Navient drives by junkland; Ford up on IG bump; First Quantum, CommScope fall post-plunge

By Abigial W. Adams

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

Navient Corp. priced a $500 million offering of seven-year senior notes (Ba3/B+/BB-) in a deal that looked optically attractive.

EG Group also telegraphed its intention to price new junk-rated debt as it launched an add-on to its term loan.

While the shadow calendar continues to grow, two deals remain on the forward calendar, including the Raising Cane’s Restaurants LLC $500 million offering of long five-year senior notes (B3).

Price talk for Raising Cane’s deal circulated the market on Tuesday with pricing expected during Wednesday’s session.

Meanwhile, the secondary space firmed on Tuesday with equity markets strong 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.

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

Ford Motor Co. and Ford Motor Credit Co. LLC’s senior notes (Ba2/BBB-/BBB-) dominated the tape with the capital structure gaining ½ to 2 points as the company achieved high-grade status.

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

Navient drives by

Navient priced a $500 million offering of seven-year senior notes in a Tuesday drive-by at 99.81 with a coupon of 11½% to yield 11½%, according to a market source.

Pricing came in line with talk for a yield of 11½% and at the midpoint of initial guidance for a yield in the mid-11% area.

The deal looked optically attractive with pricing well wide of the index, sources said.

However, there may be a reason for it with student loan servicers in the crosshairs of contentious student loan forgiveness programs.

Upcoming

Meanwhile, Raising Cane’s set price talk on its $500 million offering of long five-year senior notes in the 9½% area, according to a market source.

Official talk comes tight to early guidance for a yield in the high 9% to 10% area, according to a market source.

The shadow calendar also continued to grow.

EG Group 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.

Ford a Rising Star

Ford’s capital structure was on the rise on Tuesday as the company achieved rising star status.

Ford’s senior notes were lifted ½ to 2 points with buyers in the market chasing the now high-grade notes.

“There were a lot of BWICs for Ford today,” a source said.

Ford’s 6.1% senior notes due 2032 were the most active in the debt stack with the notes lifted ½ point.

They were wrapped around 92½ heading into the market close with the yield 7¼%.

There was $103 million in reported volume.

The 3¼% senior notes due 2032 gained 1 point to 75 5/8 with the yield also 7¼%.

There was $77 million in reported volume.

The 7.35% senior notes due 2030 jumped 1½ points to par 3/8 with the yield also 7¼%.

There was $70 million in reported volume.

The 6.8% senior notes due 2028 added 1¼ points to trade up to 99 7/8 with a yield of 6 7/8%.

There was $56 million in reported volume.

The notes were in focus after S&P Global Ratings upped their rating to BBB- from BB+, citing EBITDA margins and liquidity as reasons for the upgrade.

S&P follows Fitch Ratings which raised Ford to BBB- from BB+ in September.

The notes were switching hands following the upgrade with high-grade investors once again able to add Ford to their portfolio.

Ford’s credit ratings were slashed to junk at the outset of the Covid pandemic in March 2020.

CommScope fire sale continues

The fire sale in CommScope’s capital structure continued on Tuesday with the notes falling another 5 to 12 points in heavy volume after a double-digit plunge on Monday.

CommScope’s 6% senior notes due 2025 (Caa1/CCC+) dropped another 12 points.

They were trading in the 60½ to 61½ context with the yield rising to 41 3/8%, a source said.

There was $90 million in reported volume.

The notes closed last Friday on an 89-handle.

“Wow,” a source said.

The 8¼% senior notes due 2027 dropped another 10 points to close the day at 42½ with the yield 41 5/8%.

There was $34 million in reported volume.

CommScope’s 6% senior secured notes due 2026 (B1/B) fell 2 points to close the day at 82 with the yield 15 3/8%.

There was $19 million in volume.

Sellers continued to offload their positions in the credit after it issued an earnings warning the previous session.

Market rumors that a large holder was exiting their position in the name fanned the flames of the selling frenzy, a source said.

Sellers dig in to First Quantum

First Quantum’s senior notes 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 2 points in heavy volume.

The notes were trading in the 84¾ to 85¼ context early in the session and sank to 83 heading into the close.

There was $27 million in reported volume.

The notes lost 8 points the previous session.

First Quantum’s 6 7/8% senior notes due 2027 were off another 4 points to close the day at 85¼ with the yield now 11 5/8%.

There was $16 million in reported volume.

First Quantum’s notes fell 4 to 8 points the previous session after the Panamanian president called for a citizen’s vote on the country’s contract with First Quantum.

First Quantum’s cooper mine in Panama is its largest asset.

Indexes

The KDP High Yield Daily index inched up 3 basis points to close Tuesday at 47.98 with the yield now 8.23%.

The index shaved off 5 bps on Monday.

The ICE BofAML US High Yield index was down 30 bps with the year-to-date return now 4.662%.

The index was off 3.5 bps on Monday.

The CDX High Yield 30 index gained 24 bps to close Tuesday at 99.33.

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