Neogen on tap; junk bond energy names under pressure; Carvana volatile

By Paul A. Harris and Abigail W. Adams

Portland, Me., July 5 – A new deal surfaced in junkland for Wednesday business.

Neogen Corp. is planning to price a $350 million offering.

Meanwhile, it was another volatile day in the secondary space with the cash bond market opening the first full trading week of the second half of 2022 with losses but closing the day unchanged.

The cash bond market was off ¼ point early in the session but ended the day largely flat with the stability in Treasuries helping to lift the secondary space, a source said.

The 10-year Treasury yield continued to come in from its peak with the yield settling at 2.805% on Tuesday.

While declining Treasury yields were helping to lift rate-sensitive names, recession concerns continued to plague the market with plunging crude oil futures pressuring the energy sector.

Callon Petroleum Co.’s 7½% senior notes due 2030 (B3/B/B+) continued to trend lower on Tuesday.

Carnival Corp.’s 10½% senior notes due 2030 (B2/B) remained under pressure with cruise line operators beginning to serve as a de facto recession indicator.

Carvana Co.’s high-beta 10¼% senior notes due 2030 (Caa2/CCC) were volatile alongside the broader market with the notes down early in the session but closing the day with gains.

New business

There was news in the high-yield primary market on Tuesday.

Neogen plans to price a $350 million offering of senior notes due July 2030 (B2/BB) on Wednesday.

The deal is being whispered in the high 8% area, a sellside source said.

It comes in a debt-for-debt exchange related to the Lancing, Mich.-based food safety company's announced combination with 3M's Food Safety Business. No proceeds will go to Neogen.

Energy under pressure

Energy names were under pressure on Tuesday as crude oil futures plunged below $100 a gallon for the first time since April.

Callon’s recently priced 7½% senior notes due 2030 continued to trend lower in light volume. The 7½% notes fell ½ point to close Tuesday at 91¼, according to a market source.

The notes were currently yielding 9%.

The oil and gas company priced a $600 million issue of the 7½% notes at par on June 9.

Callon’s 8% senior notes due 2028 also remained under pressure. The notes were down 1 point to close the day at 95 with the yield 9.08%, a source said.

While it appeared the notes had plunged 4 points to 92 last Friday, the trades were canceled with the previous market for the notes on a 96-handle.

The energy sector was under pressure as crude oil futures plummeted due to fear of slowing growth.

West Texas Intermediate crude oil futures settled at $99.50, a decrease of $8.93 or 8.2%, on Tuesday.

Carnival submerged again

Carnival’s senior notes continued to see selling pressure on Tuesday as recession concerns continued to rattle the market.

The cruise line operator’s most recently priced 10½% senior notes due 2030 were down ½ point.

The notes were changing hands in the 82 to 82½ context in active trading with the yield 14 3/8%, according to a market source.

The notes continued to trade near their all-time lows after sinking 10 points the previous week.

Carnival’s capital structure was under heavy selling pressure the previous week following an analyst’s report that questioned the ability of the company to stay afloat in a global economic downturn.

Carvana’s rocky road

Carvana’s 10¼% senior notes due 2030 were volatile alongside the broader market on Tuesday.

The 10¼% notes were down ½ point to trade as low as 80½ early in the session.

However, they improved alongside the broader market as the session progressed.

The notes closed the day up ½ point at 82¼ with the yield wrapped around 14%.

Friday: $471 million inflows

The high-yield ETFs saw $471 million of daily cash inflows on Friday, the most recent session for which data was available owing to the Monday Independence Day holiday, according to a market source.

It was the second consecutive sizable positive daily flow for the high-yield ETFs which saw $729 million of inflows on Thursday, June 30.

Meanwhile actively managed high-yield funds sustained $250 million of outflows on Friday.

The combined funds are tracking $696 million of net inflows for the week that will conclude with Wednesday's close, the source said.

Indexes

The KDP High Yield Daily index closed Tuesday flat at 54.52. However, the yield fell 2 basis points to 7.64%.

The index posted a cumulative loss of 64 points on the week last week.

The ICE BofAML US High Yield index rose 7 bps with the year-to-date return now 13.794%.

The index fell 150 bps on the week last week.

The CDX High Yield 30 index rose 50 bps to close Tuesday at 97.5.

The index posted a cumulative loss of 190 bps on the week last week.

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