Junk primary quiet on Friday; Chart holds premium; Navacord tucked away; Medline active

By Paul A. Harris and Abigail W. Adams

Portland, Me., Dec. 9 – A surprisingly busy week for the junk bond primary week might mean there is more new business to follow before the end of the year, especially in light of the positive receptions to recent deals.

Meanwhile, the cash bond market’s strong open gave way to a sideways day with the market unchanged after the latest economic data point suggested continued inflation and a hawkish Fed.

However, illiquidity continued to set in with activity light outside of new paper.

Chart Industries, Inc.’s two tranches of senior notes remained active with the notes unchanged after making strong gains on the break.

While new paper from Chart continued to dominate activity in the secondary space, Jones DesLauriers Insurance Management Inc.’s (Navacord Corp.) 10½% senior notes due 2030 (Caa2/CCC/CCC+) were nowhere to be seen with the notes largely tucked away, although they were quoted above their discounted issue price.

Medline Industries’ junk bonds continued to actively trade although with little movement in price.

Quiet end to busy week

The new issue market remained quiet on Friday following Thursday's burst of action.

However, given Thursday's executions the new issue market may have a little way left to run before the end of the year, sources said on Friday.

To recap, Chart Industries, Inc., in the first junk-rated, dollar-denominated deal to price since before Thanksgiving, priced $1.97 billion of notes in two tranches: 7½% senior secured notes due January 2030 (Ba3/B+) and 9½% senior unsecured notes due January 2031 (B3/B).

The deal was a blowout, sources said.

Demand came to as much as $9.5 billion across both tranches, and both bonds were trading at premiums to their reoffer prices on Friday morning, a trader said.

Also Jones DesLauriers Insurance Management Inc., a broker partner of Navacord Inc., priced a $300 million issue of 10½% eight-year senior notes (Caa2/CCC/CCC+), the first deal to price with triple-C equivalent ratings (“triple hooks”) on both sides of the split since mid-June.

With Chart Industries being a blowout, and the triple-hooks Navacord deal pricing within price talk, the primary market activity could revive in the week ahead, sources say.

Cash balances of the funds remain high. Issuance has been historically low. The new issue calendar is empty. And the pipeline is heard to be lean, they add.

With the Chart Industries deal indicating pent-up demand on the part of investors, a window of opportunity for issuers could be inching open in the late going of 2022, a trader said on Friday.

That said, however, no one professed visibility – such as a non-deal roadshow, for example – on potential business for the week ahead.

Chart strong

Chart’s two tranches of senior notes held onto the strong gains made after breaking for trade the previous session.

The 9½% senior notes due 2031 (B3/B) dipped below a 101-handle with the notes trading down to par 1/8, a source said.

However, the notes closed the day where they ended the last, wrapped around 101.

The notes continued as a volume leader with $80 million on the tape.

Chart’s 7½% senior secured notes due 2030 (Ba3/B+) dipped below a par-handle in intraday activity to trade down to 99¾.

However, the notes regained their previous level and were marked in the par ½ to 101 context heading into the market close.

There was $120 million in reported volume.

Chart priced an upsized $1.46 billion, from $1.31 billion tranche of the 7½% secured notes at 98.661 to yield 7¾% on Thursday.

Pricing came at the tight end of the 7¾% to 8% yield talk and slightly rich to talk for 1.5 points of OID.

The deal also included a downsized $510 million, from $750 million, tranche of the 9½% notes at 97.949 to yield 9 7/8%.

Pricing came at the tight end of yield talk in the 10% area and slightly cheap to talk for 2 points of OID.

Tucked away

Navacord’s 10½% senior notes due 2030 were nowhere to be seen in the secondary market with the small issue largely tucked away.

While volume was virtually non-existent, the notes were marked above their discounted issue price at 98 bid, a source said.

The deal was “clubby,” with the issue tucked away, a source said.

Navacord priced a $300 million issue of the 10½% notes (Caa2/CCC/CCC+) at 97.384 to yield 11% on Thursday.

The yield printed at the wide end of the 10¾% to 11% yield talk.

Medline active

Medline’s senior notes were active although with little movement in price on Friday.

Medline’s 3 7/8% senior secured notes due 2029 (B1/B+/BB-) continued to trade on an 84-handle.

The notes were changing hands in the 84 3/8 to 84 5/8 context heading into the market close.

The yield was just shy of 7%.

There was $15 million in reported volume.

The notes have largely traded on an 84-handle for the past two weeks.

The 5¼% senior notes due October 2029 (Caa1/B-/B-) were slightly stronger with the notes trading in the 81¾ to 82¼ context heading into the market close, a source said.

The yield was about 8¾%.

There was $14 million in reported volume.

The notes have largely traded on an 82-handle for the past two weeks but dipped below the previous session.

Fund flows

The dedicated high-yield bond funds had $310 million of net daily cash outflows on Thursday, according to a market source.

Actively managed high-yield funds sustained $230 million of outflows on the day.

High-yield ETFs saw $80 million of outflows on Thursday, the source said.

News of Thursday's daily flows follows a Thursday afternoon report that the combined funds saw $66 million of net inflows on the week to the Wednesday, Dec. 7 close, according to fund-tracker Refinitiv Lipper.

That weekly inflow was the sixth positive weekly cash flow in the past seven weeks, for the junk funds, according to the market source who added that over the course of those seven weeks the combined funds have had $11.8 billion of net inflows.

Indexes

The KDP High Yield Daily index gained 4 points to close Friday at 52.54 with the yield 7.18%.

The index gained 8 points on Thursday and 5 points on Wednesday after slipping 15 points on Tuesday and 8 points on Monday.

The index posted a cumulative loss of 6 points on the week.

The CDX High Yield 30 index gained 27 basis points to close Friday at 100.8.

The index was down 27 bps on Thursday, crept up 3 bps on Wednesday and slid 8 bps on Tuesday and 61 bps on Monday.

The index posted a cumulative loss of 66 bps on the week.

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