Bath & Body jumps post-earnings; Flora Food on an uptrend; HY funds add $2.93 billion

By Paul A. Harris and Abigail W. Adams

Portland, Me., Nov. 17 – With a quiet primary market in the high-yield sector, the secondary space was in focus and continued to give back gains on Thursday with the cash bond market off ¼ to 3/8 point as the market reevaluated the dovish pivot rally sparked by softer than expected inflationary figures.

The secondary space has slipped over the past two sessions as equities turned negative on the heels of hawkish comments from Federal Reserve officials and analysts’ upwardly revised forecasts for the terminal Fed rate.

With activity surrounding recent issues tempering, topical and earnings-related news were drivers of activity in the space.

Bath & Body Works, Inc.’s senior notes were on the rise in heavy volume as the company’s capital structure climbed 1 to 2½ points following a large earnings beat.

Sigma Holdco BV’s (Flora Food Group) 7 7/8% senior notes due 2026, an illiquid issue that rarely trades in volume, were active on Thursday with the strong gains made over the past month continuing.

Medical Properties Trust, Inc.’s split-rated 5% senior notes due 2027 (Ba1/BBB-) were softer in heavy volume.

Meanwhile, cash continued to enter the space with high-yield mutual and exchange-traded funds seeing inflows of $2.93 billion in the week through Wednesday’s close, according to the Refinitiv Lipper Fund Flows report.

Quiet primary

With no fresh announcements on Thursday the only deal on the active forward calendar is the Pegasus Merger Co./Tenneco Inc. $1 billion offering of six-year senior secured notes (B2/B-).

The deal is in the market in support of the buyout of Tenneco by Apollo, which closed on Thursday, according to an 8-K document filed with the SEC (see related story in this issue).

The bonds were in roadshow mode at the beginning of the month, and have been slogging against heavy investor pushback, sources say.

Although the market has been anticipating an announcement regarding covenant concessions it has been radio silence on the Tenneco deal for a week.

Bath & Body Works’ earnings

Bath & Body Works’ senior notes were in focus on Thursday with the retailer’s capital structure climbing 1 to 2½ points on the heels of a large earnings beat.

The 6 5/8% senior notes due 2030 (Ba2/BB) were the most active in the capital structure.

The notes climbed 1 1/8 points to 92½ with the yield about 7.9%, according to a market source.

There was $21 million in reported volume.

The 6 7/8% senior notes due 2035 rose 1¾ points to 88 with the yield just shy of 8½%.

There was $17 million in reported volume.

The 7½% notes due 2029 saw the largest price appreciation with the notes climbing 2½ points to 98½ with the yield 7 7/8%.

Bath & Body Works was on the rise after a large earnings beat and upwardly revised forward guidance.

Flora gains

Sigma Holdco’s (Flora Food) 7 7/8% senior notes due 2026, an illiquid issue that rarely trades in volume, were active on Thursday with the note’s strong uptrend continuing.

The 7 7/8% notes broke above a 71-handle on Thursday with the notes trading in the 71¾ to 72 context heading into the market close with the yield about 19¼%, a source said.

There was $10.5 million in reported volume.

The notes were on a 61-handle at the start of the month but there were some round lot trades in the 67 to 68 context the previous session, a source said.

Medical Properties slips

Medical Properties’ split-rated 5% senior notes due 2027 were softer in heavy volume on Thursday.

The notes fell about ½ point to break below an 83-handle.

The notes were trading in the 82¾ to 83¼ context throughout the session with the yield about 9½%.

There was $20.75 million in reported volume.

$1.35 billion inflows

The dedicated high-yield bond funds saw $1.352 billion of net daily cash inflows on Wednesday, according to a market source.

High-yield ETFs had $990 million of inflows on the day.

Actively managed high-yield funds saw $362 million of inflows on Wednesday, the source said.

News of Wednesday's daily flows was followed by a Thursday afternoon report that the combined funds saw $2.93 billion of net inflows in the week to Wednesday's close, according to Refinitiv Lipper.

Indexes

The KDP High Yield Daily index fell 15 points to close Thursday at 51.74 with the yield now 7.56%.

The index was down 10 points on Wednesday after rising 23 points on Tuesday and 26 points on Monday.

The ICE BofAML US High Yield index slid 40.1 bps with the year-to-date return now negative 11.566%.

The index was up 1.2 bps on Wednesday, 43.7 bps on Tuesday and 33.6 bps on Monday.

The CDX High Yield 30 index slid 4 bps to close Thursday at 100.39.

The index slipped 9 bps on Wednesday, gained 20 bps on Tuesday after falling 23 bps on Monday.

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