Morning Commentary: Navient on tap; First Quantum, CommScope destruction continues

By Abigail W. Adams

Portland, Me., Oct. 31 – The domestic high-yield primary market continued at a slow and steady pace on Tuesday with one drive-by offering in the market and the shadow calendar growing.

Navient Corp. plans to price a benchmark issue of seven-year senior notes (Ba3/B+/BB-) in a Tuesday drive-by with initial guidance for a yield in the mid-11% area, according to a market source.

The issue size was heard to be $500 million.

The pricing seemed optically cheap, a source said.

However, there may be a reason for it.

EG Group also telegraphed its intention to price new junk rated debt as it launched a fungible $500 million-equivalent dollar- and euro-denominated add-on to its senior secured term loan B due February 2028.

The retail and fuel station company is planning to offer new senior secured debt to help refinance its 2025 and 2026 debt securities.

Meanwhile, the secondary space opened with a firmer tone on Tuesday with equity and Treasury markets largely flat as the Federal Open Market Committee commences the second-to-last meeting of 2023.

The future of rates is the big question that markets have been asking, a source said.

While broader markets await an answer, it was topical news that continued to drive movements in the secondary space.

The destruction in CommScope Holding Co., Inc.’s and First Quantum Minerals Ltd.’s capital structure continued early Tuesday after both credits saw a double-digit plunge in their senior notes the previous session.

CommScope’s 6% senior notes due 2025 (Caa1/CCC+) sank another 4 points in early trade after a 15 point plunge the previous session.

The 6% notes traded down to a 69-handle and were trading in the 69¼ to 69¾ context in heavy volume early in the session, a source said.

CommScope’s earnings warning and market rumors that a large holder was exiting its position in the credit sparked a fire-sale in the company’s senior notes the previous session.

First Quantum’s capital structure also continued to reel from the upcoming referendum called to determine the future of its Panamanian copper mine.

The 8 5/8% senior notes due 2031 (//B+) were down another 1 point to trade in the 84¾ to 85¼ context early in the session.

The notes sank 8 points the previous session.

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