Junk bond primary reopens; Coinbase surges; Laredo falls; funds add $2.93 billion

By Paul A. Harris and Abigail W. Adams

Portland, Me., Aug. 4 – After spending a month and a half in a near-vegetative state the high-yield new issue market not only awakened on Thursday, but burst into the middle of the ring punching.

Meanwhile, the secondary space continued to add to its gains as falling oil prices, better-than-expected earnings and strong inflows helped sustain a rally.

While the market remained firm, trading volume remained thin with earnings and topical news the drivers of activity in the space as market players awaited the deals in the pipeline to break for trade.

CCO Holdings’ 5 3/8% senior notes due 2029 were slightly weaker in active trading on the heels of its new offering on Thursday.

Coinbase Global, Inc.’s senior notes (Ba2/BB+) surged in heavy volume following news of a new partnership with BlackRock Inc.

Laredo Petroleum, Inc.’s senior notes were down following earnings, despite besting analyst expectations.

The weakness in the notes was most likely due to falling oil futures, which settled below levels Laredo used to determine future guidance.

Strong inflows continued with high-yield mutual and exchange-traded funds adding $2.934 billion in the week through Wednesday’s close, according to the Refinitiv Lipper Fund Flow Report.

It was the second-consecutive multibillion inflow to the market with the previous week’s $4.83 billion inflow the largest of the year.

Reopened primary market

Two issuers, each bringing a single tranche of junk, raised a combined total of $2 billion in razor-sharp executions.

Both deals came as drive-bys.

Both upsized.

One priced through talk while the other priced at the tight end.

Charter Communications, Inc., one of the market's best-known issuers, and one that is seldom slow to detect an open issuance window, priced an upsized $1.5 billion issue (from $1 billion) of seven-year senior notes (B1/BB-) at par to yield 6 3/8%.

The yield printed at the tight end of yield talk in the 6½% area. Initial guidance had the deal coming to yield in the 6 5/8% area.

Charter ended up playing to around $4 billion of demand, according to a sellside source who added that a significant amount of reverse inquiry helped to propel the deal into the market.

The new CCO Holdings, LLC and CCO Holdings Capital Corp. 6 3/8% notes due 2029 were par bid, par ½ offered heading into Thursday's close.

Meanwhile Advisor Group Holdings, Inc. priced an upsized $500 million issue (from $475 million) of five-year senior secured notes (B2/B-/B) at par to yield 8 5/8%.

The yield printed through the 8¾% to 9% yield talk. Initial guidance was in the low-to-mid 9% area.

It was playing to around $1 billion of orders at midday Thursday, according to a sellside source who added that it came into the market on the back of about $500 million of reverse inquiry.

CCO Holdings down

CCO Holdings’ existing 5 3/8% senior notes due 2029 were slightly weaker in active trading on the heels of the new offering.

The notes were down about ¼ point to close the day at 96¼, a source said.

The yield on the notes was just north of 6%.

There was $12 million in reported volume.

While Charter’s new issue sparked activity in its outstanding notes due 2029, the new paper priced largely in line with where the 5 3/8% notes have been trading, a source said.

However, the recent level of the 5 3/8% notes is at its highest level since late May.

The 5 3/8% notes traded down to an all-time low of 89 in mid-June as the secondary space retested lows for the year.

Coinbase surges

Coinbase’s senior notes surged in active trading on Thursday with the crypto-exchange’s capital structure lifted by an announcement of a new partnership with BlackRock.

The 3 3/8% senior notes due 2028 jumped more than 6 points in intraday activity.

The notes traded as high as 73½ early in the session but came in as the session progressed.

The notes closed the day up abut 4 points on a 71-handle.

They were changing hands in the 71 to 71½ context heading into the market close with the yield about 9¾%.

There was $20 million in reported volume.

Coinbase’s 3 5/8% senior notes due 2031 surged 8 points in intraday activity.

The notes traded as high as 70 early in the session but came in later in the day.

They closed Thursday up 6 points, on a 68-handle.

They were changing hands in the 68 to 68½ context heading into the market close.

The yield on the notes was just north of 8¾%.

There was $30 million in reported volume.

Coinbase’s capital structure jumped following news Coinbase was partnering with BlackRock to offer crypto-trading, custody and prime brokerage services to BlackRock’s institutional clients.

The news marked a dramatic shift in sentiment toward Coinbase, whose capital structure sold off the previous week following news the Securities and Exchange Commission launched an investigation into the company.

Coinbase’s 3 3/8% senior notes sank to a 65-handle and the 3 5/8% senior notes sank to a 60-handle the previous week following news of the SEC investigation.

Laredo’s earnings

Laredo’s senior notes were down in active trading on Thursday despite posting an earnings beat.

Laredo’s 9½% senior notes due 2025 (B3/B) fell 1 point to close the day at 102½, a source said.

There was $13 million in reported volume.

The 7¾% senior notes due 2029 were also off 1 point to close the day at 96¾.

The notes fell despite beating expectations with the weakness most likely the result of falling oil prices, a source said.

Laredo’s forward guidance was based on $100 for oil for 2022 and $90 for oil in 2023, according to a company news release.

However, West Texas Intermediate crude oil futures sank below $90 on Thursday for the first time since January in the wake of an OPEC meeting.

WTI crude settled at $87.80, a decrease of $2.86 or 3.15%.

Indexes

The KDP High Yield Daily index gained 17 points to close Thursday at 57.34 with the yield now 6.45%. The index gained 6 points on Wednesday, fell 13 points on Tuesday after gaining 8 points on Monday.

The ICE BofAML US High Yield index rose 31.5 basis points with the year-to-date return now negative 8.123%.

The index gained 14.4 bps on Wednesday, 7 bps on Tuesday and 22.2 bps on Monday.

The CDX High Yield 30 index gained 27 bps to close Thursday at 101.27.

The index gained 54 bps on Wednesday after falling 42 bps on Tuesday and 27 bps on Monday.

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