New York Community Bancorp notes improve, unit Flagstar paper down; Spirit Airlines up

By Cristal Cody

Tupelo, Miss., Feb. 8 – New York Community Bancorp, Inc.’s 8.332% fixed-to-floating rate subordinated notes due 2028 (Ba2//BB+) recovered some ground on Thursday.

The notes improved around 2 points, while subsidiary Flagstar Bancorp, Inc.’s 4 1/8% fixed-to-floating rate subordinated notes due 2030 (Ba2) traded down over 1½ points.

The company’s paper has been under pressure following a downgrade to junk on Tuesday with New York Community Bancorp facing heavy losses on its core commercial real estate lending services.

“Recent loan losses at New York Community Bank are fueling fears of a surge in real estate defaults this year,” according to analysts at Confluence Investment Management on Thursday. “Banks are struggling to value properties due to high vacancies and borrowing costs, making potential buyers wary. As a result, concerns linger that other banks might also face difficulties in managing their CRE.”

Overall market tone remained mostly positive on Thursday with indices eking out small gains. The S&P 500 index was up 0.06%.

Treasury yields moved higher.

The benchmark 10-year note yield climbed 6 basis points to 4.17%.

The iShares iBoxx High Yield Corporate Bond ETF fell 4 cents, or 0.05%, to $77.20.

“Up until the last week, rates had rallied nicely but they’ve turned around a bit,” a source said Thursday.

Spirit Airlines Inc.’s 8% senior secured notes due 2025 grabbed most of the attention in the distressed market over the session after the company reported earnings results and said it intends to press on with fighting to complete a merger with JetBlue Airways Corp.

The notes traded around 3¾ points to over 5¼ points better on more than $37 million of volume.

NYCB, Flagstar mixed

New York Community Bancorp’s 8.332% subordinated notes due 2028 (Ba2//BB+) were quoted heading out on Thursday better at 77 bid on $10.25 million of secondary action, a source said.

The notes declined about 7 points on Wednesday to 75 bid.

New York Community Bancorp originally sold $300 million of the notes with a 5.9% coupon at par in 2018 with the issue reset to a floating rate on Nov. 6, 2023.

Flagstar’s 4 1/8% fixed-to-floating rate subordinated notes due 2030 declined over 1½ points on Thursday to 67 bid, the source said. Volume hit $7 million.

New York Community Bancorp’s 6 3/8% series A non-cumulative preferred stock (B1//B+) closed off 1.95% at $16.44 after declining 4.32% on Wednesday.

Common shares (NYSE: NYCB) ended the day down 6.5% at $4.19.

Moody’s Investors Service downgraded the subordinated notes to junk on Tuesday and noted the company’s provision for credit losses soared 526% to $833 million in 2023 from $133 million in 2022.

The Hicksville, N.Y.-based company reported that as of Tuesday, 72% of its $83 billion of total deposits are from insured and collateralized deposits.

Spirit Airlines higher

Spirit Airlines’ 8% senior secured notes due 2025 rose over 5¼ points in active trading that totaled over $23 million on Thursday, a market source said.

The bonds were quoted at 72 bid and yielding 30.74%.

Spirit Airlines’ paper has come back from a low of 47½ bid, 48½ offered after a court ruling blocked its $3.8 billion merger with JetBlue Airways on Jan. 16.

The U.S. District Court of the District of Massachusetts granted the U.S. Department of Justice’s request for a permanent injunction against the proposed merger of Spirit and JetBlue, but the companies filed a notice of appeal that will be heard in June by the U.S. Court of Appeals for the First Circuit.

“Also, while Spirit remains focused on consummating the merger with JetBlue and is looking forward to prosecuting the expedited appeal of the U.S. District Court’s order, the company is aware of its 2025 and 2026 debt maturities and is assessing options to address those maturities when the time is appropriate,” Scott Haralson, Spirit’s chief financial officer, said in the earnings release on Thursday.

Spirit Airlines on Thursday reported fourth-quarter revenue declined 5% to $1.32 billion, while fiscal 2023 revenue added 5.8% to $5.36 billion.

Losses were lower in the quarter and for the year. Losses totaled $214.8 million in the fourth quarter, down from $305.73 million a year earlier.

Fiscal 2023 losses declined to $495.76 million from $598.92 million in 2022.

The Miramar, Fla.-based low-cost airline’s stock (NYSE: SAVE) closed 3.31% higher at $7.18.

Distressed index improves

S&P U.S. High Yield Corporate Distressed Bond index one-day total returns gained on Wednesday to 0.58%, compared to 0.29% on Tuesday and minus 0.53% on Monday.

Month-to-date total returns hit the positive space at 0.14% midweek, up from minus 0.44% on Tuesday and negative 0.72% at the week’s start.

Year-to-date total return losses improved to minus 2.01% versus to negative 2.58% on Tuesday and minus 2.86% on Monday.

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