First Republic down as bank pressure continues; AMC, DISH paper higher; Qurate drops

By Cristal Cody

Tupelo, Miss., March 29 – First Republic Bank’s notes (B2/BB-/CCC+) gave back gains made at the start of the week.

The 4 3/8% subordinated notes due 2046 (B2/B-) dropped 1¼ points during the session and were down nearly 5 points from Monday following news reports the company was no longer for sale.

The bank space continued to be pummeled on Wednesday with Congressional testimony underway investigating the collapse of Silicon Valley Bank and Signature Bank and the announcement from the U.S. Senate Finance Committee that Credit Suisse violated a 2014 plea agreement with the Justice Department by helping American clients evade taxes.

In the prior week, the bond market was rocked following the Swiss government’s decision to write down to zero Credit Suisse Group AG’s CHF 16 billion of additional tier 1 bonds as part of its government-brokered acquisition by UBS Group AG.

Stress from the bank failures is expected to lead to defaults.

“Recent banking system funding data reveals concerning trends playing out in the banking system,” BNP Paribas Securities Corp. analyst Meghan Robson said in a research note.

Federal deposit data released Friday showed a $98 billion drop in bank deposits for the week ending March 15, according to the note.

The week marked a “deposit flight” with a $120 billion outflow from small banks versus a $66 billion inflow to large banks, Robson said.

“Small banks increased lending over the week, potentially a result of ‘corporate fright’ – likely driven by a drawdown of revolvers,” Robson said. “Lastly, we see evidence of ‘deposit fight’ – small banks increased deposit rates relatively more in an effort to curb outflows. We believe these trends suggest an acceleration of tighter lending conditions ahead which will drive a pickup in downgrades and defaults.”

The Federal Reserve Bank of New York said Wednesday in the March update of its Corporate Bond Market Distress index that the high-grade space improved, while the junk market was up slightly but still at low historical levels.

Stocks rallied with indices up 1% or higher on Wednesday.

The S&P 500 index closed the day 1.43% better.

The iShares iBoxx High Yield Corporate Bond ETF added 91 cents, or 1.24%, to $74.29.

The CBOE Volatility index retreated further from above a 20 handle and declined 3.71% to 19.23.

AMC Entertainment Holdings, Inc.’s and DISH Network Corp.’s distressed paper traded heavily on Wednesday.

AMC’s bonds were about 1 point to over 3 points higher after rallying Tuesday on market chatter of a potential merger with Amazon.com, Inc.

DISH’s notes headed out about 1½ points to 4 points better.

DISH’s 5¼% notes due 2026 (Ba3/B+) were up nearly 1½ points on $31 million of secondary supply.

Also Wednesday, Qurate Retail Inc.’s 8½% senior notes due 2030 (Caa2/CCC-) sank 4 5/8 points in active trading.

First Republic softens

First Republic Bank’s 4 3/8% subordinated notes due 2046 (B2/B-) dropped 1¼ points to 51¾ bid on $10 million of trading on Wednesday, a source said.

The 4 5/8% subordinated notes due 2047 (B2/B-) fell 2½ points to 51½ bid in light activity totaling $2 million.

The notes have given back gains made at the start of the week when the 4 3/8% tranche rallied 6 points to hit 56¼ bid, and the 4 5/8% notes traded nearly 2 points better at 52 3/8 bid on Monday.

The bank received a rescue when 11 major banks announced March 16 they would make $30 billion of deposits into First Republic.

First Republic Bank was cut to junk ratings earlier in March by Moody’s Investors Service, S&P Global Ratings and Fitch Ratings.

The San Francisco-based bank’s stock closed 5.63% higher at $14.26.

AMC jumps

AMC Entertainment Holdings’ 10% senior secured second-lien notes due 2026 (Caa3/CCC-) held onto gains from the prior session and added another point to head out at 61¾ bid on more than $15 million of volume on Wednesday, a source reported.

The bonds rallied over 2½ points on $30 million of secondary action on Tuesday.

AMC Entertainment Inc.’s 5¾% subordinated notes due 2025 (Ca/CCC-) also climbed 3¾ points to around 58½ bid in thin trading on Wednesday.

The company’s stock fell about 3% to $5.

Despite market chatter, market observers do not expect a merger with Amazon with Wedbush Securities analysts Alicia Reese and Michael Pachter calling a union “unlikely” in a note on Tuesday.

AMC, a Leawood, Kan.-based movie theater owner, faces an April 27 court hearing over a lawsuit from Allegheny County Employees’ Retirement System in the Delaware Court of Chancery regarding its issuance of preferred equity.

DISH perks up

DISH’s paper climbed in heavy secondary trading on Wednesday, a source said.

The 5 7/8% senior notes due 2024 (B3/B) rallied 4 points to 84¾ bid on $27.95 million of volume.

The notes had declined 1¾ points on Tuesday on more than $23 million of trading.

DISH’s 5¼% notes due 2026 (Ba3/B+) also were up nearly 1½ points at 75¾ bid in heavier secondary action that topped $31 million on Wednesday.

The Englewood, Colo.-based satellite cable operator’s stock closed up about 5% at $9.10.

Qurate Retail down

In the distressed retail space, Qurate Retail’s 8½% senior notes due 2030 (Caa2/CCC-) sank 4 5/8 points to a quote of 25 3/8 bid on $8.34 million of trading on Wednesday, a source said.

At the start of the week, the bonds shed 3 7/8 points to 30 1/8 bid.

Subsidiary QVC Inc.’s paper has also been under pressure over the week since Fitch reported Monday it downgraded QVC and parent West Chester, Pa.-based Qurate.

Distressed index declines

S&P U.S. High Yield Corporate Distressed Bond index one-day returns declined on Tuesday to minus 0.44% from 0.37% on Monday.

Month-to-date return losses widened to minus 5.94% on Tuesday versus minus 5.53% on Monday.

Quarterly and year-to-date total returns slipped to 2.62% on Tuesday from 3.07% at the start of the week.

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