Morning Commentary: New Carvana bonds continue to slouch; debut issuer Bioventus on tap

By Paul A. Harris

Portland, Ore., April 29 – The high-yield bond market dipped ¼ point on Friday morning to the accompaniment of higher rates on risk-free securities and a weak opening in the U.S. stock market, sources said.

The iShares iBoxx $ High Yield Corporate Bd (HYG) share price was down half a buck, or 0.63%, at $79.01, in the mid-morning.

Junk was down ½ point to ¾ point on the week, according to a bond trader in New York.

Bonds sold at par by Carvana Co. earlier in what has been an extremely light week for issuance continued to trade heavily on Friday morning, the trader said.

The Carvana 10¼% senior notes due May 2030 (Caa2/CCC) were 98 bid, 98½ offered on Friday morning after being wrapped around 99 on Thursday.

The Carvana deal struggled earlier in the week, with bond investors claiming that the Tempe, Ariz.-based online car retailer's deal was too rich at the initial talk of 10% to 10½% and insisting that 11% was nearer to the mark.

Then on Wednesday news came that the deal upsized to $3.275 billion from $2.275 billion as Carvana scrapped a proposed $1 billion offering of preferreds and shifted the proceeds to the senior notes.

With the upsize announcement came final talk at 10¼%, the midpoint of initial guidance, investor pushback notwithstanding.

Shortly thereafter the market heard that venture capital firm Apollo Global Management stepped in to take down nearly half ($1.6 billion) of the upsized Carvana 10¼% senior notes offering.

Elsewhere, in a deal heard to have gone much more smoothly, both tranches of the new Mineral Resources Ltd. senior notes (Ba3/B+/BB) were wrapped around their new issue prices on Friday morning, the trader said.

The Mineral Resources 8% notes due 2027 (5.5-year) and the 8½% notes due 2030 (eight-year) were both 99¾ bid, par ¼ offered on Friday morning.

They both came at par on Wednesday in tranches sized at $625 million apiece.

In the dollar-denominated primary market, Bioventus LLC is on deck with a $415 million offering of five-year senior notes (Caa1/CCC+) talked to yield 9¾% to 10%, slightly wide to initial guidance in the mid-to-high 9% area.

The company's debut deal, it had been expected to price following the close of books on Thursday, which had been scheduled to take place midday Thursday.

There was no fresh news on the Bioventus deal on Friday morning, sources said.

Fund flows

High-yield ETFs sustained $380 million of daily cash outflows on Thursday, according to a market source.

Actively managed high-yield funds saw $95 million of outflows on the day.

News of Thursday's daily flows follows a Thursday afternoon report that the combined funds sustained $118 million of net outflows in the week to the Wednesday, April 27 close, according to fund tracker Refinitiv Lipper.

Weekly outflows have moderated in comparison to the previous week's $886 million outflow and the $4.03 billion outflow for the week to April 13, according to the market source.

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