DISH junk bonds pricing pushed to Monday; Ford back at par; Carvana breakdown continues

By Abigail W. Adams

Portland, Me., Nov. 4 – The domestic high-yield Friday primary market session was quiet with no new deals announced and the new paper expected for to price delayed until Monday.

DISH Network Corp. was slated to price its $2 billion offering of five-year non-call-two-year senior secured notes (Ba3/B+) on Friday but pricing was pushed back until Monday with the deal undergoing covenant changes.

The tepid response to the deal was a surprise to some given its cheapness and the relatively strong fundamentals of the company.

However, there is some wariness about its wireless business segment and the deal was announced before Federal Reserve chair Jerome Powell dashed the market’s hope for a dovish pivot and warned the terminal rate may be higher than anticipated.

The secondary space was turbulent on Friday following the U.S. nonfarm payroll report, which gave a mixed picture of the economy – a trend with the economic indicators shaping Central Bank policy.

While job growth was greater than anticipated, the unemployment rate also came in higher than expected.

The market was strong early in the session with cash bonds rising as much as ½ point.

However, selling took hold as the trading day progressed and the cash bond market closing largely unchanged.

However, Ford Motor Credit Co. LLC’s 7.35% senior notes due 2027 (Ba2/BB+/BB+), the only deal to clear the primary market during the week, eliminated its losses from the past two sessions and jumped back to par.

However, Carvana Co.’s capital structure continued to break down after disappointing earnings with its 10¼% senior notes due 2030 (Caa2/CCC) sinking double digits in heavy volume.

DISH delayed

DISH’s $2 billion offering of five-year senior secured notes was expected for Friday but the deal was pushed to Monday’s session.

Initial price talk also came wide to initial guidance and the deal underwent covenant changes.

DISH talked its senior secured notes with a coupon of 11½% to 11¾% and an original issue discount of 98 for an all-in yield of 11¾% to 12%, according to a market source.

Early guidance was for a 2-point OID and a yield in the mid to high 11% area.

Books are expected to close at 10 a.m. ET Monday, a source said.

The deal also underwent covenant changes limiting the amount of pari passu debt permitted.

The tepid response to the deal was a surprise to some given its cheapness and the relatively strong fundamentals of the company.

However, DISH has some short-term maturities looming and there is risk involved in the buildout of its wireless network, which proceeds from the new offering are earmarked for.

The deal was also announced on Tuesday when the market widely expected a dovish tone from the Federal Reserve Open Market Committee.

The market quickly lost its risk-on sentiment following Federal Reserve chair Jerome Powell’s Wednesday press conference.

Ford returns to par

Ford’s 7.35% senior notes due 2027 (Ba2/BB+/BB+) wiped out losses from the past two sessions and returned to par.

The notes were changing hands in the 99½ to 99¾ context in early trade and continued to gain as the session progressed.

They were marked at 99 7/8 bid, par 1/8 offered heading into the close, a source said.

Ford’s new 7.35% notes have struggled over the past two session, falling to a 99-handle as the market digested Powell’s comments.

However, they improved alongside the broader market on Friday.

The notes traded as high as par ¼ on the break but were wrapped around par before selling pressure drove the market lower on Wednesday.

Ford priced a $1.5 billion issue of the 7.35% notes at par on Tuesday.

Carvana’s breakdown

Carvana’s capital structure continued to break down with its already struggling senior notes moving dramatically lower post-earnings.

The used car e-commerce platform’s 10¼% senior notes due 2030 sank more than 10 points on Friday.

They traded as low as 45½ in the late afternoon with the yield 28%, a source said.

There was $41 million in reported volume.

The notes were on a 59-handle heading into earnings.

The $3.275 billion issue priced at par in late April.

Carvana’s 4 7/8% senior notes due 2029 fell 5 points to close the day on a 34-handle with the yield brushing up against 26%.

The 5½% senior notes due 2027 sank 7 points to a 36-handle with the yield 34%.

The company posted a large earnings miss and a stark slowdown in sales with its already negative EBITDA accelerating, a source said.

Indexes

The KDP High Yield Daily index rose 4 points to close Friday at 50.91 with the yield now 7.92%.

The index fell 50 points on Thursday, 10 points on Wednesday, 3 points on Tuesday and 12 points on Monday.

The index posted a cumulative loss of 71 points on the week.

The CDX High Yield 30 index gained 79 bps to close Friday at 99.11.

The index sank 62 bps on Thursday, 69 bps on Wednesday, gained 42 bps on Tuesday and fell 72 bps on Monday.

The index posted a cumulative loss of 82 bps on the week.

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