First Republic Bank notes pull back following Friday’s gain; iHeartCommunications lower

By Cristal Cody

Tupelo, Miss., Dec. 11 – First Republic Bank’s 4 5/8% subordinated notes due 2047 were moving heavily in the distressed secondary market on Friday and over Monday’s session.

In fact, the notes hit their highest price since May after the bank’s collapse, a market source said.

Overall market tone stayed fairly positive ahead of the Federal Reserve’s rate decision due Wednesday with the Street expected to largely clear out afterward for the holidays.

No changes to the current 5¼% to 5½% Federal Funds rate are expected, according to market sources.

The CBOE Volatility index rose 2.27% over the session to 12.63.

Stock indices all closed better, while the junk space was slightly softer.

The S&P 500 index improved 0.39%.

The iShares iBoxx High Yield Corporate Bond ETF declined 5 cents, or 0.07%, to $75.81.

iHeartCommunications, Inc.’s paper softened further on Monday but trading was thin after the bonds went into the weekend more than 2 points to 4 points lower following a ratings downgrade.

The notes traded on Monday less than ½ point weaker on the day.

First Republic active

First Republic Bank’s 4 5/8% subordinated notes due 2047 were quoted down more than ½ point from Friday at 2½ bid on more than $12 million of paper changing hands over the session, a source said.

The bonds had rallied over 2 points on Friday to around 3¼ bid on more than $14 million of secondary volume.

The issue was last seen with a 3 handle back in May.

First Republic Bank’s paper was thinly traded in November and was moving around 1/8 bid last month.

The bank’s notes traded with a 50s handle in March.

First Republic Bank priced $400 million of the notes as an investment-grade offering on Feb. 6, 2017 at 98.437 to yield 4.723%.

The bank, among three that collapsed earlier this year, was closed and auctioned to JPMorgan Chase & Co. on May 2.

The notes had dropped to pennies in the following sessions on default expectations.

JPMorgan’s purchase of the bank did not include First Republic’s corporate debt or preferred stock.

On March 31, First Republic had reported $3.6 billion of preferred stock and $800 million of subordinated notes outstanding, according to a report from Moody’s Investors Service.

The bank was dropped to junk in March and received an initial lifeline when 11 major banks announced March 16, 2023 that they would make $30 billion of deposits into First Republic.

The former San Francisco-based bank faces a class action lawsuit from Swedish pension fund Alecta over investor losses.

iHeartMedia softens

iHeart’s 6 3/8% senior secured notes due 2026 (Caa1/B+) traded 1/8 point weaker at 79 5/8 bid in light trading totaling more than $2 million on Monday, a source said.

The bonds went out Friday down 3¾ points at 79¾ bid on over $13 million of trading supply.

The 8 3/8% senior notes due 2027 (Caa3/CCC+) also softened ½ point to 60½ bid in slower volume totaling more than $2 million on Monday.

iHeart’s notes traded on Friday 3 points weaker on $11.7 million of secondary activity.

Moody’s on Thursday downgraded iHeartCommunications based on increasing refinancing risks and elevated financial leverage from a decline in radio advertising demand.

The subsidiary of San Antonio-based parent media broadcasting company iHeartMedia, Inc. has around $3.1 billion of debt maturities due in 2026 and $1.7 billion due in 2027, Moody’s said.

Distressed returns dip

S&P U.S. High Yield Corporate Distressed Bond index one-day total returns ended Friday down slightly at 0.15%, compared to 0.17% on Thursday, 0.3% on Wednesday, 0.72% on Tuesday and 0.43% at the start of the prior week.

Month-to-date total returns improved to 1.89% on Friday from 1.73% on Thursday, 1.56% on Wednesday, 1.26% on Tuesday and 0.54% in the first session of the week.

Year-to-date distressed total returns were higher at the prior week’s close at 17.21% versus 17.02% on Thursday, 16.82% on Wednesday, 16.48% on Tuesday and 15.65% in the Dec. 4 session.

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