Deutsche Bank paper down in heavy secondary focus; Carvana declines; QVC under pressure

By Cristal Cody

Tupelo, Miss., March 24 – Deutsche Bank AG’s bonds topped the list of active junk and distressed trading action on Friday as another bank was engulfed in the financial crisis sparked two weeks ago.

The issuer came under focus as its credit default swap spreads widened over the week and further on Friday, sources said.

Deutsche Bank’s 7½% perpetual junior subordinated notes (Ba2/BB-) slid about 9½ points on more than $30 million of paper traded.

The space remained under pressure over the week following the Swiss government’s decision on Sunday to write down to zero Credit Suisse Group AG’s CHF 16 billion of Additional tier 1 bonds as part of its acquisition by UBS Group AG.

The continued bank fallout was sparked two weeks ago after depositors fled Silicon Valley Bank and the government seized the bank March 10.

“Depositors withdrew $42 billion from Silicon Valley Bank – about a quarter of its deposits – in one day leading to a run on the lender, according to the California Department of Financial Protection and Innovation,” KBRA said in a report.

Meanwhile on Friday, the Federal Reserve Board published its previously announced decision to deny an application by crypto-focused Custodia Bank, Inc., of Cheyenne, Wyo.

Market tone overall was mostly positive with stock indices higher and volatility lower.

The CBOE Volatility index was down 3.85% at 21.74.

The S&P 500 index closed up 0.56%.

The iShares iBoxx High Yield Corporate Bond ETF declined 15 cents to $73.60.

Carvana Co.’s paper treaded lower on Friday in light secondary action as the market continues to weigh its exchange offer announced on Wednesday.

Carvana’s 5 5/8% notes due 2025 (Caa2/C) fell 2 points during the session but mostly held onto gains of about 10 points made following the announcement.

Wedbush Securities Inc. analysts said in a note released Friday that the exchange offer is “not a game-changer” and that a larger restructuring is “still likely.”

The exchange offer is “not very attractive,” the Wedbush analysts said, adding that Carvana “newly issued bonds would likely trade well below par.”

Elsewhere, QVC Inc.’s distressed notes gave back about 2¾ points to 5 points over the day.

QVC’s 4 3/8% senior secured notes due 2028 (B2/B-) dropped 4 points to a 40 bid handle.

Deutsche Bank lower

Deutsche Bank’s 7½% perpetual junior subordinated notes (Ba2/BB-) slid about 9½ points to 69¾ bid on Friday on more than $30 million of paper traded, a source said.

The 4.789% perpetual notes (Ba2/BB-) dropped 12½ points to 61 bid on $4.8 million of trading.

Yields on Deutsche Bank’s perpetual notes were in the 28% to 33% plus area.

Deutsche Bank’s split-rated paper was down more than 1 point, the source said.

The bank’s 3.729% notes due 2032 (Baa3/BB+) were trading 1 point lower at a 72 handle on $8 million of volume.

The Frankfurt-based bank’s stock closed down 3.11% at $9.35 after earlier dropping to $8.85 on heavy trading of 36.4 million shares on Friday, compared to average volume of 4.5 million shares.

Carvana notes dip

Carvana’s paper mostly held onto midweek gains with the 5 5/8% notes due 2025 (Caa2/C) down 2 points at 60¼ bid on $3 million of trading on Friday, a source said.

The issue was down ¾ point on Thursday after trading Wednesday about 10 points better.

The Tempe, Ariz.-based online car retailer announced Wednesday an exchange offer for five tranches of notes for up to $1 billion of new 9%/12% cash/PIK toggle senior secured second-lien notes due 2028.

S&P Global Ratings downgraded the issuer and the notes on Thursday and cited the exchange as distressed and equivalent to a default.

Carvana “is still burning” $1 billion per year, according to the Wedbush note.

The latest transactions, combined with $1.9 billion of committed liquidity resources at the fourth quarter, “could extend the company’s life through 2024,” the analysts said. “Cost cuts and a further turn in the used car market together are highly unlikely to solve the company’s cash flow challenges, meaning a restructuring will be necessary at some point.”

QVC paper drops

QVC’s bonds were heading into the weekend down about 2¾ points to 5 points in light trading, a source said Friday.

The company’s 4.45% senior secured notes due 2025 (B2/B-) shed 5 points to a quote of 57½ bid on $4 million of secondary activity.

QVC’s 4 3/8% senior secured notes due 2028 (B2/B-) dropped 4 points to a 40 bid handle on $2 million of trading.

The home shopping network is a subsidiary of West Chester, Pa.-based Qurate Retail Inc.

Distressed returns

S&P U.S. High Yield Corporate Distressed Bond index one-day returns improved modestly to 0.06% on Thursday.

One-day returns were minus 0.2% on Wednesday, 0.15% on Tuesday and minus 0.57% on Monday.

Month-to-date return losses improved to minus 4.69% from minus 4.74% on Wednesday, minus 4.55% on Tuesday and minus 4.69% at week’s start.

Quarterly and year-to-date total returns were 3.99% on Thursday, compared to 3.93% on Wednesday, 4.14% on Tuesday and 3.99% 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.