Regal Rexnord on junk horizon; Ford unchanged in active trade; DISH lower; Carnival gains

By Paul A. Harris and Abigail W. Adams

Portland, Me., Jan. 5 – The high-yield syndicate desks continued to await the pricing of their first junk-rated issue of 2023 on Thursday with hope centered on a potential deal from Regal Rexnord Corp.

Meanwhile, the secondary space held up well in the face of continued macro data supporting further hawkish moves by the Federal Reserve.

The latest ADP National Employment Report, which came in well above expectations and reflected the continued strength of the labor market, dragged the market lower early in the session.

However, the secondary space recouped its losses to close the day flat.

Ford Motor Credit Co. LLC’s new tranches (Ba2/BB+/BB+) were active yet unchanged on Thursday with the notes holding onto the gains made the previous session.

DISH Network Corp.’s 11¾% senior secured notes due 2027 (Ba3/B+) were lower in heavy volume with the notes giving back what they picked up in the previous session.

Carnival Corp.’s 10 3/8% senior priority notes due 2028 (B2/B+) continued to add during Thursday’s session despite some softness in the market.

Waiting, waiting

Earlier in the week the year's first junk tranches were done when Ford Motor Credit priced $2.75 billion in three tranches. However, that deal was done on the investment-grade desk.

Regal Rexnord (Baa3/BB+/BBB-) was heard to be staging for the sale of split-rated Rule 144A/Regulation S senior unsecured notes to help replace the $5.5 billion 364-day senior bridge loan put in place in November as part of the financing for its acquisition of Altra Industrial Motion Corp.

A non-deal roadshow is expected to get underway shortly, according to a portfolio manager who added that J.P. Morgan Securities LLC will be the left bookrunner.

Regal Rexnord is also expected to bring an offering of investment-grade-rated senior secured notes, the manager said.

The new issue market could see a somewhat more vigorous volume of activity, according to the portfolio manager who remarked that since the beginning of the year spreads have tightened and the market's tone has been pretty good.

Later Thursday a bond trader said that $10 billion is the currently projected amount of January issuance volume that is being bandied about the market.

Should such volume indeed materialize, however, it would be less than half of the $24 billion that priced in January 2022, the trader added.

Ford unchanged

Ford’s newly priced tranches continued to trade in heavy volume although with little movement in price.

The 6.95% senior notes due 2026 and 7.35% senior notes due 2030 continued to trade on a par handle.

The 6.95% notes dipped lower early in the session but pared their losses into the close with the notes continuing to move in the par 3/8 to par 5/8 context.

The 7.35% notes also dipped lower amid the market heaviness early in the session but returned to the par ¼ to par ½ context heading into the close.

Ford priced a $1.3 billion tranche of the 6.95% notes at 99.873 to yield 7% and a $1.15 billion tranche of 7.35% notes at 99.877 to yield 7 3/8% on Tuesday.

DISH lower

DISH’s 11¾% senior secured notes due 2027 were lower in active trading on Thursday with the notes giving back gains from the previous session.

After closing the previous session wrapped around 104, the 11¾% notes gave back ½ point to return to a 103-handle.

The notes were changing hands in the 103½ to 103¾ context throughout the session, a source said.

There was $25 million in reported volume.

DISH priced a $2 billion issue of the 11¾% notes at 98.171 in November.

The notes ranked among the best performing new deals of 2022 and were one of only a handful to close the year above their issue price.

Carnival adds

While it was a soft day for the market, Carnival’s 10 3/8% senior priority notes due 2028 continued to add in heavy volume.

The 10 3/8% notes rose ½ point to return to a 104-handle.

The notes were changing hands in the 104 to 104½ context heading into the market close.

There was $18 million in reported volume.

Carnival priced a $2.03 billion issue of the 10 3/8% notes at 98.465 in October 2022.

The notes also ranked among the best performing new issues of 2022.

Indexes

The KDP High Yield Daily index shaved off 1 point to close Thursday at 52.22 with the yield 7.34%.

The index rose 24 points on Wednesday and 34 points on Tuesday.

The ICE BofAML US High Yield index was flat on Thursday with the year-to-date return remaining at 1.173%.

The index rose 60.3 basis points on Wednesday and 57 bps on Tuesday.

The CDX High Yield 30 index fell 20 bps to close Thursday at 100.97.

The index rose 32 bps on Wednesday.

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