Western Alliance, PacWest sink; financials drop; DISH bonds soften, CDS spreads gap out

By Cristal Cody

Tupelo, Miss., May 4 – Banking fears dominated the session Thursday with Western Alliance Bancorp. and PacWest Bancorp sliding further.

Western Alliance’s notes sank 10 points to more than 30 points on more than $28 million of secondary trading as the company sought to assure investors.

The bank’s paper was yielding in the 32% to over 55% area.

The holding company for Western Alliance Bank announced in a news release Thursday in response to a Financial Times article that the company was considering a potential sale of all or part of the business as “categorically false in all respects.”

The company added also that it has not “hired an advisor to explore strategic options.”

Late Wednesday at 9:38 p.m. ET, Western Alliance had released a statement “reaffirming its financial strength as well as its deposit growth guidance in response to recent industry events.”

The issuer outlined key financial metrics, including that the bank has not experienced unusual deposit flows following Monday’s collapse and government sale of First Republic Bank.

PacWest Bancorp also sold off after the issuer announced late Wednesday that it has explored strategic asset sales and options and has been approached by several potential partners and investors with discussions ongoing.

The bank said, though, it has not experienced unusual deposit flows since First Republic Bank’s sale.

PacWest’s $500 million of $25-par 7¾% perpetual preferred stock (//B) that priced in June 2022 finished down 46% at $6.24.

The company’s stock dropped 50.62% to $3.17 on Thursday.

The day also saw the announcement of the termination of TD Bank Group’s plan to acquire Memphis-based First Horizon Corp.

The companies said in a statement that the merger agreement, first announced on Feb. 28, 2022, ended due to regulatory approval uncertainties.

Regional banks came under renewed focus with the third bank collapse since March on Monday after First Republic Bank was shut and auctioned to JPMorgan Chase & Co.

The KBW Regional Banking index continued to decline on Thursday with the index down 3.51% at 78.69, the lowest level since 2020.

The SPDR S&P Regional Banking ETF dropped 5.45% to 36.08 by the close on heavy volume.

Other financial issuers were pressured during the session on lighter trading, a source said.

KeyCorp’s 5% perpetual securities (Baa3/BB+) declined 10 points to a quote of 65 bid on $1.7 million of volume.

Goldman Sachs Group, Inc.’s 3.8% perpetual notes (Ba1/BB+) gave back more than 4 points to head out at 77¾ bid on $3 million of trading.

The Federal Reserve noted Wednesday when it announced it raised the target range for the Federal Funds rate by 25 basis points to 5% to 5¼%, the highest rate since 2007, that it considered the U.S. banking system “sound and resilient.”

Stocks remained lower a second session following the Fed’s decision.

The S&P 500 index declined 0.72%.

The iShares iBoxx High Yield Corporate Bond ETF was 22 cents lower at $74.36.

The CBOE Volatility index moved out of the teens on Thursday. The index rose 9.54% to 20.09.

Meanwhile Thursday, DISH Network Corp.’s bonds were down about 2¾ points to 4¼ points, while its credit default swap spreads gapped out nearly 1,000 bps this week.

Western Alliance plunges

Western Alliance Bancorp.’s notes sank 10 points to more than 30 points on more than $28 million of volume over the session, a source said.

The 3% notes due 2031 (Ba1) dropped to 45 bid, down 10 points.

Trading volume totaled nearly $17 million.

The notes have given back 20 points from where the issue was last seen on Wednesday at 65 bid on $18.6 million of secondary action.

Western Alliance’s 5¼% notes due 2030 (Ba1) plunged about 31 points to trade with a 42 bid handle on $11.2 million of volume on Thursday.

The notes were last seen Wednesday off 5¼ points at around 73 bid.

Western Alliance’s shares closed the day down 38.45% at $18.20.

The Phoenix-based regional bank holding company’s stock opened the week at $37.55.

DISH declines

DISH remained soft on Thursday with the issuer’s bonds off about 2¾ points to 4¼ points in light secondary trading, while its CDS spreads moved out nearly 1,000 bps this week, sources said.

DISH DBS Corp.’s 7¾% senior notes due 2026 (B3/B-) fell 4¼ points to 51 bid on $3 million of secondary volume.

The 7 3/8% senior notes due 2028 (B3/B-) softened 2¾ points to 45 bid on $5.75 million of trading during the session.

DISH’s 5 1/8% senior notes due 2029 (B3/B-) also were down 2¾ points at 41¼ bid on $3 million of activity.

The company’s CDS spreads widened 944 bps over the past week ended Wednesday to 2,517 bps, according to a Moody’s Investors Service note.

DISH will report first-quarter earnings results on Monday.

The Englewood, Colo.-based satellite cable operator’s stock fell 4.86% to $6.65 on Thursday.

Distressed returns improve

S&P U.S. High Yield Corporate Distressed Bond index one-day returns improved on Wednesday to 0.21%, versus minus 0.21% on Tuesday and 0.01% on Monday.

Month-to-date total returns edged up to 0.1% from minus 0.2% on Tuesday and 0.01% in the first session of May.

Year-to-date total returns were 7.33% mid-week, compared to 7.11% on Tuesday and 7.34% on Monday.

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