Elis prices in Euro junk primary; Fertitta, Altice rise post-earnings; Coinbase active

By Paul A. Harris and Abigail W. Adams

Portland, Me., May 17 – While the domestic high-yield primary market remained dormant on Tuesday, Europe’s primary market continued to see new deal flow.

France-based Elis SA priced a €300 million issue of 4 1/8% five-year senior bullet notes (Ba2/BB+/DBRS: BBBL) at a discount.

The new paper saw a strong break. However, the pricing of the deal compared to the company’s previous pass at the market was an indication of how drastically the market has changed for speculative-grade credits.

Meanwhile, the secondary space was a mixed bag on Tuesday with several badly battered credits lifted by a strong risk-on sentiment despite continued hawkish comments from Federal Reserve chair Jerome Powell.

While Powell reiterated the Federal Reserve would do what it deemed necessary to curb inflation, the market has already priced in 50-basis points rate increases in coming meetings, a source said.

Strong retail sales figures and a string of positive earnings announcements helped bolster certain names.

Fertitta Entertainment, LLC’s 6¾% senior notes due 2030 (Caa2/CCC+) and Altice Financing SA’s 5¾% senior secured notes due 2029 (B2/B) made strong gains after better-than-expected earnings results.

Coinbase Global, Inc.'s senior notes (Ba1/BB+) continued to see heavy volume with the notes inching higher after some weakness the previous session.

Elis prices

Tuesday's new issue news came out of Europe.

France-based Elis priced a €300 million issue of 4 1/8% five-year senior bullet notes at 99.447 to yield 4¼%.

The yield printed inside of the 4 3/8% to 4½% yield talk. Initial guidance was in the 4 7/8% area.

The deal was heard to be playing to €3.3 billion of orders at close of books, and the new notes due May 2027 broke to 99¾ bid, 100.65 offered, a source said

In an illustration of how precipitously the cost of capital has increased for speculative grade borrowers, recall that the Saint-Cloud, France-based provider of work uniforms did a one-handle deal last September when it priced a €200 million add-on to its 1 5/8% unsecured notes due April 2028 at 101.125 to yield 1.6%.

Calling Elis's Tuesday deal an “opportunistic” pass at the market, a sellside source remarked that the difference between Tuesday's 4¼% yielding paper and the 1.6% yield of last September's add-on (2.65%) is probably a useful indicator of how prices have moved.

Meanwhile the dollar-denominated new issue market remained sidelined on Tuesday, the most recent dollar deal having cleared the market over a week ago.

Fertitta on the rise

In the secondary market, Fertitta’s 6¾% senior notes due 2030 were on the rise in active trading after the Las Vegas-based entertainment and hospitality company reported earnings.

The 6¾% notes climbed 2 points to an 81-handle.

They were changing hands in the 81¼ to 81½ context heading into the market close, a source said.

The yield on the notes was 10 3/8%.

There was $11 million in reported volume, which was 6x the average trading volume for the issue.

The notes were on the rise after the company posted earnings with the company’s revenue and operating income increasing, a source said.

The 6¾% notes have been on steady downtrend since early April alongside other CCC credits as investors shed risk.

The notes hit an all-time low of 79 the previous session, a source said.

While on the rise on Tuesday, the 6¾% notes have still lost 10 points since early April.

Altice’s earnings

Altice Financing’s 5¾% senior secured notes due 2029 were among the major gainers of Tuesday’s session after the Luxembourg-based cable TV services provider reported earnings.

The 5¾% notes rose 2¾ points to close the day at 85 with the yield now 8½%, according to a market source.

There was $11 million in reported volume.

Altice reported strong numbers with revenue rising 15% and EBITDA up 9% year-over-year, according to a market source.

Coinbase active

Coinbase’s two tranches of senior notes continued to see heavy volume on Tuesday with the notes reclaiming the ground lost on Tuesday.

The crypto-currency exchange’s 3 3/8% senior notes due 2028 gained 1 point after closing the previous session down 1 point.

The notes were changing hands in the 69½ to 70 context heading into the market close, a source said.

The notes were trading with a yield just shy of 10%.

There was $19 million in reported volume.

Coinbase’s 3 5/8% senior notes due 2031 rose ½ point to return to a 66-handle.

They were changing hands in the 66 to 66½ context heading into the close with a yield of about 9%, according to a market source.

There was $12 million in reported volume.

Coinbase’s senior notes have been extremely volatile over the past week with both tranches cratering 15 points on May 10 after reporting earnings only to cut their losses nearly in half in subsequent sessions.

However, after the wild swings of the previous week, the notes seemed to be finding their level, a source said.

Big Monday outflows

The dedicated high-yield bond funds sustained $1.55 billion of net daily outflows 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 a whopping $1.13 billion of outflows on the day, the source said, adding that those outflows were broad-based.

High-yield ETFs sustained $420 million of outflows on Monday.

The combined funds are tracking $2.08 billion of net outflows for the week that will conclude with Wednesday's close, according to the market source.

Indexes

The KDP High Yield Daily index fell 48 points to close Tuesday at 56.7 with the yield now 6.8%.

The index slid 2 points on Monday.

The ICE BofAML US High Yield index shed 0.7 basis points with the year-to-date return now 10.198%.

The index slid 2.8 bps on Monday.

The CDX High Yield 30 index gained 33 bps to close Tuesday at 100.64.

The index fell 34 bps on Monday.

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