Junk secondary swings to green following Federal Reserve minute notes; Cedar Fair gains

By Paul A. Harris and Abigail W. Adams

Portland, Me., Feb. 16 – Rate scares and geopolitical concerns continued to sideline the domestic high-yield primary market with Wednesday marking a full week with no new issuance.

The reactivation of the calendar remains speculative with some sources expecting an imminent restart and others anticipating the quiet to continue.

As potential issuers waited for market conditions to stabilize, volatility continued to roil the secondary space with the market down about ¼ point early in the session but up ¼ point by the market close.

“It was quite a swing,” a source said.

While the market was under pressure early in the session, selling pressure abated following the release of the Federal Open Market Committee meeting’s minute notes, which was not as hawkish as anticipated.

While the secondary market closed the day in positive territory, trading activity was muted amid the lack of new issuance.

However, topical news and earnings drove some outstanding issues into the spotlight.

Cedar Fair, LP’s 5¼% senior notes due 2029 (B3/CCC+) and SeaWorld Entertainment Inc.’s 5¼% senior notes due 2029 (Caa1/B-) were on the rise after Cedar Fair rejected SeaWorld’s takeover offer.

Wynn Macau Ltd.’s senior notes were boosted in active trading following earnings.

However, AMC Networks Inc.’s 4¼% senior notes due 2029 (Ba3/BB) continued their downward momentum in active trading following its earnings report.

Eyeing the primary

On Wednesday, Feb. 9, Studio City Co. Ltd. priced $350 million of 7% senior secured notes due February 2027, the latest deal to price.

However, since that deal there has been no new issuance.

Expectations as to the reactivation of the junk new issue market vary from source to source, with some insisting that an active calendar is overdue, and thus imminent.

Others say that issuers are understandably in no hurry to hazard a deal execution amid what is becoming a protracted period of February capital markets volatility. And as to opportunistic deals, “Forget about it,” they add.

If you can wait to raise capital from fixed-income investors you probably should, a buyside source said on Wednesday, and added that while volatility has sidelined high-yield new issue activity completely, leveraged loan and high-grade bond issuance has also slowed.

Cedar Fair gains

Cedar Fair’s 5¼% senior notes due 2029 were on the rise in active trading after the amusement park operator rejected SeaWorld’s takeover bid.

The 5¼% notes rose about ½ point to reclaim par after sinking below the previous two sessions.

The notes were changing hands in the par to par ¼ context heading into the market close, a source said.

Cedar Fair’s 5¼% notes were among the most actively traded issues in the secondary space with $20 million in reported volume heading into the market close.

While less active, SeaWorld’s 5¼% senior notes due 2029 jumped about 2 points to close Wednesday on a 96-handle.

The 5¼% notes have been on a downward spiral since the company announced a $3.4 billion takeover bid for Cedar Fair on Feb. 1.

They closed Tuesday on a 94-handle. They were trading on a 97-handle prior to news breaking about the takeover bid.

Wynn Macau’s earnings

Wynn Macau’s senior notes were on the rise following the hospitality and gaming company’s earnings report.

The 5½% senior notes due 2027 rose 2 points to 90 in active trading.

There was $10 million in reported volume.

Wynn Macau’s 4 7/8% senior notes due 2024 rose 1½ points to close the day at 95¼.

While the company reported a wider net loss than anticipated, it also reported a rise in casino revenues and pent-up demand.

AMC Networks earnings

AMC Networks’ 4¼% senior notes due 2029 continued their downward spiral in active trading following the cable company’s earnings.

The 4¼% notes fell ¾ point during Thursday’s session.

They were changing hands in the 93¾ to 94 context heading into the market close, a source said.

There was $14 million in reported volume.

The company’s EBITDA of $103 million was better than analyst expectations for a revenue of $82 million.

However, EBITDA reflected a year-over-year decrease, a source said.

$672 million Tuesday inflows

For the second day in a row high-yield ETFs posted solid daily cash inflows on Tuesday, according to market sources.

The junk ETFs saw $672 million of inflows on Tuesday, the most recent session for which data was available at press time.

It follows a $351 million daily inflow to the ETFs on Monday.

Those inflows come on the heels of a six-week period in which the high-yield ETFs sustained aggregate outflows in excess of $11 billion.

Actively managed high-yield funds put up decidedly negative fund flow numbers on Tuesday, as they sustained $496 million of outflows on the day.

Perhaps not surprisingly the dedicated euro-denominated high-yield funds are also bleeding cash in early 2022, a source said.

In the most recent week, the euro-denominated funds sustained €746 million of outflows.

Those funds saw €315 million of outflows in the month of January.

Year to date the euro-denominated fund flows are negative-€925 million, the source said.

Indexes

The KDP High Yield Daily index gained 7 points to close Wednesday at 62.56 with the yield now 5.2%. The index rose 10 points on Tuesday after falling 41 points on Monday.

The CDX High Yield 30 index gained 15 basis points to close Wednesday at 105.96.

The index was up 44 bps on Tuesday and 2 bps on Monday.

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