Morning Commentary: Junk firms on quiet summer Friday; new Arconic notes trade higher

By Paul A. Harris

Portland, Ore., July 28 – After opening the session unchanged, the broad high-yield bond market was up as much as ¼ point at mid-morning, according to a bond trader in New York.

On a quiet Friday session, investors generally seemed disinclined to chase paper in the secondary market, the source remarked.

The new Arsenal/Arconic deal saw some price appreciation on the morning.

The Arsenal AIC Parent LLC 8% senior secured notes due October 2030 (Ba3/B+/BB+) were 101 3/8 bid, 101 7/8 offered at mid-morning after trading as high as 102 earlier in the session, the trader said.

Those bonds, which came in support of the buyout of Arconic by Apollo and Irenic, went out Thursday at 101¼ bid, 101¾ offered, after pricing at par in a $700 million issue earlier in the session.

The Arsenal/Arconic secured notes played to demand in excess of $5 billion, and allocations were rough, sources said.

Elsewhere on Friday morning, the Univision Communications Inc. 8% senior secured notes due August 2028 (B1/B+) were par ½ bid, par ¾ offered, trading in fits and starts, the trader said, adding that dealer Goldman Sachs did a good job of cleaning up the deal.

Univision’s new bonds came in a $500 million issue that priced at par on Monday.

The primary market remained quiet on the morning, characteristic of a mid-summer Friday.

The active new issue calendar features two deals which are set to price in the week ahead.

kdc/one Development Corp., Inc. and KDC US Holdings, Inc. are marketing a $500 million offering of five-year senior secured notes (B3) with initial talk of 9¾% to 10%.

And Rain Carbon Inc. is shopping a $450 million offering of six-year second-lien senior secured notes (B3/B) with early talk in the low-to-mid 12% area.

No other deal tips for the week ahead were at hand in the early going on Friday, sources said.

Fund flows

The daily cash flows of the dedicated high-yield bond funds were mixed on Thursday, according to a market source.

Actively managed high-yield funds saw $51 million of inflows on the day.

However high-yield ETFs sustained $60 million of outflows on Thursday, the source said.

News of Thursday’s daily cash flows follows a Thursday afternoon report that the combined funds sustained $367 million of net outflows during the week to the Wednesday, July 26 close, according to fund-tracker Refinitiv Lipper.

That weekly outflow came on the heels of the previous week’s $2.2 billion inflow, the fifth-largest of 2023, to date.

Cash outflows from high yield for 2023 peaked in late March at $16 billion, according to the market source, who added that since then the junk funds have seen $7 billion of inflows.

Year-to-date cash flows of the dedicated high-yield funds were negative $9.3 billion to Thursday’s close, the market source said.

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