Avient on deck; Spirit AeroSystems, Coinbase under pressure; Lumen gains on tender

By Paul A. Harris and Abigail W. Adams

Portland, Me., July 26 – In the high-yield primary market Avient Corp. launched a bond deal on Tuesday. A warm reception put pricing on the fast track.

Meanwhile, the secondary space was soft on Tuesday with the cash bond market down ¼ to 3/8 point following last week’s strong rally.

However, trading volume remained thin as the market awaits the Federal Reserve’s widely anticipated 75 basis points rate increase on Wednesday.

While Wednesday’s rate increase is expected to yield few surprises, Federal Reserve chair Jerome Powell’s press conference will be closely watched as debates continue to rage about inflation, recession and the central bank’s future rate hike schedule.

Last week’s rally was largely sparked by relief that a 100 bps rate increase was off the table, a source said.

However, uncertainty in the market remains high with earnings reports continuing to come in mixed, as have been the economic indicators the market has used to gauge the Federal Reserve’s future course of action.

With no new paper recently entering the space, earnings-related and topical news were the driving force of activity in the market on Tuesday.

Spirit AeroSystems, Inc.’s 4.6% senior notes due 2028 (Caa1/CCC+) were under pressure in active trading on the eve of Boeing’s earning – Boeing is a key revenue source for the aerospace component manufacturer.

While volume was light, Coinbase Global, Inc.’s senior notes (Ba2/BB+) also fell following news the Securities and Exchange Commission was investigating the crypto-currency exchange.

Lumen Technologies’ 5 1/8% senior notes due 2026 (B2/BB-) gained in active trading following the enterprise technology platform’s tender offer for the notes.

Right deal, right time

For the right deal the green lights come on along the high-yield primary market tracks, market sources say.

After announcing a brief roadshow for its deal on Tuesday morning, Avient Corp. accelerated timing on an oversubscribed $725 million offering of senior notes due 2030 (Ba3/BB-) coming in support of its acquisition of Royal DSM’s Dyneema protective materials business.

Both the investor call and the deadline for commitments were moved ahead. The call was pushed up to Tuesday from Wednesday. And books close at 10:30 a.m. ET on Wednesday, whereas the deal was announced on Tuesday morning as Friday business.

The deal had been telegraphed to the market for over a week.

Reverse inquiry for Avient's notes ran to 1.5-times deal size, according to a sellside source who added that the order books were heard to be three-times deal-size on Tuesday afternoon.

Pending official price talk, the deal is in the market with initial guidance in the 7½% area.

That guidance is tight to pre-marketing price conversations that took place in the high 7% area, according to a high-yield portfolio manager.

Timing was also accelerated on Avient's concurrent term loan, with the commitment deadline moved ahead to Wednesday from Thursday.

Meanwhile books were scheduled to close Tuesday for the Patagonia HoldCo LLC $500 million offering of seven-year senior secured first-lien notes (B1/B+) supporting the buyout of Lumen Technologies' Latin American operations by Stonepeak.

However, there were no Tuesday updates on the deal, according to a sellside source who added that emerging markets bond accounts comprise the most conspicuous presence in the Patagonia order book.

Pending official price talk initial guidance specifies a 7½% coupon at OID 86.

Spirit AeroSystems pressured

Spirit AeroSystems’ 4.6% senior notes due 2028 were under pressure in active trading on Tuesday on the eve of key revenue source Boeing’s earnings report.

The 4.6% notes sank 3 points to an 80-handle, according to a market source.

The notes were wrapped around 80½ heading into the market close with the yield just shy of 9%.

There was $20 million in reported volume, making the issue among the most actively traded of Tuesday’s session.

Boeing’s earnings are slated for release on Wednesday.

Boeing is a key source of revenue for the aerospace components manufacturer, a source said.

However, Boeing is under threat of a union strike and news broke on Monday that regulators are asking Boeing to repair its 777 widebody jets due to potential fuel tank explosions.

Spirit AeroSystems is expected to post earnings early next week.

Coinbase falls

While volume was light, Coinbase’s senior notes were among the largest losers in the secondary space following news the SEC was investigating the crypto exchange.

Coinbase’s 3 3/8% senior notes due 2028 fell 3½ points to a 65-handle.

They were changing hands in the 65 to 65¼ context heading into the market close with the yield 11 3/8%.

Coinbase’s 3 5/8% senior notes due 2031 were also down 3½ point to close the day at 60 7/8 with a yield of about 10 3/8%.

Coinbase’s capital structure was under pressure on Tuesday with stock sinking 21% following news the SEC was investigating the company for allowing users to trade digital tokens that may be considered securities.

Lumen’s tender

Lumen’s 5 1/8% senior notes due 2026 were on the rise on Tuesday after the company launched a tender offer for the notes.

The 5 1/8% notes gained 1 point to close the day at 90, according to a market source.

There was $10 million in reported volume.

Lumen launched a tender offer for five series of notes on Tuesday including an offer for up to $63.55 million of the 5 1/8% notes.

The company is offering $895 per $1,000 principal amount of the notes with an early tender premium of $50, Prospect News reported.

Big inflows continue

The dedicated high-yield bond funds saw $603 million of net daily inflows of cash on Monday, and are so far tracking huge inflows on the week, according to a market source.

High-yield ETFs had $483 million of inflows on the day.

Actively managed high-yield funds saw $120 million of inflows on Monday, the source said.

Monday marked the third consecutive session in which the dedicated junk funds had big inflows, trailing $1.104 billion of net daily inflows last Friday and $1.82 billion of net inflows last Thursday (the first session that will figure into the present reporting week's tally).

The combined funds are tracking a whopping $4.36 billion of net inflows for the week that will conclude with Wednesday's close, according to the market source.

Indexes

The KDP High Yield Daily index fell 17 points to close Tuesday at 56.45 with the yield now 6.82%. The index rose 2 points on Monday.

The ICE BofAML US High Yield index fell 31 basis points with the year-to-date return now negative 10.448%.

The index gained 3.6 bps on Monday.

The CDX High Yield 30 index sank 50 bps to close Tuesday at 99.63.

The index gained 13 bps on Monday.

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