Volvo prices junk euro deal; Macy’s, Victoria’s Secret fall; Nordstrom gains; Twitter down

By Paul A. Harris and Abigail W. Adams

Portland, Me., May 24 – While the domestic high-yield primary market remained dormant on Tuesday, the European market continued to churn out offerings.

Volvo Car AB priced a €500 million issue of 4¼% six-year unsecured green bonds (Ba1/BB+) at a discount on Tuesday.

It is unclear when the domestic primary market will resume activity with the forward calendar empty at the end of the session.

Tuesday marked another volatile day for the secondary space with the market opening the day in the red but closing with gains with a declining 10-year Treasury yield helping to bolster the space, sources said.

While the market erased its losses and firmed heading into the close, trading volume remained thin with no new issuance to jumpstart activity.

While the overall market gained steam heading into the close, retailers remained among the worst performing sectors in the market.

Victoria's Secret & Co.’s 4 5/8% senior notes due July 2029 (B1/BB-) and Macy's Retail Holdings LLC’s senior notes (Ba2/BB) continued their downward trend on Tuesday with both retailers’ earnings reports fast approaching.

While the retail sector remained under pressure on Tuesday, Nordstrom, Inc. broke the trend with the luxury department store chain’s 5% senior notes due 2044 on the rise after a surprise earnings beat.

Twitter, Inc.’s 5% senior notes due 2030 (Ba2/BB+) saw a fresh round of activity on Tuesday with the notes hovering just above their all-time lows as social media companies come under pressure following an earnings warning from industry peer Snap Inc.

Volvo prices

The lights came up in the euro-denominated new issue market on Tuesday.

Volvo Car priced a €500 million issue of 4¼% six-year unsecured green bonds at 99.353 to yield 4 3/8%, at the tight end of the 4 3/8% to 4½% yield talk. Initial guidance was 4¾% to 4 7/8%.

The deal represents the Sweden-based carmaker's second green issue. In September 2020 Volvo Car placed €500 million of 2½% unsecured green bonds due October 2027. Those bonds were 92.43 bid, 93.26 offered on Tuesday, representing an approximately 4.1% yield to worst, a market source said.

The new deal was heard to be three-times oversubscribed at the close of books.

That level of demand enabled Volvo to ratchet down pricing, and thus reduce its concession to market conditions to approximately ¼% from 3/8%, the source said.

Volvo's deal came exactly one week after the most recent previous euro-junk deal.

On Tuesday, May 17 French work uniform supplier Elis SA priced a €300 million issue of 4 1/8% senior bullet notes due May 2027.

Meanwhile the dollar-denominated new issue market remained dormant on Tuesday, and the active forward calendar was empty.

It is not clear that the primary market will reactivate ahead of the holiday weekend to come, sources say.

The most recent dollar-denominated deal came last Wednesday, May 18, when Carnival Corp. priced $1 billion of 10½% senior notes due June 2030, in a drive-by.

Retail under pressure

Retail remained one of the worst performing sectors of Tuesday’s session even as the broader market firmed heading into the close.

Victoria’s Secret’s 4 5/8% senior notes due July 2029 hit their lowest level on Tuesday since the $600 million issue priced at par in June 2021.

The notes traded down to a 78-handle in high-volume activity and were changing hands in the 78 3/8 to 78 5/8 context heading into the market close, according to a market source.

The yield on the notes was about 8.7%.

There was $22 million in reported volume.

Victoria’s Secret is scheduled to report earnings on June 1.

Macy’s capital structure continued to take a hit on Tuesday.

The department store chain’s 4½% senior notes due 2034 sank 2¾ points to close Tuesday at 67½ with a yield of 8.8%.

There was $5 million in reported volume.

While the 4½% notes were the most active in the capital structure, the retailer’s 6 1/8% notes due 2032 were seen down 1½ points to close the day at 84 with a yield of 8½% and the 5 1/8% senior notes due 2042 were down 1¼ points to close the day at 66¼ with a yield of 8¾%, a source said.

Macy’s is set to report earnings on May 26.

The retail space has been “decimated” following a slew of disappointing earnings and recession fears, a source said.

However, Nordstrom bucked the trend with the company’s 5% senior notes due 2044 on the rise after a surprise earnings beat.

The 5% notes were lifted after Nordstrom reported earnings after the close of equity markets.

The notes had been hovering around 74 during Tuesday’s session but jumped 3 points to 77 following the earnings announcement.

The luxury department store chain was an outlier among its industry peers.

The company reported a surprise sales beat and raised its forward guidance.

The company may “be in its own class,” with its consumers not as affected by the recession as others, a source said.

Twitter active

Twitter’s 5% senior notes due 2030 were active although little changed on Tuesday after industry peer Snap sounded an alarm that dragged down equity markets.

The 5% notes remained on a 97-handle in high-volume activity.

They were changing hands in the 97 to 97½ context throughout the session, a source said.

The notes closed Tuesday with a yield of about 5.4%.

There was $13 million in reported volume.

While Twitter’s senior notes were stable on Tuesday, the social media company’s stock sank after Snap lowered its second-quarter guidance one month after issuing it.

When announcing second-quarter revenue and adjusted EBITDA would be below the low end of its previously announced range, the company stated that the macroeconomic environment has “deteriorated further and faster than anticipated.”

Twitter’s 5% notes have been hovering near their lows over the past week.

While they traded as high as 102 after Elon Musk’s takeover of the company was announced, they have since given back all their gains with the takeover now in doubt.

Fund flows

The dedicated high-yield bond funds sustained $262 million of net 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 $251 million of outflows on the day.

High-yield ETFs sustained $11 million of outflows on Monday, the source said.

Indexes

The KDP High Yield Daily index rose 3 points on Tuesday to close the day at 56.85 with the yield now 6.84%.

The index jumped 57 points on Monday.

The ICE BofAML US High Yield index inched up 2.6 basis points with the year-to-date return now negative 10.576%.

The index gained 17.5 bps on Monday.

The CDX High Yield 30 index rose 16 bps to close Tuesday at 99.92.

The index gained 69 bps on Monday.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.