Junk: Xerox pressured post-earnings; Hertz down on macro risks; Staples jumps on unit sale

By Paul A. Harris and Abigail W. Adams

Portland, Me., April 23 – Observance of Passover, thinning Wall Street’s ranks, made for a quiet day in the high-yield new issue market, a trader said.

Two deals on the active calendar are expected to price before the end of the week.

Brightline East LLC is running a full roadshow for a $1.25 billion offering of senior secured notes due Jan. 31, 2030. Initial guidance has the notes coming to yield 10% to 11%, sources say.

And ION Corporates is marketing a $730 million equivalent two-part offering of Helios Software Holdings, Inc. and ION Corporate Solutions Finance Sarl five-year senior secured notes (B2/B), including a tranche of dollar-denominated notes with initial guidance in the 9% area.

Meanwhile, the secondary space continued to firm on Tuesday with the market up another 1/8 to ¼ point to nearly eliminate its losses from the previous week.

The market was breathing a sigh of relief after a strong two-year Treasury auction with demand outstripping expectations, a source said.

Market players have pointed to weak demand for Treasuries as a worrying sign for the market.

With the new deal pipeline slowing down and the slew of issuance from the previous week largely tucked away, topical and earnings-related news were the driving force of volume during Tuesday’s session.

Xerox Holdings Corp.’s 8 7/8% senior guaranteed notes due 2029 (B1/BB) were under pressure after an earnings miss with the notes dropping below issue price for the first time since hitting the market.

Hertz Corp.’s senior notes (Caa1/B+) were also lower in active trade after the company announced an amendment to its credit agreement as a preemptive measure due to macro risk.

Staples Inc.’s 10¾% senior notes due 2028 (Caa2/CCC) were among the largest gainers of Tuesday’s session after the office supplies retailer announced the sale of a business unit.

Xerox’s earnings

Xerox’s 8 7/8% senior guaranteed notes due 2029 were under pressure in active trade on Tuesday with the notes dropping below issue price for the first time since hitting the aftermarket.

The 8 7/8% notes dropped 1½ points to a 98-handle.

They were trading in the 98 to 98½ context heading into the market close, a source said.

There was $16 million in reported volume.

Tuesday’s session marked the lowest level for the notes and the first time they have traded below issue price since the $500 million issue priced at par on March 6.

The notes were under pressure after Xerox reported a large earnings miss with the company reporting a sizeable decrease in revenue year over year and negative free cash flow,

Hertz lower

Hertz’s senior notes were lower in active trade after the rental car company amended its credit agreement and warned of macro risks.

Hertz’s 5% senior notes due 2029 were off about 1 point.

They were wrapped around 72 with a yield of about 12% in the late afternoon, a source said.

There was $16 million in reported volume.

The 4 5/8% senior notes due 2026 were off about 5/8 point.

They were trading at 82 7/8 with the yield 12½%, a source said.

There was also $16 million on the tape.

Hertz’s senior notes were under pressure after the company amended its credit agreement, which was done as a preemptive move against risks posed by the macro-economic environment, the company said in an 8-K filing with the Securities and Exchange Commission.

Staples surges

Staples’ 10¾% senior notes due 2028 were among the largest gainers of Tuesday’s session after the company announced the sale of a business unit.

The 10¾% notes jumped 3 points on the news to a 95-handle.

They were trading at 95½ with a yield of 12 5/8% heading into the market close, a source said.

There was $20 million in reported volume.

The notes attracted strong buying interest after the company announced that it sold DEX Imaging to Gamut Capital Management and the Doyle family, who founded DEX, which was acquired by Staples in 2019.

While the amount of the sale was undisclosed, “it’s good for the company,” a source said. “It means cash.”

Fund flows

High-yield ETFs had $54 million of daily cash inflows on Monday, according to a market source.

Actively managed high-yield funds were flat to slightly negative, on the day, sustaining $2 million of outflows on Monday.

The combined funds are tracking $9 million of net outflows on the week that will conclude with Wednesday’s close, according to the market source.

Indexes

The CDX High Yield 30 index added 39 basis points to close Tuesday at 106.24.

The index was up 50 bps on Monday.

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