Junk bonds retract gains; Charter lower; Chart falls with market; Tenet worse for wear

By Paul A. Harris and Abigail W. Adams

Portland, Me., Dec. 15 – Junk bond trading was under pressure on Thursday as the market further digested the Federal Reserve’s hawkish outlook and dot plot plan which placed the Federal Fund target rate on a 5% handle for 2023.

The secondary space was unfazed by the Federal Reserve announcement on Wednesday; however, selling pressure took hold during Thursday’s session with the cash bond market off ½ to ¾ point, sources said.

End-of-year illiquidity continued to set in with volume light amid the market weakness.

Topical news, large liquid issues, and end-of-year clean-up were the drivers of activity in the space.

Charter Communications, Inc.’s capital structure remained under pressure with its split-rated notes and subsidiary CCO Holdings, LLC’s senior notes (B1/BB-) down again after falling on Wednesday.

Chart Industries, Inc.’s recently priced tranches snapped their strong uptrend with the notes falling ¾ to 1 point alongside the broader market.

Tenet Healthcare Corp.’s 6 1/8% senior notes due 2028 (B3/B-) saw heavy selling on Thursday which drove the notes down 1½ to 2 points.

December

The high-yield new issue bourse remained idle on Thursday, as market sources continued to forecast that 2022 issuance has now run its course.

Due to the idleness of the primary market the imbalance between the demand for new bonds among investors, and the anemic supply that has obtained during the historically low-volume year of 2022 has gotten more pronounced as the year has progressed, a sellside source said on Thursday.

Nowhere has this been more apparent than the late-year Chart Industries, Inc. execution, a $1.97 billion two-part deal that was three times oversubscribed, with the two tranches initially enjoying robust price appreciation in the secondary market, the sellsider said.

The Chart Industries 7½% senior secured notes due January 2030 (Ba3/B+), which priced a week ago at 98.661 to yield 7¾% in a $1.46 billion tranche, have generically been trading at about $2.50 above the issue price.

The Chart Industries 9½% senior unsecured notes due January 2031 (B3/B), which priced at 97.949 to yield 9 7/8% in a $510 million tranche on the same day, have been trading around $4 above issue price.

The initial demand for the Chart paper, and its vigorous ensuing performance in the secondary market point to a market that has far too little supply with which to meet investor demand, the sellsider said.

That demand will certainly carry into the new year, with market sources saying the book of 2022 issuance is now closed.

Early 2023 should bring some supply, but it is unlikely to be a robust amount in the context of the modern high-yield new issue market, a syndicate banker said on Thursday.

Chart on Thursday

In spite of general strength, the strong uptrend in Chart’s recently priced tranches ebbed on Thursday with selling pressure in the market driving the notes lower.

Chart’s 7½% senior secured notes due 2030 (Ba3/B+) sank ½ point to a par-handle.

The notes were changing hands in the par ½ to par ¾ context heading into the market close, a source said.

They ended the previous session at 101 bid.

There was $16 million in reported volume.

Chart’s 9½% senior notes due 2031 (B3/B) fell 1 point to break below a 102-handle after trading above it the previous session.

The notes were changing hands in the 101½ to 102 context on Thursday, a source said.

There was $11 million in reported volume.

The weakness on Thursday was attributed to general market conditions and profit taking in the name, sources said.

Chart’s dual-tranche offering may have been the high-yield primary market’s last hurrah in 2022.

Chart priced a $510 million tranche of the 9½% notes at 97.949 to yield 9 7/8% and a $1.46 billion tranche of the 7½% notes at 98.661 to yield 7¾% on Dec. 8.

Charter down again

Charter’s capital structure remained under pressure on Thursday after heavy selling in the name the previous session.

Charter’s split-rated 5¼% senior notes due 2053 (Ba1/BBB-) sank another ½ point to close the day at 83¼.

There was $18 million in reported volume.

The notes have fallen about 1½ points since Tuesday.

CCO Holdings’ 4½% senior notes due 2030 sank another 1¾ points to close Thursday at 81 with the yield climbing to 7 3/8%.

There was $17 million in reported volume.

Charter has been under pressure since the company unveiled a $5.5 billion network upgrade plan at its Investors Day on Tuesday.

Tenet under pressure

Tenet’s 6 1/8% senior notes due 2028 were under pressure in heavy volume on Thursday.

The notes fell 1¾ points to close the day at 89¾ with the yield now 8 3/8%, according to a market source.

There was $13 million in reported volume.

Indexes

The KDP High Yield Daily index fell 22 points to close Thursday at 52.84 with the yield 7.07%.

The index gained 4 points on Wednesday, 42 points on Tuesday and 6 points on Monday.

The ICE BofAML US High Yield index fell 53.5 bps with the year-to-date return now negative 9.542%.

The index gained 5 bps on Wednesday, 66 bps on Tuesday and 17.1 bps on Monday.

The CDX High Yield 30 index fell 92 bps to close Thursday at 101.02.

The index shaved off 2 bps on Wednesday after gaining 99 bps on Tuesday and 18 bps on Monday.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.