ltd.’s secured and unsecured tranches both sank in active trading with the secured tranche dropping to a 97-handle while the unsecured tranche gave back its gains and sank below par.

Medline Industries’ already struggling senior notes hit their lowest level on Monday since hitting the secondary space.

Lumen Technologies’ senior notes continued their downward spiral with the 5 3/8% senior notes due 2029 (B2/BB-/BB) down more than 8 points since the company released earnings last Thursday.

Losses also continued to mount for Goodyear Tire & Rubber Co.’s senior notes with some issues also down 7 points since Thursday’s earnings release.

The primary

Geopolitical concerns and apprehensions about the impact of Fed tightening on the junk bond set in motion a selloff in Europe and the United States on Monday, with sources in both places marking cash bonds as much as half a point lower in intraday activity.

The primary market, which had been anticipated to be somewhat active, remained quiet on Monday, although there is visibility on as much as $5 billion to $7 billion of new issue business during the Feb. 14 week, should a somewhat supportive capital markets backdrop emerge, sources said.

Viasat Inc. is expected to bring $1.6 billion offering of unsecured notes with assumed pricing of 5½% in the week ahead, sources say.

Viasat's concurrent $700 million term loan B (Ba3/BB/BB+) kicked off last week.

Norwegian sinks

Norwegian Cruise Line’s recently priced tranches sank further under heavy market conditions on Monday with the higher-yielding, unsecured notes joining their unsecured counterparts below par.

Norwegian’s 7¾% notes due 2029 (Caa1/B-) gave back their premium in high-volume activity.

They fell ¾ point to close the day in the 99¾ to par ¼ context.

There was $28 million in reported volume.

Norwegian’s 5 7/8% senior secured notes due 2027 (B1/B+) tumbled 1½ point to close the day in the 97½ to 98 context.

There was about $15 million in reported volume.

While the 5 7/8% notes sank to a 99-handle on Friday, the 7¾% notes were holding a premium to their issue price and closed the day in the par ½ to par ¾ context as investor demand for higher-yielding notes increased.

Norwegian priced a $1 billion tranche of the 5 7/8% notes and a $600 million tranche of the 7¾% notes at par on Feb. 10.

Medline’s new low

Medline Industries’ already struggling senior notes hit new lows on Monday as investors shed risk.

The 5¼% senior notes due 2029 (Caa1/B-/B-) fell 1 point in active trading to end the day at 94½, according to a market source.

The notes now carried a yield of 6.164%.

There was about $18 million in reported volume.

The 3 7/8% senior notes due 2029 (B1/B+/BB-) fell 1½ point to a 92-handle.

They were changing hands in the 92½ to 92¾ context heading into the market close with about $18 million in reported volume.

The notes were yielding north of 5%.

Medline priced a $4.5 billion tranche of the 3 7/8% secured notes and a $2.5 billion tranche of the 5¼% notes at par in September 2021 in the largest leveraged buyout financing deal since the global financial crisis.

Several LBO deals have struggled in recent sessions as a risk-off sentiment took hold of the market.

Lumen drops

Lumen Technologies’ capital structure remained under pressure as investors continued to react to the company’s disappointing earnings.

Lumen’s 5 3/8% senior notes due 2029 fell another 2 points during Monday’s session.

They traded as low as 86 but stood poised to close the day at 87, according to a market source.

The notes were trading on a 95-handle last Wednesday, a source said.

The notes were active with about $10 million in reported volume.

Level 3 Financing Inc. (Lumen Technologies)’s 3¾% sustainability-linked senior notes due July 15, 2029 sank another ¾ to 1 point to 88½ on Monday.

Lumen’s capital structure has been under pressure since reporting disappointing earnings last Wednesday.

Goodyear drops

Goodyear Tire’s capital structure remained under pressure on Monday following last week’s disappointing earnings report.

The company’s SEC Registered 5¼% senior notes due 2031 sank 3 points to close the day at 96½, according to a market source.

They were trading on a 101-handle on Wednesday heading into the company’s earnings report.

The Rule 144A 5¼% senior notes due 2031 fell about 4 points to close the day at 95 7/8.

The notes closed Friday on a par-handle.

The 4 7/8% senior notes due 2027 sank 3 points to close the day at 97¾.

The tire manufacturer’s capital structure has been under pressure since the company reported earnings last Thursday.

While the company beat expectations on the top and bottom lines, the sell-off in the name was sparked by free cash flow estimates.

Outflows

The dedicated high-yield bond funds sustained $1.47 billion of daily net outflows on Friday, according to a market source.

High-yield ETFS saw $1.27 billion of outflows on the day, the source said, noting that the junk ETFs have now seen more than $11 billion of outflows, or 14% of assets under management, since Jan. 4.

Actively managed high-yield funds sustained $195 million of outflows on Friday, according to the market source.

Indexes

The KDP High Yield Daily index fell 41 points to close Monday at 62.39 with the yield now 5.29%.

The index posted a cumulative loss of 63 points on the week last week.

The CDX High Yield 30 index rose 2 basis points to close the day at 105.37.

The index posted a cumulative loss of 73 bps on the week last week.

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