Ford HY benchmark offering prices, outstanding notes active, unchanged; Medline higher

By Paul A. Harris and Abigail W. Adams

Portland, Me., Jan. 3 – The year 2023 started off with well-known issuer Ford Motor Credit Co. LLC pricing the first junk bond offering as a benchmark transaction.

Meanwhile, it was a strong start to the year for the secondary space with the cash bond market adding 3/8 point although activity in the space remained muted.

Ford’s latest offering sparked activity in its 6.1% senior green notes due 2032 (Ba2/BB+).

While the notes were the most actively traded issue of Tuesday’s session, there was little price movement with the notes flat in the heavy volume.

Medline Industries Inc.’ junk bonds were on the rise with substantial trading activity with the notes paring their losses after slipping in the final days of 2022.

Altice USA Inc. subsidiary CSC Holdings LLC’s junk bonds also improved in a busy day for the issue after closing 2022 near their historic lows.

The kickoff

Ford Motor Credit priced the year's first junk bond deal on Tuesday, a $2.75 billion amount of senior notes (Ba2/BB+/BB+) that came in three tranches.

The deal, which priced on the investment-grade desk, included $300 million of SOFR plus 295 basis points three-year floating-rate notes that priced at par.

It also included $1.3 billion of 6.95% three-year fixed-rate notes that priced at 99.873 to yield 7%.

The long tranche priced as $1.15 billion of seven-year 7.35% notes that priced at 99.877 to yield 7 3/8%.

All three tranches priced on top of official price talk.

Terms circulated after Tuesday's close.

In the early going, demand across all three tranche came to $6 billion, skewed toward the longer-dated tranche, a sellside source said.

Among factors driving that notable investor demand was the near absence of new issue activity during the final weeks of the old year, the source remarked.

No other deals were announced on Tuesday.

Nor or there any high-yield bond offerings being telegraphed to investors, a portfolio manager said.

Ford active, unchanged

Ford’s 6.1% senior green notes due 2032 were the most actively traded issue in the secondary space although with little movement in price.

The notes continued to trade in the 92¾ to 93 context with the yield about 7 1/8%, according to a market source.

There was $21 million in reported volume.

The notes were active after Ford reopened the primary market with a two-tranche benchmark-size offering.

Medline gains

Health care supplies manufacturer Medline’s junk bonds were on the rise in heavy volume on Tuesday with the notes paring their losses from an end-of-year dip in the final days of 2022.

Medline’s 3 7/8% senior secured notes due 2029 (B1/B+/BB-) gained 1¼ points.

They were changing hands in the 81¾ to 82¼ context heading into the market close with a yield of about 7 5/8%.

There was $16 million in reported volume.

The 5¼% senior notes due 2029 (Caa1/B-/B-) also rose about 1¼ points to break above an 80-handle.

The notes were changing hands in the 80 7/8 to 81 1/8 context heading into the market close, a source said.

The yield was about 9 1/8%.

There was $17 million in reported volume.

The notes closed 2022 on a 79-handle.

Medline’s notes were on a strong uptrend in November with the 3 7/8% notes trading as high as an 86-handle and the 5¼% notes trading up to an 84-handle.

However, the notes gave back most of their gains in December, particularly in the final trading sessions of the year when the 3 7/8% notes fell to an 80-handle and the 5¼% notes traded down to a 79-handle.

CSC Holdings improves

Cable operator CSC Holdings’ junk bonds were in focus in the distressed debt space with the notes improved after closing the previous year near historic lows.

The 7½% senior notes due 2028 (Caa1/B-) gained 1 point in active trading.

The notes closed Tuesday at 69 1/8 with the yield 16½%, according to a market source.

There was $9.5 million in reported volume.

The 5¾% senior notes due 2030 gained about ½ point to close the day at 58 with the yield 15 7/8%.

The company’s 4 5/8% senior notes due 2030 gained 3/8 point to close the day at 55 7/8.

The yield was 14%.

There was about $8 million in reported volume.

While the notes improved on Tuesday, they remain near their historic lows.

CSC Holdings saw heavy selling in December after parent company Altice announced it would not pursue the sale of its Suddenlink business.

The sale could have netted the company $20 billion which could have been used to pay down debt, sources previously said.

Fund flows

High-yield ETFs saw $326 million of daily cash inflows last Friday, according to a market source.

Actively managed high-yield funds sustained $157 million of outflows on that day.

During the past two weeks the combined funds saw $103 million of net inflows, the source said.

In terms of the yearly cash flows, 2022 closed with the combined funds having sustained a massive $47 billion of net outflows, according to the market source.

Indexes

The KDP High Yield Daily index gained 34 points to close Tuesday at 51.99 with the yield now 7.43%.

The ICE BofAML US High Yield index rose 57 bps with the year-to-date return 0.57%.

The CDX High Yield 30 index closed Tuesday at 100.85.

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