AM General prices; secondary losses accelerate; Tenet Healthcare sells off

By Paul A. Harris and Abigail W. Adams

Portland, Me., Sept. 21 – The Sept. 21 opened with only one deal clearing the market – a stark contrast to the previous Monday when $3.4 billion of junk cleared the market in a burst of drive-by business accompanied by a steep buildup to the new deal calendar.

Following a roadshow that ran throughout the past week, AM General sold $600 million of eight-year senior secured notes (B2/B+).

While new deal activity was thin on Monday, there is an active forward calendar with $2 billion expected to price before the week draws to a close.

Meanwhile, the secondary space was again heavy as a risk-off attitude pervaded the markets, a source said.

The overall market was down about ¼ to ½ point with the healthcare space leading losses as the death of Supreme Court Justice Ruth Bader Ginsburg cast fresh doubt over the Affordable Care Act.

Tenet Healthcare Corp.’s recently priced 6 1/8% senior notes due 2028 (Caa1/CCC+/B) sold off in high-volume activity on Monday with the notes closing the day well below par.

HCA Healthcare, Inc.’s 3½% senior notes due 2030 (Ba2/BB-/BB) also saw renewed attention with the notes shaving off their premium in the active trading.

Several other recent issues also sank below par amid the heaviness in the market including First Quantum Minerals Ltd.’s 6 7/8% senior notes due 2027 (CCC+/B-) and Methanex Corp.’s 5 1/8% senior notes due 2027 (Ba1/BB/BB).

While Consolidated Communications Holdings, Inc.’s recently priced 6½% senior notes due 2028 (B2/B+) were growing soft after a strong break, the notes were able to maintain a healthy premium in high-volume activity.

Monday’s primary

The Sept. 21 week got underway in stark contrast to the previous Monday, Sept. 14, when a whopping $3.4 billion of junk cleared the market in a burst of drive-by business accompanied by a steep buildup to the new deal calendar.

The latest Monday saw just one deal price.

Following a roadshow that ran throughout the past week AM General sold $600 million of 9½% eight-year senior secured notes (B2/B+) in the middle of talk.

Investors appeared to take a view that with a 9½% coupon at par the issuer left some value on the table: the notes traded to 102 bid, 103 offered late Monday afternoon, in spite of a Monday selloff that took the broad market down around ¼ of a point, a trader remarked.

Elsewhere Monday the news flow was on the thin side. Three issuers, one from the United States, one from Spain and one from Australia, hit the road with junk deals (see related stories in this issue).

News of a crush of new coronavirus cases in Europe, blazing across the headlines just as the pandemic’s death toll in the United States is closing in on the 200,000 threshold, sparked selling in junk bonds as well as stocks on Monday, according to a trader in New York.

In the past week Spain saw more than 53,000 new cases, with 114 new infections per 100,000 people in that interval, the trader noted.

The news out of Europe caused the high-yield market in the U.S. to open ¼ to ½ point lower on Monday morning, the trader said, adding that the index retraced some of that loss to close down around ¼ point.

Monday's rather thin news flow notwithstanding, at the close there remained a fairly substantial active new issue calendar of $2 billion dollar-denominated deals expected to clear before the end of the week.

Tenet Healthcare sells off

Losses intensified for Tenet Healthcare’s recently priced 6 1/8% senior notes due 2028 with the notes down about 3 points in high-volume activity.

Tenet’s 6 1/8% notes sank to a 96-handle on Monday and were changing hands in the 96¼ to 96½ context heading into the market close, a source said.

The notes were among the most actively traded during Monday’s session with about $30 million in reported volume.

Tenet Healthcare is a high beta name and the 6 1/8% notes have lagged their issue price since weakness hit the secondary space.

The notes were selling off on Monday alongside the broader healthcare sector.

HCA Healthcare’s 3½% senior notes due 2030 also gave back much of their premium in active trading.

The 3½% notes dropped 2 points to close the day at par ½, according to a market source.

There was more than $18 million on the tape by the late afternoon.

The death of Ginsburg and the rush of the Trump administration to appoint a conservative to the bench cast doubt over the future over the Affordable Care Act, a source said.

The uncertainty around the act also cast uncertainty over a source of revenue for healthcare services companies.

Below par

Several recent deals dropped below par amid the sell-off in risk assets on Monday.

First Quantum Minerals’ 6 7/8% senior notes due 2027 dropped 3 points in active trading.

The notes were changing hands in the 97¾ to 98 context heading into the market close.

The bonds saw more than $27 million in reported volume during Monday’s session.

The notes closed the previous session at 99¾ bid, par offered.

Methanex’s 5 1/8% senior notes due 2027 continued to trade off on Monday.

The notes were down 5/8 point to close the day at 99¼, according to a market source.

There was more than $24 million on the tape heading into the market close.

The 5 1/8% notes were wrapped around par at Friday’s close.

Weaker

Consolidated Communications’ 6½% senior notes due 2028 gave back some of their gains after a strong break.

However, the notes continued to trade at a healthy premium despite the broader weakness in the market.

The 6½% notes shaved off about 1 point and were wrapped around 101 in active trading on Monday, a source said.

There was about $25 million in reported volume during the session.

The notes saw a strong break on Friday, trading up to a 102-handle.

Consolidated Communications priced a downsized $750 million issue of the 6½% notes at par on Friday.

The yield printed at the tight end of the 6½% to 6¾% yield talk.

$330 million Friday outflows

For the second consecutive session the dedicated high-yield bond funds saw daily net outflows in excess of $300 million on Friday, according to a market source.

The combined funds saw $330 million of outflows on the day: $460 million of outflows from high-yield ETFs, but $130 million of inflows to actively managed high-yield funds, the source said.

Friday's $330 million of net outflows from the combined funds follows $317 million of net outflows on Thursday, the source recounted.

Indexes down

Indexes opened the week on soft footing after all posted cumulative gains the previous week.

The KDP High Yield Daily index dropped 27 bps with the yield now 5.44%.

The index posted a cumulative gain of 12 bps on the week last week.

The ICE BofAML US High Yield index sank bank into negative territory on Monday.

The index was down 69.6 bps with the year-to-date return now negative 0.209%.

The index posted a cumulative gain of 13.6 bps on the week last week.

The CDX High Yield 30 index dropped 71 bps to close Monday at 105.78.

The index was up 43 bps on the week last week.

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