Carvana’s existing notes drop; Twitter gains continue; American Bath pops; junk calendar grows

By Paul A. Harris and Abigail W. Adams

Portland, Me., April 26 – Carvana Co.’s outstanding notes were among the largest losers in the junk bond secondary space on Tuesday with the notes down 1 to 2 points in heavy volume as the market awaited the used car e-commerce company’s latest offering.

As a backdrop, Tuesday marked another brutal day for equity markets with the Dow Jones industrial average down more than 2% and the Nasdaq Composite index down almost 4%.

However, the high-yield market was holding up well as equities crumbled, sources said.

While the CDX index was off almost 100 bps to mark its lowest close of the year, the cash bond market was relatively flat, sources said.

However, several issues were on the rise on Tuesday due to topical and earnings-related news.

Twitter, Inc.’s senior notes (Ba2/BB+) continued their upward momentum following Monday’s surprise takeover news.

American Bath Group LLC’s (CP Atlas Buyer, Inc.) 7% senior notes due 2028 (Caa2/CCC) outperformed on Tuesday with the notes jumping 5 points following earnings.

Calendar builds

In Tuesday's high-yield primary market Australia-based Mineral Resources Ltd. disclosed plans to price $1 billion of senior notes (Ba3//BB) on Thursday.

The deal comes in two tranches, each sized at a minimum of $400 million: 5.5-year notes with initial guidance of 8% to 8¼% and eight-year notes with initial guidance of 8½% to 8¾%.

Elsewhere, debut issuer Bioventus LLC announced plans to price a $415 million offering of five-year senior notes (Caa1/CCC+), also on Thursday.

Initial guidance is in the mid-to-high 9% area.

Meanwhile, the Tuesday session failed to generate any hard news on the closely watched megadeal from Carvana, a $2.275 billion offering of eight-year senior notes (Caa2/CCC+).

The buzz in the market is that efforts to build a book for the well-telegraphed acquisition financing deal hit headwinds at initial guidance of 10% to 10½%, and Carvana's rate could push out as far as 11%.

One buyside source noted that the Carvana 4 7/8% senior notes due September 2029, which came at par in a $750 million issue last August, are now trading in the 70s, yielding approximately 9¼%.

Carvana's shares, which were trading just below $140 in late March, have fallen over 47% from that level in the interim, closing Tuesday at $73.33, the buysider said.

Carvana down

Of Carvana’s existing issues, its 5 7/8% senior notes due 2028 fell about 1 point to close the day at 81 7/8, according to a market source.

The notes were yielding 9.73%.

There was $23 million in reported volume.

The 4 7/8% senior notes due 2029, mentioned above, were more precisely down 1 3/8 points to close the day at 76¾.

The yield on the notes was 9.315%.

There was $20 million in reported volume.

The 5½% senior notes due 2027 were down 1 point to 83 with the yield now 9.9%.

There was $17 million in reported volume.

The notes were taking a hit as the market awaits Carvana’s latest offering, which was expected to price cheap to the outstanding notes on a relative value basis, a source said.

Holders of Carvana’s outstanding issues were most likely selling to switch into the new offering.

Carvana’s capital structure has been under pressure since the company announced earnings and new debt and equity offerings the previous week.

Twitter gains

Twitter’s senior notes continued to rip on Tuesday as the market receives more clarity about Elon Musk’s whirlwind takeover of the social media company.

Twitter’s 5% senior notes due 2030 rose another 2 points to close Tuesday at 103.75.

The notes dominated activity in the secondary space with $73 million in reported volume.

Twitter’s 3 7/8% senior notes due 2027 climbed another ¾ point to top par for the first time since late January.

The notes were changing hands in the par ¼ to par ¾ context throughout Tuesday’s session, a source said.

There was $42 million in reported volume.

The notes continued to rise as the market receives more assurance about Musk’s takeover of the company.

The 5% notes jumped 2 points and the 3 7/8% notes jumped 3 points on Monday as news midsession that Twitter had agreed to Musk’s takeover proposal.

American Bath jumps

American Bath’s 7% senior notes due 2028 outperformed the market on Tuesday with the notes jumping 5 points following earnings, a source said.

The notes closed Tuesday at 85½ after trading on an 80-handle the previous session.

The small, illiquid issue was active with $9 million in reported volume.

“Their numbers were good,” a source said.

Big Monday outflows for ETFs

High-yield ETFs sustained a massive $1.01 billion daily outflow of cash on Monday, the most recent session for which data was available at press time, according to a market source.

Actively managed high-yield funds saw $99 million of outflows on Monday, the source said.

The combined funds are tracking $182 million of net outflows for the week that will conclude with Wednesday's close.

Indexes

The KDP High Yield Daily index rose 2 points to close Tuesday at 59.22 with the yield now 6.21%.

The index shaved off 9 points on Monday.

The ICE BofAML US High Yield index gained 13.4 basis points with the year-to-date return now negative 7.203%.

The index shaved off 18.3 bps on Monday.

The CDX High Yield 30 index fell 96 bps to close Tuesday at 102.24.

The index gained 46 bps on Monday.

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