Secondary rally continues, eliminates monthly losses; Nissan in demand; DISH pares losses

By Paul A. Harris and Abigail W. Adams

Portland, Me., March 31 – The final week of March saw the dollar-denominated high-yield new issue market's first reopening since the week beginning Feb. 26.

Two issuers raised a combined $597 billion of proceeds.

Both of the week's deals, one tranche apiece from EnLink Midstream, LLC and LABL, Inc., priced in a.m.-to-p.m. drive-by executions that came tight or rich to talk.

Both of the deals in question were trading well above new issue prices on Friday morning, sources said.

Prior to the LABL deal, which priced Tuesday, the most recent previous dollar-denominated deal to get done was the Jones DesLauriers Insurance Management Inc./Navacord Inc. $500 million issue of 8½% secured notes due March 2030 that priced on March 2.

LABL ended the longest dormant period in the dollar primary market since early 2020, which took place during the initial Covid scare, a market source said.

Should market conditions remain favorable, as they have been through the latter part of the final week of March, the primary market will likely get busier in the week ahead, source say.

Look for four or five deals during the first week of April, a trader advised, without offering or claiming to have any potential issuer names.

Meanwhile, look for a possible deal from the building supplies sector in the week ahead, said a high-yield portfolio manager who declined to identify the prospective issuer.

Should that deal surface it will be led by JPMorgan, the investor said.

Companies that come may be in for some sticker shock, as higher rates and market volatility find high-yield investors insisting on being well-compensated for taking on risk.

Nevertheless, if issuers with near-to-intermediate term maturities wish to address them in the high-yield new issue market now may be the time, the portfolio manager warned.

The investment banks are in conversations with various issuers, telling them that if they have a 2025 maturity to address now is the time to think about it, because the markets could close at some point, the investor said.

Meanwhile, the secondary space continued its uptrend on Friday to close a volatile month on firm footing.

Positive earnings, reduced concern about instability in the banking sector, and softer-than-expected Consumer Price Expenditure print on Friday continued to draw buyers back to the market, which closed the quarter well bid, sources said.

The cash bond market added another ¼ to ½ point.

Credit spreads continued to tighten after blowing out past 530 bps the previous week with spreads now hovering around 480 bps.

The rate rally largely drove the gains in the secondary space with BB and investment grade credits the largest benefactors, according to a BofA Global Research report.

Nissan Motor’s cross-over senior notes (Baa3/BB+) remained sought after with the notes making strong gains since S&P downgraded the company to junk.

DISH Network Corp.’s senior notes continued their strong rebound with the notes slashing their losses from a brutal month by more than half over the past three sessions.

Uniti Group LP, Uniti Fiber Holdings Inc., Uniti Group Finance 2019 Inc., CSL Capital, LLC’s 10½% senior secured notes due 2028 (B2/B/BB+) have also rebounded strongly over the past three sessions after trading down to an all-time low on Tuesday.

Nissan in demand

Nissan’s cross-over senior notes remained well bid on Friday with high-yield and cross-over investors continuing to chase the recently downgraded notes.

Nissan’s 4.345% senior notes due 2027 climbed another 1 point.

The notes were trading in the 93¾ to 94¼ context heading into Friday’s close with the yield about 5 7/8%.

There was $24 million in reported volume.

Nissan’s 4.81% senior notes due 2030 gained ½ point to close the day on a 90-handle.

The notes were trading in the 90¼ to 90¾ context during Friday’s session, a source said.

There was $45 million in reported volume.

Nissan’s notes have made strong gains over the past week and half as widening credit spreads attracted bargain shoppers.

The notes are trading at higher levels now than when they were rated investment grade.

S&P downgraded Nissan to BB+ from BBB on March 7 with the company’s EBITDA and sales volume expected to remain weak amid a difficult business environment.

The 4.345% notes were trading on a 91-handle, and the 4.81% notes were trading on an 87-handle prior to their downgrade.

The downgrade increased Nissan’s investor base, a source said. “There are more buyers,” a source said.

DISH slashes losses

DISH’s senior notes continued their strong rebound with the notes more than slashing their monthly losses in half over the past three sessions.

DISH’s 5 7/8% senior notes due Nov. 15, 2024 (B3/B) climbed another 2½ points.

They were changing hands in the 89 to 89½ context in heavy volume with the yield narrowing to 13 5/8%, a source said.

There was $37 million in reported volume.

The notes have surged 8 to 9 points since Tuesday when they traded down to an 80-handle.

The notes were trading on a 94-handle in late February before a ransomware attack and deteriorating market conditions sparked heavy selling in the name.

DISH’s 11¾% senior secured notes due 2027 (Ba3/B+) climbed 1½ points to return to a 96-handle.

The notes were changing hands in the 96 to 96½ context with the yield about 12 7/8%.

There was $25 million in reported volume.

The notes have gained 7 points over the past three sessions.

They were trading on a 102-handle in late February.

Improved market conditions and renewed buyer interest in telecom following Intelsat’s merger talks sparked a strong recovery in DISH’s capital structure.

Uniti’s rebound

Uniti’s 10½% senior secured notes due 2028 also continued to rebound strongly after hitting a new all-time low on Tuesday.

The 10½% notes climbed another 1½ points to break above a 96-handle.

They were changing hands in the 96½ to 97 context on Friday, a source said.

The yield was about 11 3/8%.

There was $21 million in reported volume.

Uniti’s 10½% notes traded down to 93¾ on Tuesday, the lowest level for the notes since the $2.6 billion issue priced at par on Feb. 2.

Indexes

The KDP High Yield Daily index gained 40 points to close Friday at 51.68 with the yield now 7.15%.

The index gained 21 points on Thursday and 20 points on Wednesday after falling 10 points on Tuesday and inching up 2 points on Monday.

The index gained 73 points on the week.

The CDX High Yield 30 index gained 51 bps to close Friday at 101.49.

The index rose 43 bps on Thursday and 94 bps on Wednesday, fell 27 bps on Tuesday, and gained 55 bps on Monday.

The index gained 216 bps on the week.

Fund flows

High-yield ETFs saw $269 million of daily cash inflows on Thursday, according to a market source.

Actively managed high-yield funds, however, sustained $50 million of outflows on the day.

News of Thursday's daily cash flows follows a Thursday afternoon report that the combined funds sustained $2.14 billion of net outflows during the week to the Wednesday, March 29 close, according to fund-tracker Refinitive-Lipper.

That represents the sixth outflow from the junk funds in the past seven weeks, a trader said.

Year-to-date the combined funds have seen $16 billion of net outflows, which come on the heels of the record $48.9 billion of outflows which the funds sustained in 2022, according to the market source.

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