Junk: Kendrion/Kevlar, Allwyn price; Clarios flat at par; DISH rebounds; Level 3 rises

By Paul A. Harris and Abigail W. Adams

Portland, Me., April 21 – For new junk bond paper, the market turned to Europe, on Friday.

Meanwhile, it was a quiet session in the secondary space with new paper dominating the tape as liquidity in the broader market continued to thin.

While quiet, the secondary space firmed on Friday as investors shrugged off growing credit crunch concerns.

The cash bond market closed the day with an 1/8 to ¼ point gain after a flat open.

Clarios Global LP/Clarios US Finance Co., Inc.’s 6¾% senior secured notes due 2028 (B1/B+/B+) had a lackluster start in the aftermarket with the notes stuck at par in heavy volume.

DISH Network Corp.’s short-dated 5 7/8% senior notes due Nov. 15, 2024 (B3/B) wiped out their losses from the previous session with the notes returning to an 82-handle.

Lumen Technologies subsidiary Level 3 Financing, Inc.’s senior notes (B1/B) made large gains in thin volume following the completion of a distressed debt exchange for Lumen notes.

Europe

Two tranches of dollar-denominated junk priced on Friday.

Both came from European issuers.

Italy-based Kedrion Biopharma priced a $790 million tranche of Kevlar SpA 6½% senior secured notes due Sept. 1, 2029 (B3/B) at 84 to yield 9.963%, in line with talk.

And London-based Allwyn Entertainment Financing (UK) plc sold $700 million of 7 7/8% notes due April 30, 2029 which priced at par to yield 7.88%, tight to talk.

Clarios flat

Clarios’ new 6¾% senior secured notes due 2028 had a lackluster start in the aftermarket with the notes flat in heavy volume.

The 6¾% notes traded in a tight range around par throughout Friday’s session.

There was $90 million in reported volume.

“They didn’t go anywhere,” a source said.

While the offering played to heavy demand during bookbuilding, the tight pricing left little room for movement in the aftermarket.

Clarios priced an upsized $750 million, from $500 million, issue of the 6¾% notes at par on Thursday.

The yield printed at the tight end of yield talk in the 6 7/8% area.

There was a massive $1.6 billion of reverse inquiry in the deal, sources said.

DISH rebounds

DISH’s 5 7/8% senior notes due Nov. 15, 2024 eliminated losses from the previous session with the notes returning to an 82-handle as the broader market firmed.

The 5 7/8% notes jumped almost 2 points in active trade.

They were changing hands in the 82 3/8 to 82 5/8 context heading into the market close, a source said.

The yield fell to about 19 3/8%.

There was $17 million in reported volume.

DISH’s 5 7/8% notes were under pressure on Thursday with the notes breaking below an 81-handle as a risk-off sentiment spread through markets.

Level 3 rises

Level 3’s senior notes were among the major gainers of Friday’s session with the notes rising 2 to 5 points following the completion of Lumen’s distressed debt exchange.

Level 3’s 3 5/8% senior notes due 2029 were the most active in the capital structure with the notes rising 4½ points to close the day at 58½.

The yield was 14½%.

There was $8 million in reported volume.

The 4¼% notes due 2028 jumped 4¾ points to close the day at 61¼ with the yield 15 3/8%.

There was $5 million in reported volume.

The 4 5/8% notes due 2027 gained 3½ points to close the day at 65 7/8 with the yield 15 5/8%.

There was $7 million in reported volume.

The 3 7/8% senior secured notes due 2029 (Ba2/BB-) rose 2½ points to close the day at 74½ with the yield 9 1/8%.

The 3¾% senior notes due 2029 jumped 5 points to close the day at 59 with the yield 13¾%.

Level 3’s senior notes have been under pressure since mid-March after Lumen launched a distressed debt exchange for $1.5 billion of its unsecured notes.

Level 3 issued about $925 million of new 10½% senior secured notes due 2030 in exchange for Lumen’s notes.

However, Level 3’s outstanding notes have been on the rise following the completion of the exchange.

Fund flows

The dedicated high-yield bond funds sustained $213 million of net daily outflows on Thursday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs had $164 million of outflows on the day.

Actively managed high-yield funds sustained $49 million of outflows on Thursday, the source said.

News of Thursday’s daily outflows follows a Thursday report that the combined funds had a very hefty $3.1 billion of net inflows in the week to the Wednesday, April 19 close, according to fund-tracker Refinitiv Lipper.

Over the past three weeks the junk funds have seen $7.1 billion net inflows, recouping nearly half of the $15.7 billion of net outflows that they sustained during the preceding seven weeks, according to the market source.

Year-to-date the combined funds have sustained $9.3 billion of net outflows, the source added.

Indexes

The KDP High Yield Daily index gained 5 points to close Friday at 51.76 with the yield 7.15%.

The index fell 7 points on Thursday and 14 points on Wednesday, gained 3 points on Tuesday and fell 10 points on Monday.

The index posted a cumulative loss of 23 points on the week.

The CDX High Yield 30 index rose 32 basis points to close Friday at 101.29.

The index was down 18 bps on Thursday, 21 bps on Wednesday and 14 bps on Tuesday after inching up 3 bps on Monday.

The index posted a cumulative loss of 18 bps on the week.

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