Western Alliance notes lower; regional banks stay in focus; Lumen mixed post earnings

By Cristal Cody

Tupelo, Miss., May 3 – Western Alliance Bancorp became the latest bank to send shivers through the financial markets with the issuer’s paper down about 2¾ points to 5¼ points in heavy secondary action on Wednesday.

Western Alliance’s 3% notes due 2031 (Ba1) declined 2¾ points.

The bank’s stock closed down 4.4% but sank more than 30% in early after-hours trading.

PacWest Bancorp also sold off with shares down 57% in after-hours trading at $2.74 after closing the day 2% lower at $6.42, sources noted.

PacWest’s $500 million of $25-par 7¾% perpetual preferred stock (//B) sold on June 1, 2022 closed the day down 7.65% to $11.59 but plunged 54% in early after-hours volume to where the issue was last seen at $5.31.

The space has been under renewed pressure this week with the collapse on Monday of First Republic Bank and its fire sale to JPMorgan Chase & Co. that sent First Republic’s subordinated notes to trade at less than 1 bid by Tuesday on expectations of a default. The market has seen three major bank collapses since March.

The KBW Regional Banking index ended Wednesday down less than 1% at 81.56 after sliding Tuesday to its lowest level in nearly three years.

Higher-grade financial paper saw some gains on Wednesday, including Wells Fargo & Co.’s 5.9% perpetual securities that were ¾ point better following the Federal Reserve’s rate hike, a source said.

The Fed announced it raised the target range for the Federal Funds rate by 25 basis points to 5% to 5¼%, the highest rate since 2007.

“Economic activity expanded at a modest pace in the first quarter,” according to the Fed’s statement. “Job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated. The U.S. banking system is sound and resilient.”

Stocks declined following the report with indices closing lower.

The S&P 500 index dropped 0.7%.

The iShares iBoxx High Yield Corporate Bond ETF fell 4 cents, or 0.05%, to $74.58.

The CBOE Volatility index, up 10.7% on Tuesday, rose 4.11% by the close to 18.51.

Elsewhere Wednesday, Lumen Technologies, Inc.’s notes went out mixed in strong trading after the company posted first-quarter earnings results.

The 4% senior secured notes due 2027 (B3/BB-) were down ½ point.

Western Alliance drops

Western Alliance’s 3% notes due 2031 (Ba1) declined 2¾ points to 65 bid on Wednesday, a source said.

Secondary supply hit $18.6 million.

The bank’s 5¼% notes due 2030 (Ba1) slid more than 5¼ points to head out around 73 bid on lower activity of $1.5 million during the session.

Shares closed Wednesday 4.4% softer at $29.57 and sank 30.47% in early after-hours trading to $20.56.

The stock opened the week at $37.55.

The Phoenix-based regional bank holding company was downgraded in April by Moody’s Investors Service, Fitch Ratings and KBRA.

Lumen bonds mixed

Lumen Technologies’ 4% senior secured notes due 2027 (B3/BB-) were strongly traded over the session with more than $16 million of paper changing hands on Wednesday, a source said.

The bonds dropped ½ point to 68 bid.

Other Lumen paper was stronger over the session but saw lighter secondary action.

Lumen’s 6 7/8% senior notes due 2028 (Caa1/CC) rallied over 5 points to head out at 49 bid on trading totaling $1.9 million.

The Denver-based telecommunications company on Tuesday reported lower revenue in the first quarter along with slightly weaker earnings.

Distressed index down

S&P U.S. High Yield Corporate Distressed Bond index one-day returns dropped Tuesday to minus 0.21% from 0.01% on Monday.

Month-to-date returns over the prior two sessions totaled minus 0.2% on Tuesday.

Year-to-date total returns declined to 7.11% from 7.34% at the start of the week.

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