Junk closes with weekly gains; Tenet breaks par; Community Health gains; Carnival improves

By Paul A. Harris and Abigail W. Adams

Portland, Me., July 22 – The domestic high-yield primary market marked a quiet summer session on Friday with no deals pricing and just one deal on the active forward calendar.

Patagonia HoldCo LLC is expected to price its $500 million offering of seven-year senior secured first-lien notes (B1/B+) in the week ahead.

Meanwhile, it was another strong session for the secondary space with ETF buying lifting the overall market, a source said.

While the rally lost steam heading into the close, the cash bond market gained another ½ point, closing the week with a gain of 2½ points.

Despite the strength in the market, trading volume was “anemic” on Friday, a source said, with the summer doldrums setting in.

Carnival Corp.’s senior notes continued to see heavy volume with the notes resuming their upward momentum after giving back some gains the previous session.

Tenet Healthcare Corp.’s 6 1/8% senior secured notes due 2030 (B1/BB-/BB-) reclaimed par for the first time since shortly after pricing following a surprise earnings beat.

However, CHS/Community Health Systems, Inc.’s senior notes were the major gainers of Friday’s session with the hospital chain’s 6 1/8% senior secured notes due 2030 (Caa2/CCC) jumping 5 points on renewed optimism for the company’s upcoming earnings.

The forward calendar

A quiet summer Friday brought the July 18 week to its conclusion.

The week saw just two deals, representing a total of $691 million of proceeds, clear the market.

The active forward calendar features just one deal.

Patagonia HoldCo LLC is on the road with a $500 million offering of seven-year senior secured first-lien notes (B1/B+) supporting the buyout of Lumen Technologies' Latin American operations by Stonepeak.

Initial guidance specifies a 7½% coupon with a discount of 86.

Pricing is set for the Stonepeak deal in the week ahead.

There is a shadow calendar.

However at least some of it is heard to be delayed until the post-Labor Day period.

That's the case with an expected $5.4 billion of debt offerings backing the leveraged buyout of Tenneco Inc. by Apollo Global Management Inc., according to market sources.

The offerings, including $3 billion of bonds and $2.4 billion of leveraged loans, had previously been expected to come in July.

Altogether around $15 billion of business that had been teed up for summer is now believed to have been delayed until after Labor Day, which is being observed on Sept. 5, a market source said.

Carnival gains

Carnival’s senior notes resumed their upward momentum on Friday after giving back some gains the previous session.

The cruise line operator’s 10½% senior notes due 2030 jumped 1½ points.

They were changing hands in the 89½ to 90 context heading into the market close, a source said.

There was $18 million in reported volume.

Carnival’s 6% senior notes due 2029 also rose 2 points with the majority of prints on a 77-handle.

There was $13 million in reported volume.

ETF buying was once again lifting the notes that had pulled back the previous session over concern about the cruise line operator’s $1 billion stock sale earlier in the week.

However, the notes closed the week with strong gains with Carnival’s 10½% notes up 8 points and the 6% notes up 5 points on the week.

Hospital chains outperform

Hospital chains outperformed on Friday as strong earnings stoked optimism for the sector.

Tenet’s 6 1/8% senior secured notes due 2030 reclaimed par on Friday for the first time since pricing in early June.

The 6 1/8% notes rose ½ point and were changing hands in the par to par ¼ context heading into the close.

The notes have been on a steady uptrend since hitting an all-time low of 93¾ in early July. Strong earnings helped propel the notes further.

Tenet reported adjusted EBITDA of $843 million for the second quarter versus analyst expectations for adjusted EBITDA of $729 million.

Tenet priced a $2 billion issue of the 6 1/8% notes at par on June 1.

While Tenet’s senior notes rose on Friday, Community Health’s senior notes were the major benefactors of Tenet’s strong earnings with the company’s capital structure up 2 to 5 points.

Community Health’s 6 7/8% senior notes due 2029 (Caa2/CCC) rose more than 5 points.

The notes traded as high as 66 during Friday’s session before coming in to close the day on a 64-handle, a source said.

The notes closed the previous session on a 59-handle.

While the hospital chain’s unsecured paper was the major gainer of the session, the company’s secured notes were also on the rise.

Community Health’s 5¼% senior secured notes due 2030 (B2/B) jumped 2 5/8 points to close the day at 83 5/8 and its 4¾% senior notes due 2031 (B2/B) rose 2 points to close the day on an 81-handle.

Community Health is scheduled to report earnings on July 27.

Big inflows continue

The dedicated high-yield bond funds saw a whopping $1.82 billion of net daily inflows of cash on Thursday, the most recent session for which data was available at press time, according to a market source.

Actively managed funds saw $1.34 billion of inflows on the day, the source said, noting that those inflows were broad-based.

High-yield ETFs had $480 million of inflows on Thursday, to add to the $1.03 billion of daily inflows that the ETFs saw on Wednesday.

News of Thursday's daily flows trailed a Thursday afternoon report that the combined funds sustained $885 million of net outflows in the week to Wednesday's close, according to Refinitiv Lipper.

It was the fifth outflow in six weeks, although the negative flows moderated as the period progressed, the market source said.

The combined funds have sustained $45.8 billion of net outflows for the year to Thursday's close, according to the market source.

Indexes

The KDP High Yield Daily index rose 35 points to close Friday at 56.6 with the yield now 6.77%.

The index posted a cumulative gain of 31 points on the week.

The ICE BofAML US High Yield index gained 56.7 basis points with the year-to-date return now negative 10.174%.

The index posted a cumulative gain of 225 bps on the week.

The CDX High Yield 30 index fell 64 points to close Friday at 100.

However, the index still posted a cumulative gain of 118 bps on the week.

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