VistaJet flies in and out of junkland; Vermilion at a premium; Grubhub rebounds; Post down

By Paul A. Harris and Abigail W. Adams

Portland, Me., April 20 – Junk bond issuers apparently cannot exit the market fast enough during the April 18 week with a second issuer announcing a two-day deal and then bookrunners working double-time to get them through the potentially volatile space in one day.

VistaJet launched its deal with announced Thursday pricing, but managed to get booked on a direct flight out on Wednesday, instead.

Meanwhile, the secondary space was firm on Wednesday with the market up about ¼ point as Treasury yields came in, a source said.

The 10-year Treasury yield fell below the 2.9% threshold on Wednesday to settle at 2.84%.

While the market was firmer, volume remained thin as investors digest the latest earnings reports for clues about the impact of inflation on fundamentals.

While Netflix Inc.’s equity cratered 35% following earnings on Wednesday, its split-rated senior notes were unchanged in light volume.

Vermilion Energy Inc.'s recently priced 6 7/8% senior notes due 2030 (B3/BB-/BB-) were in focus with the notes trading at a premium to their discounted issue price.

Grubhub Inc.’s 5½% senior notes due 2027 (Ba3/BB) were on the rebound after dipping the previous session.

While the overall market firmed on Wednesday, Post Holdings, Inc.’s 4½% senior notes due 2031 (B2/B+) had some selling pressure that drove the notes to a new all-time low.

Fly-by

VistaJet priced an upsized $500 million issue (from $440 million) of 7 7/8% five-year senior notes (Caa1/B-/BB-) at 98.986 to yield 8 1/8% early Wednesday evening.

The yield printed at the tight end of yield talk in the 8¼% area. The issue price came in line with discount talk in the one-point area.

The deal was heard to have played to $1.2 billion of demand, according to a sellside source who added that the Malta-based company has a decent or better following in the U.S. junk bond market.

Amid the snarls and snags of contemporary commercial air travel, with the next Covid variant possibly lingering in the passenger waiting area of some international airport, private aviation service is an easy story to like, the source remarked.

As with the Vermilion Energy deal on Tuesday, timing on VistaJet was accelerated. Both deals were expected to remain in the market overnight, when they were announced.

Both ultimately came and went as drive-bys.

For issuers bold enough to step into the market, and reconciled to present-day prices, there appears to be plenty of demand, said the sellsider who added that the market remains starved for paper.

Netflix unchanged

While Netflix saw its equity crater on Wednesday, its split-rated senior notes were relatively unchanged after the streaming behemoth announced its first loss of subscribers in almost a decade.

Netflix’s 4 3/8% senior notes due November 2026 (Ba1/BBB) continued to trade on a 101-handle in light volume with the yield about 4%.

However, the 4 7/8% senior notes due 2028 were down about ½ point to close Wednesday at 101½ with the yield about 4½%.

Netflix stock dragged down the Nasdaq Composite index and other growth stocks during Wednesday’s session following the company’s earnings report.

While stock was taking a hit on missed expectations for subscribers, the fundamentals remain strong, a source said.

Vermilion at a premium

Vermilion Energy’s recently priced 6 7/8% senior notes due 2030 were trading at a premium to their discounted issue price in heavy volume.

The 6 7/8% notes traded in a range of 99 5/8 to par ¼ during the session with the notes wrapped around par heading into the close, a source said.

There was $61 million in reported volume

In a heavily oversubscribed offering, Vermilion Energy priced a $400 million issue of the 6 7/8% notes at 99.241 to yield 7%.

The yield came at the wide end of the 6 7/8% to 7% yield talk, which tightened from earlier talk of 7% to 7¼%.

The deal was heard to have played to $1.5 billion in demand.

Grubhub rebounds

Grubhub’s 5½% senior notes due 2027 were bouncing off their lows from the previous session following news of a decrease in sales.

The 5½% notes gained about 2½ points to close the day at 86½, according to a market source.

The yield on the notes was about 8¾%.

The notes traded as low as 83 5/8 the previous session with a yield north of 9%.

Grubhub’s notes were pressured by news that parent company Just Eat Takeaway was considering a sale of Grubhub after a decline in sales.

Grubhub saw a 5% decrease in orders in the United States in the first quarter, The Wall Street Journal reported.

Just Eat Takeaway announced it was exploring a potential sale of the company about one year after acquiring it for $7.3 billion.

The 5½% notes made large gains following the merger announcement in June 2020 with the notes leveling off at 105 for the first half of 2021.

However, the 5½% notes have been on a strong downtrend as the market reprices itself amid a higher rate environment.

The notes fell below par in December 2021 and have steadily trended lower since.

Post Holdings down

Post Holdings’ 4½% senior notes due 2031 were down in active trading on Wednesday with sellers in the market, a source said.

The 4½% notes fell about ½ point to close the day at 85, according to a market source.

The level marked a new all-time low for the notes, which have been on a strong downtrend throughout the year alongside other rate-sensitive names.

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

While Post Holdings’ 4½% notes were under pressure on Wednesday, the other notes in its capital structure were unchanged, a source said.

The consumer-packaged goods holding company is scheduled to report earnings on May 6.

Tuesday outflows

The dedicated high-yield bond funds sustained $694 million of net outflows on Tuesday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs saw $418 million of outflows on the day.

Actively managed high-yield funds sustained $276 million of outflows on Tuesday, the source said.

Indexes

The KDP High Yield Daily index rose 4 points to close Wednesday at 59.79 with the yield now 6.02%.

The index fell 15 points on Tuesday and 20 points on Monday.

The ICE BofAML US High Yield index rose 17.7 bps with the year-to-date return now 6.454%.

The index fell 12.6 bps on Tuesday and 18.8 bps on Monday.

The CDX High Yield 30 index gained 25 bps to close Wednesday at 104.06.

The index was down 5 bps on Tuesday and 15 bps on Monday.

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