Massive junk primary with eight issuers; Endure Digital, Taseko Mines flat; AA in focus

By Paul A. Harris and Abigail W. Adams

Portland, Ore., Jan. 28 – A massive Thursday in the high-yield new issue market saw eight issuers bring a total of ten tranches for a combined $5.1 billion face amount of issuance.

Meanwhile, the secondary space firmed on Thursday with the market up about 1/8 point after the weakness of the previous session.

However, some of the recent deals had lackluster receptions in the secondary space.

Endure Digital Inc.’s newly priced 6% senior notes due 2029 (Caa2/CCC+) and Taseko Mines Ltd.’s 7% senior secured notes due 2026 (Caa1/B-/B-) fell flat in the aftermarket.

Outside of the new paper, American Airlines Group, Inc.’s soon-to-mature 5% notes due June 1, 2022 gained in high-volume activity.

Meanwhile, the outflows continued with high-yield mutual and exchange-traded funds losing $1.329 billion in the week through Wednesday’s close, according to the Refinitiv Lipper Fund Flow report.

Massive Thursday

Only two of the eight issuers in the Thursday market were drive-by issuers.

Three of the eight upsized their offerings.

Executions remained neatly pressed and folded.

Two of the ten tranches came inside of talk. Five came at the tight ends of talk. And three priced in the middle of talk.

And in line with lamentations on the credit quality of deals lately coming into the red hot high-yield market, four of Thursday's 10 tranches came with triple-hook ratings (Caa1 or lower and CCC+ or lower) on both sides of the split.

And in what may be a first for a single day in the primary market, spread among Thursday's 10 tranches were a total of five ratings below Caa1 and/or CCC+ (see related stories in this issue).

Meanwhile, the mob action that took hold of the stock market earlier in the week is only indirectly impacting the junk bond market, a bond trader said on Thursday.

Bonds from credits such as AMC Entertainment Holdings, Inc. and GameStop Corp., which saw triple-digit increases in their share prices earlier in the week – much of it taken back on Thursday – were active, the trader said.

Bond investors reasoned, for example, that with its swollen share price AMC might sell stock and use the proceeds to repay debt, the trader said, and added that the company ought to do so, but so far has not.

The narrative that the mob trading seen earlier in the week was inspired by a bunch of couch potatoes who might otherwise be wearing 3-D helmets and blasting away at video games did not play very well for this professional bond trader, who spoke on background.

No doubt the mob was involved, the trader said.

Flat

Endure Digital’s recently priced 6% senior notes due 2029 and Taseko Mines; 7% senior secured notes due 2026 had lackluster receptions in the secondary space with the notes largely stuck at their issue prices.

The pricing was tight and the names were “meh,” a source said.

Endure’s 6% senior notes were marked at par 1/8 bid, par 3/8 offered in the midafternoon.

The cloud-based platform solutions company priced an upsized $685 million, from $640 million, issue of the 6% notes at par on Wednesday.

Pricing came tighter than the 6¼% to 6½% yield talk.

The deal was heard to be playing to at least $3 billion of orders.

Taseko Mines’ 7% senior secured notes due 2026 were also flat in the aftermarket.

The notes were marked at par bid, par ¼ offered in the midafternoon.

The mining company priced an upsized $400 million, from $325 million, issue of the 7% notes at par on Wednesday.

Pricing came at the tight end of the 7% to 7¼% yield talk.

American Airlines volatile

American Airlines’ soon-to-mature 5% senior notes due June 1, 2022 were volatile in high-volume activity on Thursday.

The notes gained as much as 5 points early in the session.

They traded up to a 95-handle before coming in to close the day in the 92½ to 93 context, according to a market source.

The notes were also up more than 1 point during Wednesday’s session.

It was unclear if the activity was driven by the embattled airline’s earnings report, or the ongoing battle between retail traders and short-sellers which drove up the company’s stock more than 22% early in Thursday’s session.

American reported its fourth-quarter earnings prior to the market open on Thursday.

While the airline reported its largest ever annual net loss of $9.5 billion, it also reported $14.3 billion of total available liquidity at the end of the fourth quarter, which is expected to increase to $15 billion by the end of the first quarter, according to a company news release.

The 5% notes have $750 million outstanding, according to Trace data.

American Airlines’ stock spiked on Thursday.

However, the increase in the stock price was the result of retail traders taking aim at the heavily shorted name in order to cause a short-squeeze, as opposed to the fundamentals of the company.

Indexes gain

Indexes returned to the green on Thursday.

The KDP High Yield Daily index was up 3 points to close Thursday at 69.29 with the yield 4.28%.

The index dropped 9 points on Wednesday and 4 points on Tuesday after gaining 1 point on Monday.

The ICE BofAML US High Yield index gained 12.5 points with the year-to-date return now 0.454%. The index dropped 18.3 bps on Wednesday after gaining 2.3 bps on Tuesday and 4.8 bps on Monday.

The CDX High Yield 30 index gained 16 points to close Thursday at 108.06. The index sank 48 points on Wednesday, 15 points on Tuesday and 11 points on Monday.

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