Primary on holiday; Coty struggles; Carnival under pressure; Telesat down

By Paul A. Harris and Abigail W. Adams

Portland, Me., Nov. 23 – The domestic high-yield primary market was dormant on Tuesday and is expected to remain that way until the return from the Thanksgiving Holiday in the United States.

Meanwhile, the secondary space was under pressure on Tuesday as the tech sell-off continued to roil equity markets.

The secondary space was down as much as ¼ point midsession; however, it pared its losses into the close.

November seemed to be the “month of BWICs,” a source said, with several bids-wanted-in-competition lists circulating the market.

New and recent issues remained in focus albeit with mixed trajectories.

Coty Inc.’s new 4¾% senior secured notes due 2029 (B1/B+) were lagging their issue price with the notes stuck on a 99-handle.

However, Warrior Met Coal, Inc.’s 7 7/8% senior secured notes due 2028 (B1/BB) continued to trade at a large premium to their discounted issue price.

With the new issue calendar drying up in the run-up to the long weekend, several outstanding issues returned to the spotlight.

Carnival Corp.’s senior notes were under pressure on Tuesday as renewed lockdowns in Europe put a damper on the reopening trade.

Telesat Canada LLC’s 6½% senior notes due 2027 (Caa1/B) were down in active trading following a merger that took the satellite communications company public.

Coty struggles

The dollar-denominated high-yield new issue market remained dormant on Tuesday, with one session remaining ahead of the extended Thanksgiving holiday weekend in the United States.

With the Nasdaq down around 1% at lunchtime in New York, high-yield bonds were off 1/8 of a point to ¼ of a point, a bond trader said.

New bonds priced Monday by Coty Inc., the HFC Prestige Products, Inc./HFC Prestige International U.S. LLC 4¾% senior secured notes due January 2029 (B1/B+), were lagging their new issue price, trading at 99½ bid, 99¾ offered.

The $500 million deal priced at par in a Monday drive-by.

The deal came ultra-tight, a trader remarked.

Investors are beginning to show signs of fatigue at such tight-pricing deals, the source asserted.

By contrast, Warrior Met Coal’s 7 7/8% senior secured notes due December 2028 (B1/BB) were up 1 to 1¼ points on Tuesday.

The $350 million deal priced on Friday at 99.343 to yield 8%.

People are gravitating to the higher coupons, the trader said, adding that there have lately been large portfolio trades that tend to be concentrated in triple-C paper.

Whether or not the higher coupons are actually compensating investors for the additional risk they must shoulder in order to get them is another story, the source conceded.

Carnival under pressure

Carnival’s senior notes were down in active trading on Tuesday as renewed lockdowns put a damper on the reopening trade.

The cruise line operator’s 6% senior notes due 2029 (B3/BB-/B+) fell about ¼ point. They were changing hands in the par to par ¼ context heading into the market close, a source said.

There was about $17 million in reported volume.

The 6% notes traded as high as 103 in early November but have been on a downward trajectory over the past two weeks.

Carnival’s 4% senior notes due 2028 were off about ¾ point to close the day at 99 bid, a source said.

There was about $16 million in reported volume.

The 4% notes traded as high as 102 in early November but have also been on a downward trajectory over the past two weeks.

Carnival’s entire capital structure has been under pressure recently with stock closing the past 12 sessions with losses, a source said.

Telesat down

Telesat’s 6½% senior notes due 2027 were trading down on Tuesday following the completion of a merger that enabled the company to go public.

The 6½% notes were down about 2½ points to close the day at 81½, a source said.

The notes were on an 84-handle on Monday.

Telesat recently completed its merger with majority owner Loral Space & Communications and began trading on the Nasdaq Global Select Market and the Toronto Stock Exchange on Nov. 19.

The company, which trades on the Nasdaq under the ticker “TSAT” has been on a downward spiral.

Stock opened last Friday at $47.81. It closed Tuesday’s session at $33.56.

$424 million Monday outflows

High-yield ETFS sustained $424 million of daily outflows on Monday, the most recent session for which data was available at press time, according to a market source who noted that the junk ETFs are lately seeing steady outflows.

Actively managed high-yield funds were positive on Monday, posting $42 million of inflows on the day.

The combined funds are tracking $1.34 billion of net outflows for the week that will conclude with Wednesday’s close.

Indexes

The KDP High Yield Daily index fell another 4 points to close Tuesday at 67.76 with the yield now 4.1%.

The index was down 4 points on Monday.

The CDX High Yield 30 index shaved off 5 basis points to close Tuesday at 108.66. The index was down 28 bps on Monday.

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