LABL/Multi-Color at a premium; Intelsat jumps on merger talks; DISH bounces

By Paul A. Harris and Abigail W. Adams

Portland, Me., March 29 – The European high-yield new-issue market was active on Wednesday as Nexans SA priced an upsized €400 million issue (from €325 million) of five-year senior sustainability-linked bullet notes (expected S&P: BB+) at par to yield 5½%, through price talk.

The deal traded to 101 1/8 bid, 101 ½ offered, a market source said.

In Europe, interest rates have yet to reach levels that are prohibitive to speculative grade issuers with high credit quality, sources say.

Also, the high-yield accounts in Europe are understood to have a lot of cash to put to work, they add.

The dollar-denominated primary market remained inactive on Wednesday.

Barring a $700 million-plus burst of combined issuance during the Thursday and Friday sessions (not impossible, sources say) March will end with less than $5 billion of new junk issuance.

Not surprisingly March issuance, at $4.25 billion to Wednesday's close, is poised to be the new year's lowest total monthly issuance (January saw $20.4 billion, February saw $14.4 billion).

March will end up being the slowest month since last December, during which only $2.4 billion priced.

And barring that above-mentioned burst, March will come in with total issuance below $5 billion.

Going back to the beginning of 2018 only seven monthly issuance totals lagged the $5 billion mark.

Four of those seven months came in 2022: May at $4 billion, July at $2 billion (the lowest monthly total since the beginning of 2018), October at $3.7 billion and, as mentioned, December at $2.4 billion.

March 2023 to date, with only two sessions remaining to play out, just barely tops March 2020's $4.24 billion which came, of course, amid the initial volatility that gripped the capital markets while the world attempted to size up the scope of the coronavirus pandemic.

Meanwhile, it was a strong day in the secondary space with positive earnings helping to lift market sentiment ahead of a heavy slate of economic data.

Buyers returned to the market on Wednesday after a largely sideways week with the cash bond market lifted ½ to ¾ point and the CDX index up about 1 point, sources said.

There was an uptick of trading activity with the first new paper since early March entering the space.

LABL, Inc.’s, which does business as Multi-Color Corp., 9½% senior secured notes due 2028 (B2/B-) were trading at a healthy premium to their issue price although the notes closed off their highs.

Intelsat Jackson Holdings, SA’s 6½% first-lien secured notes due 2030 (B3/B+) outshined the market with news the satellite company was in merger talks catapulting the notes 6 to 7 points higher.

The merger talks also helped lift DISH Network Corp.’s badly battered capital structure with the satellite broadcaster’s senior notes jumping 1 to 3 points.

LABL at a premium

LABL’s new 9½% senior secured notes due 2028 were trading at a healthy premium to their issue price on Wednesday with the notes active despite the small size of the issue.

The 9½% notes were marked at par ¾ bid, 101¼ offered heading into the market close, a source said.

While the notes maintained a healthy premium to their issue price, they closed off the highs of the day, trading on a 101-handle early in the session.

The notes saw a big bid from dealers, which attracted flippers that normally are not active in small, heavily oversubscribed offerings, a source said.

There was $48 million in reported volume.

In the first new deal since early March, LABL priced a $300 million issue of the 9½% notes at par in a Tuesday drive-by.

The yield printed at the tight end of the 9½% to 9¾% yield talk. Initial guidance was in the 10% area.

The deal was heard to have played to $1.9 billion of demand with the deal coming to the market with $200 million in reverse inquiry, sources said.

Intelsat talks

Intelsat’s 6½% first-lien secured notes due 2030 were the largest gainers of Wednesday session with the notes jumping 6 to 7 points on news of merger talks.

The 6½% notes climbed to a 90-handle following reports SES SA was in advanced merger negotiations with Intelsat.

They were trading in the 90¼ to 90¾ context heading into the market close.

There was $8 million in reported volume.

The notes were trading on an 84-handle heading into Wednesday’s session.

Intelsat issued $3 billion of the 6½% notes as part of its bankruptcy exit financing in February 2022.

DISH gains

DISH’s badly battered capital structure was lifted by news of Intelsat’s merger negotiations with its senior notes jumping 1 to 3 points.

DISH’s soon-to-mature 5 7/8% senior notes due Nov. 15, 2024 (B3/B) were the largest benefactors of the news.

The notes jumped 3 points to close Wednesday in the 83½ to 84 context, a source said.

The yield was about 18%.

There was $28 million in reported volume.

DISH’s 5¼% senior secured notes due 2026 (Ba3/B+) rose 1½ points to close the day at 75 ¾ with the yield about 13 7/8%.

There was $31 million in reported volume.

DISH’s 11¾% senior secured notes due 2027 (Ba3/B+) climbed 2 points, trading in the 92½ to 93½ context heading into the market close.

There was $20 million in reported volume.

Fund flows

High-yield ETFs sustained a whopping $1.83 billion of net daily cash outflows on Tuesday, the most recent session for which data was available at press time, according to a market source.

The HYG exchange-traded fund saw $1.34 billion of outflows on the day, amounting to 10% of assets under management, the source said.

Actively managed high-yield funds sustained $85 million of outflows on Tuesday.

The combined funds are tracking $2.04 billion of net outflows for the week that will conclude with Wednesday's close, according to the market source.

DISH’s capital structure has seen heavy selling pressure since late February when a ransomware attack sparked widespread outages that the company is still grappling with.

The attack is expected to result in a significant loss of subscribers and take a toll on the company’s fundamentals.

Market players have speculated that the company may need to restructure to meet its looming debt maturities.

However, news of Intelsat’s merger negotiations helped lift DISH with the market reevaluating the value of DISH’s assets, a source said.

Indexes

The KDP High Yield Daily index gained 20 points to close Wednesday at 51.07 with the yield now 7.41%.

The index fell 10 points on Tuesday after inching up 2 points on Monday.

The ICE BofAML US High Yield index rose 52.8 bps with the year-to-date return now 2.397%.

The index was down 12.3 bps on Tuesday after gaining 15.1 bps on Monday.

The CDX High Yield 30 index gained 94 bps to close Wednesday at 100.55.

The index fell 27 bps on Tuesday after gaining 55 bps on Monday.

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