ETF-buying lifts secondary; AMC, Carvana lifted pre-earnings; Spirit AeroSystems falls

By Paul A. Harris and Abigail W. Adams

Portland, Me., Aug. 3 – The high-yield new-issue market remained quiet on Wednesday, with another full week having passed since the most recent junk-rated, dollar-denominated issue cleared the market.

Avient Corp. priced a $725 million issue of 7 1/8% senior notes due August 2030 (Ba3/BB-) at par last Wednesday, July 27, and those notes continue trade well, sources say.

The Avient 7 1/8% notes were 103¼ bid, 103¾ offered on Wednesday morning, a trader said.

The active forward calendar is clear save for a deal that has been held over since the conclusion of its roadshow a week ago, and that has at least one foot planted squarely in emerging markets, according to market sources.

The Patagonia Holdco LLC $500 million offering of seven-year non-call-three senior secured first-lien notes (B1/B+) has clearly been struggling, sources say.

Contemplated discounts on the $1.3 billion of debt financing in the market supporting Stonepeak's $2.7 billion acquisition of Lumen Technologies' Latin American operations have deepened, with the $800 million term loan price talk dropping to 82 from 90, and the bonds heard to be coming in the low 80s, down from 86.

Meanwhile, it was another strong day in the secondary space with ETF-buying continuing to lift the broader market.

ETFs continued to circulate offers-wanted-in-competition lists as strong inflows continued.

“They’re adding to their positions,” a source said.

However, outside of ETF buying, trading volume in the secondary space remained thin with no new issuance to jolt activity.

Earnings remained in focus although reports continued to come in mixed.

Spirit AeroSystems, Inc.’s 4.6% senior notes due 2028 (Caa1/CCC+) were among the largest losers of Wednesday’s session following an earnings miss.

AMC Entertainment Holdings, Inc.’s senior notes were on the rise in active trading as optimism surrounding earnings grows.

Carvana Co.'s 10¼% senior notes due 2030 (Caa2/CCC+) also made strong gains with earnings slated for Thursday.

Spirit AeroSystems loses

Spirit AeroSystems’ 4.6% senior notes due 2028 were among the largest losers of Wednesday’s session following an earnings miss.

The 4.6% notes fell 3½ points.

They were changing hands in the 80¾ to 81¼ context heading into the market close, according to a market source.

However, volume in the name was light.

The notes sank to an 80-handle in heavy volume the previous week on the eve of Boeing’s earnings with Boeing a key revenue source for the aerospace company.

They rebounded strongly alongside the broader market over the past week with the notes wrapped around 84 heading into Wednesday’s session.

However, the notes were again under pressure after Spirit AeroSystems’ announced earnings.

The company announced a much wider loss than expected, a source said.

AMC in focus

AMC’s senior notes were in focus on Wednesday with the notes posting gains heading into the company’s Thursday earnings release.

AMC’s 10% second-lien subordinated secured notes due 2026 (Caa3/CCC-) gained 7/8 point to close the day at 82 3/8, according to a market source.

The notes were carrying a yield of 16 3/8%.

With $20 million in reported volume, the notes were the most actively traded issue in the secondary space.

AMC’s 7½% first-lien senior secured notes due 2029 (Caa1/B-) jumped 2½ points to close Wednesday at 91¾, according to a market source.

The yield on the notes was 9¼%.

There was $4 million in reported volume.

AMC’s notes were posting gains with the movie chain operator set to report earnings on Thursday.

Carvana gains

Carvana’s struggling 10¼% senior notes due 2030 made strong gains on Wednesday on the eve of its earnings report.

The 10¼% notes jumped 3 points to an 86-handle.

They were wrapped around 86½ heading into the market close, a source said.

The yield was 13%.

The notes have climbed 6 points since last Wednesday’s Fed-induced rally.

The used car e-commerce company is slated to report earnings on Thursday.

Mixed fund flows

The daily cash flows of the dedicated high-yield bond funds were mixed on Wednesday, the most recent session for which data was available at press time, according to a market source.

Actively managed high-yield funds saw $305 million of inflows on the day, the source said, adding that those inflows were broad-based.

However high-yield ETFs posted negative cash flows on Wednesday, sustaining $217 million of outflows on the day, according to the market source.

The combined funds are tracking $2.41 billion of net inflows for the week to Wednesday's close.

Indexes

The KDP High Yield Daily index gained 6 points to close Wednesday at 57.17 with the yield 6.51%.

The index fell 13 points on Tuesday after gaining 8 points on Monday.

The ICE BofAML US High Yield index rose 14.4 bps with the year-to-date return now negative 8.438%.

The index gained 7 bps on Tuesday and 22.2 bps on Monday.

The CDX High Yield 30 index gained 54 bps to close Wednesday at 101.

The index fell 42 bps on Tuesday and 27 bps on Monday.

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