Primary reactivation eyed; Icahn boosted on loan agreement; Level 3 gains continue

By Paul A. Harris and Abigail W. Adams

Portland, Me., July 10 – The dollar-denominated new-issue market, which has been skunked since the July 4 Independence Day holiday, remained quiet on Monday.

However, sources expect the primary market to reactivate in the coming days with sources expecting $1 billion to $2 billion in issuance.

Meanwhile, a soft open for the secondary space gave way to a strong close with the cash bond market ending the day up an 1/8 point after opening down 1/8, a source said.

The secondary market gained strength alongside Treasuries with yields coming down from recent heights.

The market was under pressure the previous week with Treasury yields shooting to multi-year highs following the July 6 ADP employment report that blew past expectations.

However, the U.S. nonfarm payrolls report that came out lasted Friday reflected a different picture of the labor market with the job gains reported coming in below expectations.

While Treasuries stabilized last Friday, they saw a strong session on Monday with yields returning to their levels prior to the ADP report’s release.

While the market firmed, activity in the secondary space remained muted with no new issuance since the start of the third quarter and few making moves ahead of earnings.

Topical news was the driver of activity in the space on Monday with Icahn Enterprises LP’s senior notes (Ba3/BB) among the largest gainers in the market.

Icahn’s senior notes were lifted ½ to 2 points after a new loan agreement relieved some concerns raised by the short-seller report that targeted the company in early May.

Lumen Technologies subsidiary Level 3 Financing, Inc.’s senior secured notes (Ba2/BB-) resumed their strong uptrend in heavy volume on Monday.

Primary eyed

Primary market news was sparse as the week got underway.

Matterhorn Telecom SA, the parent of Swiss mobile phone and fiber optic services provider Salt Mobile SA, began a brief roadshow for a CHF 100 million offering of five-year senior secured notes (S&P: BB-).

The dollar-denominated new issue market, which has been skunked since the July 4 Independence Day holiday, remained quiet on Monday.

However, based upon conversations with clients a trader is looking for $1 billion to $2 billion or more of issuance ahead of this coming Friday’s close.

JPMorgan will have one or two deals, said the trader, adding that Viasat Inc.’s $1.6 billion offering of senior notes, coming in support of its Inmarsat acquisition, might be reignited.

That deal, which has been mired in the backlog of hung acquisition financings, began being telegraphed to the market in mid-spring, at which time the whisper had it coming with an all-in yield of 12%.

Icahn boosted

Icahn’s capital structure was boosted on Monday after a new loan agreement relieved some concerns raised by Hindenburg Research’s short-seller report that took aim at the company in early May.

Icahn’s short-duration 4¾% senior notes due Sept. 15, 2024 gained about ½ point.

The notes were trading in the 96 to 96½ context with the yield about 8%, according to a market source.

The 5¼% senior notes due 2027 gained 2 points to trade in the 87 7/8 to 88 1/8 context.

The yield was about 9%.

Icahn’s 6 3/8% senior notes due 2025 added 1½ points to end the day in the 94½ to 95 context.

Each tranche saw about $5 million in reported volume.

The notes were boosted after Carl Icahn announced a new loan agreement that consolidated his borrowings and shifted the margin call trigger for the Icahn Enterprises depositary units used as collateral.

Under Icahn’s previous loan agreements, the loan-to-value ratio that would trigger a margin call if not met was determined based on the market price of the depositary units.

The new loan agreement will calculate the loan-to-value ratio based on the net asset value of the depositary units.

Icahn’s loans that were secured by his IEP depositary shares were among the issues highlighted in Hindenburg Research’s May report.

Icahn’s capital structure plunged following the report.

While Icahn’s senior notes continue to trade at a discount to their level prior to the report’s release, they have staged a strong rebound in June.

Level 3 rises

Level 3’s secured notes continued their strong uptrend on Monday.

The 3 7/8% senior secured notes due 2029 gained 3/8 point.

The notes closed the day at 81¼ with the yield about 7 5/8%, according to a market source.

With $19 million in reported volume, the notes were the most actively traded issue in the secondary space.

Level 3’s 3.4% senior secured notes due 2027 gained 1½ points.

The notes were trading in the 86 5/8 to 86 7/8 context heading into the market close with the yield also about 7 5/8%.

There was $15 million in reported volume.

Level 3’s senior notes have been on a strong uptrend since late June with parent company Lumen among the best performing names in the high-yield market in 2023.

Fund flows

High-yield ETFs saw $383 million of daily cash inflows on Friday, the most recent session for which data was available at press time, according to a market source.

Actively managed high-yield funds sustained $138 million of outflows on the day, the source said.

Indexes

The KDP High Yield Daily index gained 7 points to close Monday at 50.28 with the yield 7.49%.

The index posted a cumulative loss of 39 points on the week last week.

The ICE BofAML US High Yield index gained 18.8 basis points with the year-to-date return now 4.986%.

The CDX High Yield 30 index gained 40 bps to close Monday at 102.23.

The index fell 94 bps on the week last week.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.