Junk primary closes week quietly; SRS soars; Altice levels; funds add $603.5 million

By Abigail W. Adams

Portland, Me., March 28 – The domestic high-yield primary market closed an active week quietly with no deals pricing ahead of the holiday weekend in the United States.

While the active forward calendar was empty heading into the long weekend, the active pace of issuance is expected to continue as issuers address their refinancing needs while credit spreads remain near their tights of the year, sources said.

The shadow calendar continues to form with Dye & Durham expected to tap the market with a $500 million secured debt offering and Genesee & Wyoming Inc. telegraphing an offering of $1 billion of secured notes.

Meanwhile, the cash bond market was either side of unchanged on Thursday after a largely sideways week.

While unchanged on Thursday, the secondary space is closing the first quarter of 2024 on firm footing with buyers active at quarter’s end amid widespread expectations for rate cuts to begin in June, a source said.

New issues remained the market’s focus and area where money is being put to work with all-in yields at historic heights despite the tight credit spreads.

The new issues to price over the past week continued to put in solid aftermarket performances with all trading at a premium to issue price.

New Home Co. Inc.’s 9¼% senior notes due 2029 (B2/B-) were no exception with the notes holding the strong gains made on the break.

AMC Networks Inc.’s 10¼% senior secured notes due 2029 (Ba3/BB) were coming in on Thursday from the heights reached in their initial days in the aftermarket. However, they maintained a strong premium in active trade.

Outside of recent issues, Altice France SA’s senior notes remained in focus with the notes leveling off after credit downgrades caused further destruction in the capital structure.

SRS Distribution Inc.’s senior notes (Caa2/CCC) were the major winners of Thursday’s session with the notes shooting up 8 to 10 points after Home Depot announced it was acquiring the company in an $18.25 billion takeover.

Meanwhile, high-yield mutual funds and exchange-traded funds saw inflows of $603.5 million in the week through Wednesday’s close after a $2 billion outflow the previous week.

New Home at a premium

New Home’s new 9¼% senior notes due 2029 were unchanged on the day with the notes holding on to the strong gains made on the break.

The 9¼% notes continued to trade in the par ½ to 101 context on Thursday, a source said.

Volume in the name was light with the small issue mostly tucked away.

New Home priced the $300 million issue of the 9¼% notes at par on Wednesday.

The coupon came on top of talk.

AMC Networks softens

AMC Networks’ 10¼% senior secured notes due 2029 were coming in on Thursday from the heights reached in their initial days in the secondary space.

The notes were off ¼ to 3/8 point.

They were trading in the par 5/8 to par 7/8 context heading into the market close, a source said.

The 10¼% notes were among the outperformers of the deals to price over the course of the week with the notes breaking above a par-handle.

The notes closed the previous session in the par 7/8 to 101 1/8 context, a level reached after breaking for trade on Tuesday.

AMC Networks priced an $875 million issue of the 10¼% notes at par on Tuesday.

SRS Distribution soars

SRS Distribution’s senior notes were the surprise winners of Thursday’s session with the notes soaring 8 to 10 points after Home Depot announced its $18.25 billion acquisition of the company.

The 6% senior notes due 2029 jumped 10 points to a 102-handle.

They were wrapped around 102 1/8 heading into the market close, a source said.

There was $22 million in reported volume.

The notes were on a 93-handle heading into Thursday’s session.

The 6 1/8% senior notes due 2029 were up 8 to 9 points in lighter volume.

They were wrapped around 102¼ heading into the market close.

The notes were trading up to their anticipated takeout price, a source said.

SRS soared after Home Depot announced it was acquiring the company in a deal with an enterprise value of $18.25 billion.

Home Depot is expecting to take out the debt upon completion of the acquisition, which is anticipated by the end of the year.

Altice downgraded

Altice France’s senior notes remained in focus with the notes leveling off after a series of credit downgrades caused further destruction in the capital structure.

Altice’s 5½% senior secured notes due 2029 (Caa1/B-) popped about 2 points early in the session to trade as high as 71.

However, they gave back their early gains to close the day largely unchanged in the 67½ to 68 context.

The yield was about 14%.

There was $45 million in reported volume.

Altice France’s 10½% senior notes due 2027 popped 2 points early in the session to trade as high as 39.

However, they gave back their early gains to close the day largely unchanged on a 37-handle, a source said.

The yield was about 54%.

There was $28 million in reported volume.

The notes have plunged about 35 points over the past two weeks with Altice France’s earnings and warning that creditors may need to participate in discounted exchanges sparking a fire-sale in the credit.

The 10½% notes were trading on a 72-handle heading into Altice’s March 19 earnings report.

They were under further pressure on Wednesday after Moody’s Investors Service downgraded the corporate family credit rating to Caa2 from B3, citing an increased probability for default.

S&P downgraded Altice France’s secured debt to CCC+ from B- and unsecured debt to CCC- from CCC on Thursday, citing a larger free operating cash flow deficit than previously anticipated.

Indexes

The KDP High Yield Daily index added 3 basis points to close Thursday at 50.87 with the yield 6.8%.

The index was up 8 bps on Wednesday, flat on Tuesday and off 6 bps on Monday.

The index was up 5 bps on the week.

The ICE BofAML US High Yield index added 5.9 bps with the year-to-date return now 1.457%.

The index added 9.1 bps on Wednesday after sliding 3.8 bps on Tuesday and 6 bps on Monday.

The CDX High Yield 30 index added 26 bps to close Wednesday at 107.24.

The index was off 5 bps on Tuesday and 4 bps on Monday.

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