Wesco Aircraft under pressure; Occidental Petroleum gains, Ford, AMC active junk names

By Paul A. Harris and Abigail W. Adams

Portland, Me., Sept. 1 – While the domestic high-yield primary market remained dormant on Wednesday, the Scandinavian market saw one deal price.

DNO priced an upsized $400 million issue of five-year notes in an oversubscribed offering.

Meanwhile, the secondary space was largely unchanged on Wednesday although there were pockets of weakness in the space, a source said.

Volume remained light with few notable movements in the names that did trade.

Incora, a company created through the merger of Wesco Aircraft Holdings Inc. and Pattonair, was the exception.

The company’s junk bonds fell downward in excess of 5 points following disappointing earnings and the resignation of the company’s chief financial officer.

Occidental Petroleum Corp.’s junk bonds were up on the week although largely unchanged on the day as crude oil futures swung between gains and losses as OPEC met.

Ford Motor Co.’s 8½% senior notes due 2023 and AMC Entertainment Holdings, Inc.’s 12% second-lien senior secured notes due 2026 (Ca/C) were actively traded although with little movement in price.

The primary market

Norwegian oil and gas operator DNO priced Wednesday's sole dollar-denominated deal, an upsized $400 million issue (from $300 million) of 7 7/8% unsecured notes due 2026.

The company attributed the upsize to a significantly oversubscribed order book.

Away from the Scandinavian market the new issue bourse remained quiet on Wednesday.

It's expected to remain that way until after the extended Labor Day weekend in the United States, which gets underway on Friday.

However, the European high-yield primary had been expected to reactivate during the August-September crossover week.

That reactivation failed to materialize.

“It is likely that people just were not ready to bring deals,” said a portfolio manager who tracks both the U.S. and European high-yield markets.

As to U.S. post-Labor Day issuance, people lately seem to be tempering their forecasts, the investor said.

The latest forecast this manager heard was $75 billion for September, with 40% of that amount coming in the form of bonds and 60% coming to the leveraged loan market.

As to why market watchers might be tempering their outlooks for September issuance, the answer is not readily apparent, according to the portfolio manager.

“The market appears to be in good shape,” the investor said.

Around mid-July high-yield spreads widened to 345 basis points from 305 bps earlier in the month, the source recounted, attributing that widening to the pandemic, but also to what was then a formidable summer new issue calendar.

They have now halved that widening, the manager said.

Spreads hit an all-time low of 304 bps on July 1, then widened to 346 bps by July 19.

They were still at 345 bps on Aug. 19.

Now they are at 322 bps, the investor said.

Wesco Aircraft tanks

Wesco Aircraft, which now operates as Incora, saw its junk bonds fall more than 5 points during Wednesday’s session following disappointing earnings and the resignation of the company’s CFO.

The 8½% senior notes due 2024 dropped 5 points to close the day at 90, according to a market source.

There was $22 million in reported volume.

The company’s 9% senior notes due 2026 were also down about 5 points to close the day at 90¼ with more than $15 million on the tape.

The aerospace supply chain company reported disappointing numbers and weak guidance, sources said.

In addition, the company reported that chief financial officer Timothy Gallagher would be resigning.

Incora was formed through the merger of Wesco Aircraft with Platinum Equity’s portfolio company Pattonair in 2020.

Wolverine Escrow is the issuing entity of the bonds.

Occidental up on week

Occidental Petroleum’s junk bonds were up on the week although largely unchanged on the day as crude oil futures fluctuated between gains and losses as OPEC met.

The oil and gas company’s 6 5/8% senior notes due 2030 closed Wednesday at 125 with the yield on the notes now about 3.2%, according to a market source.

The notes started the week on a 123-handle.

There was about $14 million in reported volume.

Occidental’s 3½% senior notes due 2029 continued to trade on a 103-handle on Wednesday and stood poised to close the day at 103 3/8, according to a market source.

There was more than $12 million in reported volume.

Crude oil futures swung between gains and losses on Wednesday as the market awaited an announcement from OPEC regarding oil output.

WTI crude oil futures traded to a high of $69.24 and a low of $67.12 before settling at $68.29 an increase of 9 cents or 0.13%.

Brent crude oil futures traded to a high of $72.38 and a low of $70.42 before settling at $71.28, a decrease of 35 cents or 0.49%.

Following Wednesday’s meeting, OPEC announced there would be no change to their July agreement to increase oil output.

Ford active

Ford’s 8½% senior notes due 2023 were once again active on Wednesday although with little movement in price.

The notes continued to trade on a 110-handle and closed the day at 110 7/8 with the yield about 1.7%, according to a market source.

There was about $12 million in reported volume.

The $3.5 billion issue has been active over the past two weeks as liquidity in the secondary space has dried up.

AMC active

AMC’s 12% second-lien senior secured notes due 2026 (Ca/C) were active although little changed on Wednesday.

The 12% notes continued to trade on a 90-handle and closed the day at 90½, according to a market source.

There was more than $14 million in reported volume.

While the movie chain operator’s 12% notes were little changed on Wednesday, the company’s stock tanked 7% following an analyst downgrade.

Macquarie downgraded AMC stock to Underperform from Neutral and set a price target of $6.

AMC stock closed Wednesday at $43.69.

$120 million Tuesday outflows

The dedicated high-yield bond funds sustained $120 million of net daily outflows on Tuesday, according to a market source.

High-yield ETFs saw $134 million of outflows on the day.

Actively managed high-yield funds were in the green on Tuesday, posting $14 million of inflows on the day, the source said.

Indexes

The KDP High Yield Daily index gained 5 basis points to close Wednesday at 70.28 with the yield now 3.59%. The index gained 8 bps on Tuesday and 10 bps on Monday.

The CDX High Yield 30 index rose 5 bps to close Wednesday at 109.86. The index shaved off 2 bps on Tuesday and was flat on Monday.

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