Junk secondary extends gains; AMC in focus; Medline uptrend continues; Citrix adds

By Paul A. Harris and Abigail W. Adams

Portland, Me., Nov. 23 – The junk bond primary market remained idle on Wednesday ahead of the Thanksgiving holiday in the United States.

One deal is believed to remain in the market – Pegasus Merger Co./Tenneco Inc.’s $1 billion offering of six-year senior secured notes (B2/B-).

The deal has faced headwinds with investors expecting covenant concessions if it is to pass the finish line.

Meanwhile, the secondary space closed Wednesday on firm footing with the market extending gains from a strong open following the release of the Federal Reserve Open Market Committee report.

The cash bond market ended the day up ¼ to ½ point, a source said.

However, trading volume and volatility was low with few surprises in the meeting minute notes.

The market is widely anticipating a 50 basis points rate increase in December, sources said.

However, the meeting minutes did little to shed light on the federal fund target rate for 2023, which has been a primary source of volatility in markets.

While volume was light, the uptrend in several names continued.

Citrix Systems Inc./Tibco Software Inc.’s 6½% senior secured notes due 2029 (B2/B) continued to add in heavy volume after reclaiming an 87-handle the previous session.

Medline Industries’ 5¼% senior notes due 2029 (Caa1/B-/B-) continued their strong uptrend with the notes trading higher to an 83-handle.

AMC Entertainment Holdings, Inc.’s junk bonds were in focus on Wednesday with the notes breaking their strong downtrend following news Amazon was investing in theater releases.

Forward calendar eyed

The primary market remained idle during the Wednesday session ahead of the Thanksgiving holiday in the United States.

One deal was believed to remain in the market.

Pegasus Merger Co./Tenneco Inc. began shopping a $1 billion offering of six-year senior secured notes (B2/B-), backing the buyout of Tenneco by Apollo, at the very beginning of November.

The buyout, itself, was completed nearly a week ago, with the investment banks ponying up their committed financing even though the bonds and the $1.4 billion term loan continue to await syndication.

Bond investors continue to anticipate accommodation in the form of covenant concessions, the trader said.

Pending such accommodations, the debt appears to be in Limbo, a source added.

Looking beyond the Thanksgiving holiday weekend, volume in the new issue market during the run-up to 2023 remains unclear, the trader said.

While some expect a significant increase in primary market activity, others doubt that such an increase will materialize before the end of the year.

“That's going to create an interesting technical situation because there is a decent amount of cash out there, with investors looking to put it to work on the new issue calendar,” the trader said.

Citrix adds

Citrix’s 6½% senior secured notes due 2029 continued to add in active trading on Wednesday after reclaiming an 87-handle the previous session.

The notes were once again broaching their all-time high of 87 7/8.

They climbed another 3/8 point to trade in the 87½ to 87¾ context for the majority of the session, according to a market source.

There was $17 million in reported volume.

The notes reclaimed an 87-handle on Tuesday as the broader market resumed its uptrend following a pause.

The $4 billion issue priced at 83.561 on Sept. 20 and have channeled between an 84- and 87-handle for the majority of their time in the secondary space.

Medline gains continue

Medline’s 5¼% senior notes due 2029 continued their strong uptrend on Wednesday with the notes climbing to an 83-handle in heavy volume.

The 5¼% notes jumped ½ point with the notes trading in the 83½ to 83¾ context heading into the market close, a source said.

The notes have moved 3 points higher over the past two sessions with the notes opening the week on an 80-handle.

The 5¼% notes have had positive momentum after a turnaround from an all-time low of 73 in early November.

AMC in focus

AMC’s junk bonds were in focus on Wednesday with the notes breaking their strong downtrend following news Amazon would begin to produce movies for theaters.

The 10% senior notes due 2026 (Caa3/CCC-) were the most actively traded issue of Wednesday’s session.

The notes climbed 4½ points to 38 with the yield now about 48%, a source said.

There was $20 million in reported volume.

While the notes had strong gains on Wednesday, they were still lower on the week with the notes previously on a 41-handle.

The 7½% notes due 2029 (Caa1/B-) regained 2 points to close the day at 57 with the yield now just shy of 20%, according to a market source.

While the notes pared their losses after a strong shift downward, they remain lower on the week with the previous level for the notes 63.

“That [Amazon] news would move them,” a source said of the bonds.

Fund flows

The dedicated high-yield bond funds sustained $209 million of net daily cash outflows on Tuesday, the most recent session for which data was available at press time, according to a market source.

Actively managed high-yield funds saw $115 million of outflows on the day.

High-yield ETFs sustained $94 million of outflows on Tuesday, the source said.

With Wednesday's daily fund flow numbers remaining to go into the tally the combined funds are tracking $2.2 billion of net inflows for the week to Wednesday's close, according to the market source.

Indexes

The KDP High Yield Daily index rose 19 points to close Wednesday at 52.13 with the yield 7.36%.

The index was up 17 points on Tuesday and down 5 points on Monday at 51.77 with the yield 7.52%.

The CDX High Yield 30 index rose 50 basis points to close Wednesday at 101.72.

The index gained 43 bps on Tuesday and 4 bps on Monday.

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