Carvana notes mixed; KeyCorp paper soft on earnings watch; Qurate Retail mostly flat

By Cristal Cody

Tupelo, Miss., March 22 – Carvana Co.’s distressed paper saw light trading on Wednesday after the company launched an exchange offer for five series of its senior notes.

Carvana’s 5 5/8% senior notes due 2025 (Caa2/CCC) were seen up about 10 points in light trading.

Other financial issuers were coming under focus in the wake of the U.S. government’s seizure of Silicon Valley Bank and Signature Bank and the Swiss government-brokered takeover of Credit Suisse Group AG by UBS Group AG, sources report.

KeyCorp’s 5% perpetual securities remained soft on a 70s handle on Wednesday after the issue dropped about 9 points last week with concern about the issuer’s upcoming earnings report growing.

The securities have given back about 20 points since the start of March.

KeyCorp usually confirms its first-quarter earnings date around Feb. 7 but by March 20 still had yet to confirm its reporting date, Christine Short of Wall Street Horizon said in a note this week.

“Our research shows that firms with abnormally late earnings confirmation dates tend to report bad news, then underperform when they finally issue quarterly numbers,” Short said.

KeyCorp missed fourth-quarter earnings estimates in January as a result of rising costs on deposits and an increase in its credit loan provision, according to the note.

With all the “regional banking worries left and right, this is not a bullish look for the Cleveland-based $11 billion market cap financials sector firm,” Short said.

Overall trading action was thin with attention on the Federal Reserve’s afternoon rate decision on Wednesday.

The Federal Reserve announced a rate hike by 25 basis points, putting the target range for the Federal Funds rate at 4¾% to 5%.

Equities softened after the news, while market volatility was marginally higher. The S&P 500 index dropped 1.65%.

The CBOE Volatility index increased 4% to 22.23.

The iShares iBoxx High Yield Corporate Bond ETF rose 4 cents to $74.01.

Home shopping network owner Qurate Retail Inc.’s 8¼% notes due 2030 (Caa2/CCC-) were mostly flat to about ¼ point softer in light trading following a downgrade from Moody’s Investors Service.

Carvana paper quiets

Carvana’s 5 5/8% senior notes due 2025 (Caa2/CCC) were seen up about 10 points at 63 bid in light trading by the close on Wednesday, a source said.

The 10¼% senior notes due 2030 were mostly flat at 52¼ bid going out.

The Tempe, Ariz.-based online car retailer said Wednesday it is offering to exchange the notes, including the 5 5/8% and 10¼% issues, for up to $1 billion of new 9%/12% cash/PIK toggle senior secured second-lien notes due 2028.

The exchange offer expires on April 19.

Market eyes KeyCorp

KeyCorp’s 5% perpetual securities went out with a handle in the 70s in light trading, a source said Wednesday.

A week ago, the paper was quoted 9 points lower on the day at 75 bid.

The issue traded with a handle in the 90s at the start of March.

After the Federal Reserve’s rate hike, KeyCorp announced Wednesday that the company and its banking affiliates raised their Prime lending rate to 8% from 7¾%, effective Thursday.

KeyCorp now is expected to issue first-quarter results on April 20, Short said.

The Cleveland-based financial services company operates KeyBank NA.

Qurate notes steady

Qurate Retail’s 8¼% notes due 2030 (Caa2/CCC-) were mostly flat to about ¼ point softer at the 35½ bid area over the session in light trading, a source said.

The notes shed about 1 point on Tuesday after Moody’s downgraded the notes and changed the company’s outlook to stable from negative.

S&P Global Ratings lowered the notes on Friday.

The West Chester, Pa.-based company reported fourth-quarter and fiscal 2022 losses at the start of the month.

Distressed returns up

S&P U.S. High Yield Corporate Distressed Bond index one-day returns improved ahead of the Fed’s rate decision.

One-day returns rose to 0.15% on Tuesday from minus 0.57% on Monday.

Month-to-date return losses narrowed to minus 4.55% from minus 4.69% at the start of the week.

Quarterly and year-to-date total returns were higher at 4.14% on Tuesday versus 3.99% on Monday.

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