Junk: Martin Midstream prices; CCO at a nominal premium; Mauser rises; Ford lifted

By Paul A. Harris and Abigail W. Adams

Portland, Me., Jan. 31 – Martin Midstream Partners LP and Martin Midstream Finance Corp. brought the curtain down on a bigger-than-expected January 2023 in the high-yield new issue market with a $400 million issue of five-year senior secured second-lien notes (Caa1/B/B).

The deal took January issuance to $20.4 billion in 25 junk-rated, dollar-denominated tranches, surpassing – and in some cases doubling – modest January forecasts that came in the waning days of the old year.

Meanwhile, it was a strong day in the secondary space with the cash bond market shaking off early weakness to close the day with a ½ point gain.

The employment cost index report, which reflected a deceleration in wage growth, fueled the market’s rally ahead of the Federal Open Market Committee’s Wednesday rate-hike decision.

There is little doubt the Federal Reserve will lift interest rates by 25 basis points on Wednesday with the market now widely expecting a pause in May.

However, recent macro data has once again raised the prospect for a rate cut in 2023, a prospect some sources remain wary of.

New paper remained in focus in the secondary space with the deals to price during Monday’s session trading at premiums to their issue prices.

Charter Communications, Inc. subsidiaries CCO Holdings, LLC and CCO Holdings Capital Corp.’s new 7 3/8% senior notes due 2031 (B1/BB-) maintained a nominal premium in heavy volume on Tuesday, although the notes saw little price movement since breaking for trade.

Mauser Packaging Solutions Holding Co.’s new 7 7/8% senior secured first-lien notes due 2026 (B2/B) continued to gain after a strong break with the heavy demand seen during bookbuilding following the notes into the secondary space.

Outside of new issues, Ford Motor Credit Co. LLC’s senior notes (Ba2/BB+) were lifted in heavy volume after the surprise earnings beat of industry peer General Motors.

Martin prices

With the new deal from Martin Midstream on Tuesday, January 2023 became the biggest month in the primary market in a year. The last month that saw a greater amount of issuance was January 2022, at $23.7 billion.

January was the first month to top $10 billion since last August ($11.7 billion), and January 2023's total handily surpassed that of the entire fourth quarter of 2022 ($15.2 billion).

Martin Midstream cleared the active dollar-denominated new issue calendar.

However, Atlas Air Worldwide Holdings Inc. is in the wings with an expected $800 million offering of first-lien senior secured notes (BB/BB+) via Barclays, sources say.

Timing on that deal remains to be determined, however Atlas Air was scheduled to kick off an $800 million term loan on Tuesday.

Proceeds from the debt will be used to support the acquisition of Atlas Air by Apollo.

CCO holds nominal premium

CCO Holdings’ new 7 3/8% senior notes due 2031 maintained a nominal premium in heavy volume on Tuesday, although the notes saw little price movement since breaking for trade.

The 7 3/8% notes were wrapped around par ¼ throughout the session, a level reached shortly after breaking for trade on Monday.

CCO Holdings priced an upsized $1.1 billion, from $1 billion, issue of the 7 3/8% notes at par in a Monday drive-by.

The yield printed at the tight end of the 7 3/8% to 7 5/8% yield talk.

The deal was heard to be playing to $2 billion of orders.

Mauser gains

Mauser’s new 7 7/8% senior secured first-lien notes due 2026 continued to gain after a strong break in heavy volume on Tuesday with the strong demand seen during bookbuilding following the notes into the secondary space.

The 7 7/8% notes rose about ½ point to close the session wrapped around 101, sources said.

There was $200 million in reported volume.

In a heavily oversubscribed offering, Mauser priced a $2.75 billion issue of the 7 7/8% notes at par on Monday.

The yield printed at the tight end of the 7 7/8% to 8 1/8% yield talk. Initial guidance was in the mid-to-high 8% area.

The roadshow for the deal was initially scheduled to run through Wednesday. However, orders for the offering were heard to be $7.3 billion, a source said.

Ford lifted

Ford’s senior notes were lifted in heavy volume on Tuesday after a surprise earnings beat from General Motors raised expectations ahead of Ford’s Thursday earnings report.

Ford Motor Co.’s 6.1% senior notes due 2032 gained 1 point to close the day wrapped around 98 1/8, a source said.

The yield fell to 6.36%.

There was $28 million in reported volume.

Ford Motor Credit’s 7.35% senior notes due 2030 and 6.95% senior notes due 2026 continued to add to the strong gains made since pricing at a slight discount in early January.

The 7.35% notes gained ¾ point to close Tuesday at 105 with the yield about 6.4%.

The 6.95% notes added ½ point to close the day at 102½ with the yield about 6%.

There was $26 million and $21 million in reported volume respectively.

“They’re trading up in sympathy,” a source said.

Fund flows

The dedicated high-yield bond funds had $484 million of net inflows on Monday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs saw $460 million of inflows on the day.

Actively managed high-yield funds saw $24 million of inflows on Monday, the source said.

The combined funds are tracking $726 million of net inflows for the week that will conclude with Wednesday's close, according to the market source.

Indexes

The KDP High Yield Daily index gained 8 points to close Tuesday at 53.31 with the yield now 6.9%.

The index was down 14 points on Monday.

The CDX High Yield 30 index jumped 55 points to close Tuesday at 102.75.

The index was down 46 points on Monday.

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