Selling pressure returns; Altice USA lower; CommScope gains; HY funds lose $3.55 billion

By Paul A. Harris and Abigail W. Adams

Portland, Me., Feb. 17 – Thursday marked another dormant day for the domestic high-yield primary market with the forward calendar empty as volatility continued to roil risk assets.

Selling pressure resumed in the secondary market with Wednesday’s late-day rally short-lived, sources said.

The market fell about ¼ point with year-to-date returns sinking further below the 4% threshold, sources said.

Outsized outflows were taking their toll on the market with areas that were previously holding also starting to crack.

“It’s definitely a liquidity market at the moment,” a source said.

Short-duration CCC-paper and yield-to-call paper were performing well amid the sell-off. However, as the market continues to widen, previously sought-after yield-to-call paper was also getting soft.

“There’s really nowhere to hide,” a source said.

With the new issue market drying up, topical and earnings-related news continued to drive several outstanding issues into the spotlight.

Altice USA Inc. subsidiary CSC Holdings LLC’s junk bonds sank 1½ to 2 3/8 points following the cable television provider’s earnings report.

However, CommScope, Inc.’s junk bonds outperformed on a down day for the market with the notes up 1½ to 2 points following earnings.

High-yield mutual and exchange-traded funds saw their sixth consecutive week of multibillion-dollar outflows.

Funds saw $3.55 billion leave the space in the week through Wednesday’s close, according to the Refinitiv Lipper US Fund Flows report.

CSC Holdings under pressure

CSC Holdings’ junk bonds were under added pressure on Thursday following disappointing earnings.

The company’s capital structure was down 1½ to 2 3/8 points.

The 4 5/8% senior notes due 2030 were the most active in the capital structure and one of the most heavily traded issues in the secondary space.

The 4 5/8% notes fell 2 3/8 points to close the day wrapped around 84, according to a market source.

There was $38 million in reported volume.

The 7½% senior notes due 2028 fell 1½ points to 98 7/8 with about $15 million in reported volume.

The 5¾% senior notes due 2030 were down 1½ points to 89¾.

The 5½% senior notes due 2027 also sank 1½ points to 99½.

Altice reported a significant loss of broadband subscribers and a decrease in its free cash flow, a source said.

The company also planned to increase its capital expenditure which would further pressure its margins.

CommScope gains

CommScope’s senior notes were among the few winners of Thursday’s session with the company’s capital structure gaining 1½ to 2 points following earnings.

CommScope’s 7 1/8% senior notes due 2028 rose 1¾ points to close the day at 92½, a source said.

The notes were the most active in the capital structure with $23 million in reported volume.

The 8¼% senior notes due 2027 were also up 1¾ points to 98¼.

Both notes were yielding about 8.6%.

CommScope’s 5% senior notes due 2027 jumped 2 points to 87½ with the yield about 8%.

The network infrastructure provider beat expectations with revenue of $2.22 billion as net sales increased.

EBITDA was $253.6 million.

Big outflows continue

The dedicated high-yield bond funds sustained $3.55 billion of net outflows in the week to Wednesday's close, according to a Thursday afternoon report from Refinitiv Lipper.

That's the sixth consecutive week of outflows, according to a market source.

It left the four-week average of flows at negative-$3.09 billion, the largest four-week average outflow since March 2020, the source said.

Of note, the dedicated investment-grade bond funds sustained $2.45 billion of outflows in the week to Wednesday's close, their largest outflow since the week to Dec. 22, 2021, according to the market source.

Indexes

The KDP High Yield Daily index shaved off 1 point to close Thursday at 62.55 with the yield now 5.24%. The index gained 7 points on Wednesday and 10 points on Tuesday after falling 41 points on Monday.

The CDX High Yield 30 index fell 43 basis points to close Thursday at 105.53. The index gained 15 bps on Wednesday, 44 bps on Tuesday and 2 bps on Monday.

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