HY secondary returns plunge past negative 10%; Coinbase dives further; Carrols pressured

By Paul A. Harris and Abigail W. Adams

Portland, Me., May 12 – The dollar-denominated new issue market remained sidelined on Thursday with only one deal clearing the market over the past week and the forward calendar empty.

However, the European market continued to generate news with Loarre Investments Sarl in the market with an €850 million two-tranche offering of seven-year senior secured notes (Ba3//BB).

Meanwhile, it was another brutal day in the secondary space with the cash bond market down 3/8 point as returns plunge past negative 10%.

Frontier Communications Holdings, LLC’s 8¾% first-lien secured notes due 2030 (B3/B/BB+) continued to come in from their heights with the notes falling to a 101-handle.

Losses continued to mount for Coinbase Global, Inc.'s senior notes (Ba1/BB+) with the notes approaching distressed levels.

Carvana Co.’s 10¼% senior notes due 2030 (Caa2/CCC) were volatile after Wednesday’s plunge with the notes launching the day with losses but closing largely unchanged.

However, Carrols Restaurant Group, Inc.’s 5 7/8% senior notes due 2029 claimed the title of the worst performing issue of Thursday’s session with the notes down 7 points following disappointing numbers.

Meanwhile, high-yield mutual and exchange-traded funds broke their losing streak with funds adding $169 million through Wednesday’s close, according to the Refinitiv Lipper Fund Flows report.

Quiet primary

The dollar-denominated new issue market remained sidelined on Thursday.

Just one dollar deal has cleared the market in the past fortnight.

Frontier priced $1.2 billion of 8¾% first-lien secured notes due May 2030 (B3/B/BB+) at par last Monday, in an issue that was upsized from $800 million, and continued to trade above par on Thursday.

That's good news and bad news for prospective issuers, sources say.

The good news is that if a company's debt capacity provides for secured issuance, chances are it can get a deal done.

The bad news is that Frontier Communications had to price its deal way too cheap, which explains why the new paper has traded so well in a market engulfed in turbulence.

The Frontier 8¾% first-lien secured notes, which priced Monday at par, came with 2¾% more coupon, and with security that is superior to the Frontier Communications 6% second-lien notes due January 2030, which priced at par last October.

In the euro-denominated market the price is also dear for Loarre Investments which is selling €850 million seven-year senior secured notes (Ba3//BB) supporting the capitalization of Spanish soccer organization La Liga by CVC Capital Partners.

The two-part deal includes a €500 million tranche of fixed-rate notes talked with a 6½% coupon at 96.6 to yield 7 1/8%, at the wide end of yield guidance in the 7% area, and a €350 million tranche of floating-rate notes with a 500 basis points spread to Euribor at 97, the cheap end of the 97 to 98 early guidance.

Frontier down

Frontier’s 8¾% first-lien secured notes due May 2030 continued to weaken in active trading with the notes down 1 point to a 101-handle during Thursday’s session.

The 8¾% notes were marked at 101¼ bid, 101½ offered early in the session.

They were lifted as the market firmed into the afternoon with the notes changing hands in the 101 3/8 to 101 5/8 context, according to a market source.

There was $25 million in reported volume.

The 8¾% notes have outperformed in weak market conditions over the past few sessions with the notes trading as high as 103 on Wednesday.

Frontier priced a $1.2 billion issue of the 8¾% notes at par on May 9.

Carvana volatile

Carvana’s 10¼% senior notes due 2030 were volatile on Thursday with the notes opening the day with losses but closing with nominal gains.

The 10¼% notes fell another 1½ points early in the session to trade as low as 82¾.

However, they gained momentum as the session progressed and closed the day with nominal gains.

The notes were changing hands in the 85½ to 86 context heading into the market close, according to a market source.

There was $62 million in reported volume.

Carvana’s 5 5/8% senior notes due 2025 also improved on Thursday with the notes up 1½ points to close the day at 75.

There was $19 million in reported volume.

The used car e-commerce company’s capital structure has been under pressure after the company announced mass layoffs due to a “recession” in auto sales.

The recently priced 10¼% notes, which priced at par on April 27, plunged 6½ points to close the day in the 84½ to 85½ context.

The notes have been under water since the $3.275 billion issue broke for trade.

Coinbase distressed

Losses continued to mount for Coinbase’s two tranches of senior notes which now trade with distressed credit spreads.

The 3 3/8% senior notes due 2028 were down another 4 points to close the day at 63, according to a market source.

There was $37 million in reported volume.

The yield on the notes is now north of 11.75%.

The notes were fast approaching distressed levels with the credit spread now 896 bps, a source said.

The 3 3/8% notes credit spread has blown out 379 bps since the company reported earnings after the market close on Tuesday.

They cratered more than 9 points during Wednesday’s session.

Coinbase’s 3 5/8% senior notes due 2031 were down another 1 1/8 points to close the day at 60 7/8, according to a market source.

There was $30 million in reported volume.

The 3 5/8% notes have held up comparatively well to their shorter duration counterpart with spreads widening by about 100 bps over the past two sessions.

The notes fell 3 points on Wednesday.

The 3 5/8% notes have held up well largely because damage was already wrought on the notes heading into earnings, a source said.

Coinbase’s capital structure plunged on Wednesday after a large earnings miss and the introduction of a new risk factor in its 10-Q report that sparked bankruptcy fears.

Coinbase continued to take a hit as Bitcoin crashed more than 10% in overnight trading due to the decoupling of TerraUSD, a stable coin that was tied to a $1 value.

However, Bitcoin pared its losses and was changing hands at $28,721, a decrease of 1.32%, shortly after the close of U.S. equity markets.

Carrol’s earnings

Carrol’s 5 7/8% senior notes due 2029 claimed the prize of the worst performing issue during Thursday’s session with the notes diving after the restaurant franchise company released earnings.

The 5 7/8% notes sank 7 points on Thursday to a 65-handle, a source said.

They were changing hands at 65¾ with a yield of 13½% heading into the close.

There was $13 million in reported volume.

The notes closed the previous session on a 72-handle.

“Ouch,” a source said.

Carrol’s 5 7/8% notes plunged after the operator of restaurant franchise chains, such as Burger King and Popeyes, reported a larger loss than anticipated in its first quarter report with inflation and the rising cost of labor taking its toll on the company.

Indexes

The KDP High Yield Daily index fell 24 points to close Thursday at 57.06 with the yield now 6.84%.

The index was down 7 points on Wednesday, rose 7 points on Tuesday after falling 52 points on Monday.

The ICE BofAML US High Yield index fell 39.4 bps with the year-to-date return now negative 10.329%.

The index fell 3.2 bps on Wednesday, gained 5.2 bps on Tuesday and fell 80.5 bps on Monday.

The CDX High Yield 30 index was down 10 bps to close Thursday at 100.31.

The index was down 13 bps on Wednesday, gained 41 bps on Tuesday and fell 70 bps on Monday.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.