Carnival sinks pre-earnings; athenahealth falls; Fortress gains; HY funds lose $2.63 billion

By Abigail W. Adams

Portland, Me., June 23 – The domestic high-yield primary market remained dormant on Thursday with the forward calendar empty heading into Friday’s session.

However, the European market showed signs of life with 888 Holdings plc holding an investor conference call on Thursday for euro-denominated floating-rate and euro-denominated senior secured notes.

Meanwhile, the tone in the secondary space further improved with the cash bond market up ¼ point as the 10-year Treasury yield continued to decline.

After hitting a multiyear high of 3.5% the previous week, the 10-year Treasury yield settled at 3.09% on Thursday.

While the market was firmer, trading activity remained muted with large, liquid issues continuing to dominate the tape.

Carnival Corp.’s senior notes were lower in heavy volume with the cruise line operator scheduled to report earnings prior to the open of equity markets on Friday.

The outlook is dim, a source said.

athenahealth Group Inc.’s 6½% senior notes due 2030 (Caa2/CCC/CCC+) were also lower in heavy volume.

Fortress Transportation and Infrastructure Investors LLC’s 6½% senior notes due 2025 (Ba3/B) were among the gainers of Thursday’s session.

High-yield mutual and exchange traded funds continued to see outflows with $2.625 billion leaving the space through Wednesday’s close, according to the Refinitiv Lipper US Fund Flows report.

The outflow follows the historic outflow of the previous week when $5.705 billion left the space.

Last week’s outflow was the third largest on record and the largest since the week ending Feb. 14, 2018 when $6.3 billion left the space.

Carnival sinks

Carnival’s senior notes dominated the tape on Thursday with the notes continuing their downward trend ahead of earnings.

Carnival’s 6% senior notes due 2029 shaved off another ¾ point to close the day at 74 with the yield 11.6%, according to a market source.

The 5¾% senior notes due 2027 were off ¼ point to close the day at 77½ with the yield 12.198%.

Carnival’s 4% first priority senior secured notes due 2028 fell 3/8 point to close the day at 84 3/8 with the yield 7.213%.

Each tranche saw more than $20 million in reported volume.

Carnival’s senior notes were in focus with the company slated to report earnings prior to the market open on Friday.

And the outlook does not look good, a source said.

The now widely anticipated recession will hit cruise line operators hard with consumers expected to tighten their discretionary spending in the second half of 2022 and 2023, the source said.

Cruise lines were expecting increased bookings and revenue during that time period.

athenahealth down

athenahealth’s 6½% senior notes due 2030 underperformed the market with the notes sinking 2½ points in active trading.

The 6½% notes were down about ½ point at the open.

They changed hands on an 87-handle for the majority of the session, according to a market source.

However, selling pressure intensified heading into the close with the notes dropping to an 85-handle.

They closed the day wrapped around 85½ with the yield now 9 1/8%.

The notes were one of the most actively traded issues in the space with $28 million in reported volume.

Fortress gains

Fortress Transportation’s 6½% senior notes due 2025 were among the major gainers of Thursday’s session.

The notes rose 1 7/8 points in active trading to close the day at 93 5/8, according to a market source.

The yield on the notes was 8.78%.

There was $12 million in reported volume.

Indexes

The KDP High Yield Daily index gained 12 points to close Thursday at 54.76 with the yield 7.56%.

The index fell 20 points on Wednesday and was up 4 points on Tuesday.

The ICE BofAML US High Yield index gained 9 basis points with the year-to-date return now negative 12.9172%.

The index fell 38 bps on Wednesday after rising 29 bps on Tuesday.

The CDX High Yield 30 index gained 33 bps to close Thursday at 97.8.

The index fell 7 bps on Wednesday after rising 48 bps on Tuesday.

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