Junkland: no new deals; reopening trade falters: AMC, Carnival, Caesars under pressure

By Paul A. Harris and Abigail W. Adams

Portland, Me., Dec. 17 – The domestic high-yield primary market remained dormant on Friday with many considering it closed for the year.

Skillz Inc.’s deeply discounted $300 million issue of 10¼% first-lien secured notes due 2026 (B3/B-) is poised to mark the last deal of the year.

The deal, which priced at 95 to yield 11.598%, also ranks as one of the few deals to price with a yield north of 11%.

Meanwhile, the secondary space was flat on Friday as liquidity continued to thin.

There was little activity in the space with only four names logging more than $10 million in reported volume, a source said.

“People are hiding,” a source said.

While volumes were light on individual names, the reopening trade continued to falter as uncertainty surrounding the impact of the Omicron variant began to take its toll.

AMC Entertainment Holdings, Inc.’s 10% senior secured second-lien notes due 2026 (Ca/CCC-) were the most active name in the secondary space with the notes continuing to trade down.

Carnival Corp.’s 6% senior notes due 2029 (B3/BB-/B+) were also trending lower in active trading.

Caesars Entertainment Inc.’s 4 5/8% senior notes due October 2029 (Caa1/CCC+) were also down.

Closed

The Omicron variant of Covid-19 sent a sizable swath of debt capital markets participants back home to work remotely, sources said on Friday.

The primary market remained dormant as it has been since Wednesday when debut issuer Skillz priced a deeply discounted $300 million issue 10¼% first-lien secured notes due December 2026 (B3/B-).

As no deals are expected to be announced during the pre-Christmas week ahead, Skillz is likely the final high-yield deal of 2021, sources say.

Reopening trade under pressure

The reopening trade remained under pressure on Friday as concern over the Omicron variant renewed lockdown fears.

AMC’s 10% senior secured second-lien notes due 2026 continued to lose ground.

The notes were off another 1 3/8 points to close the day at 93 7/8, a source said.

With $27 million in reported volume, the notes were the most actively traded issue in the secondary space.

The 10% notes have dropped 8 points over the past week.

They were on a par-handle on Monday.

With few movie releases on the horizon, box office recovery is expected to be slower than anticipated with the Omicron variant further dousing a pickup in the sector, a source said.

Carnival’s 6% senior notes due 2029 were also down in active trading.

The notes shaved off about ½ point to close the day at 96½. There was about $14 million in reported volume.

Caesar’s 4 5/8% senior notes due 2029 moved further below par.

The notes were off about ½ point. They were changing hands in the 99 1/8 to 99 3/8 context heading into the close.

There was about $9 million in reported volume.

$781 million Thursday inflows

High-yield ETFs had large daily cash inflows of $781 million on Thursday, according to a market source.

Actively managed high-yield funds were negative on the day, sustaining $28 million of outflows on Thursday.

News of Thursday's daily flows trails a Thursday report that the combined funds sustained $200 million of net outflows in the week to the Wednesday, Dec. 15 close.

That left the year-to-date cash flows of the combined funds at negative-$16.9 billion, versus the $44.9 billion of net inflows to the combined funds in 2020, according to the market source.

Indexes

The KDP High Yield Daily index shaved off 1 point to close Friday at 65.49 with the yield now 4.07%.

The index gained 10 points on Thursday after dropping 2 points on Wednesday, 12 points on Tuesday and 4 points on Monday.

The index posted a cumulative loss of 9 points on the week.

The CDX High Yield 30 index fell 5 basis points to close Friday at 108.47. The index was down 12 bps on Thursday, gained 29 bps on Wednesday and fell 15 bps on Tuesday.

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