Oldcastle on deck in junkland; Medline erases losses; CommScope under pressure

By Paul A. Harris and Abigail W. Adams

Portland, Me., April 12 – The primary market remained quiet on Tuesday with sources expecting no further new issue announcements until the conclusion of the holiday weekend ahead.

Oldcastle BuildingEnvelope (Oscar AcquisitionCo LLC) remains in the market with its $985 million two-tranche buyout deal.

Meanwhile, it was a volatile day in the secondary space on Tuesday with the market strong early in the session but fading into the close as market players digest the latest consumer price index report and its implications for the Federal Reserve’s tightening schedule.

The market was up ½ to ¾ point early Tuesday but closed the day flat to up ¼.

The CPI report came in above expectations, reflecting an annual increase to 8.5% in consumer prices versus the 8.4% expected.

However, the core consumer price index report, excluding food and energy, came in with just a 0.3% month-over-month increase, the smallest increase in the last five months.

While the rally in the secondary space faded midway through the session, several badly battered names during Monday’s session were seeing a strong rebound.

Medline Industries’ 3 7/8% senior secured notes due 2029 (B1/B+/BB-) erased losses in active trading.

Rocket Mortgage, LLC’s 2 7/8% senior notes due 2026 (Ba1/BB+) also recouped their losses from Monday.

However, CommScope, Inc.’s senior notes continued their downward momentum with the market concerned about the impact of inflation on the network technology company’s earnings.

Oldcastle gets some pushback

There is just one deal on the active forward calendar, and it has hit headwinds, sources say.

Oldcastle is marketing a $985 million two-part buyout deal.

Yield discussions on the unsecured portion, a $585 million tranche of eight-year senior unsecured notes (Caa1/CCC+), have been taking place as high as 11%, after coming into the market last week with initial guidance in the mid-to-high 9% area, sources say.

The secured portion of the deal, a $400 million offering of seven-year senior secured notes (B1/B), which came with initial talk in the mid-to-high 6% area, is understood to be getting more traction than the unsecured piece, they add.

The Oldcastle roadshow is set to wrap up on Wednesday, and the deal is also expected to price on Wednesday, a sellside source said.

Medline erases losses

Medline’s 3 7/8% senior secured notes due 2029 (B1/B+/BB-) erased losses from the previous session in active trading on Tuesday.

The 3 7/8% senior notes jumped 2 points to reclaim a 90-handle, according to a market source.

The notes were changing hands in the 90 to 90¼ context heading into the market close.

The yield on the notes was now about 5 5/8%.

There was $21 million in reported volume.

The 3 7/8% senior notes hit their lowest level since pricing at par in late September.

The notes fell almost 2 points on Monday to trade as low as 87 5/8 before closing the day wrapped around 88.

While less active, Medline’s 5¼% senior notes due 2029 (Caa1/B-/B-) were also bouncing off of their lows on Monday.

The 5¼% notes also gained about 2 points to return to an 89-handle.

The notes were wrapped around 89½ heading into the close with a yield of about 7%.

The 5¼% notes sank more than 2 points on Monday to an 87-handle.

Medline’s notes recovered alongside the broader market on Tuesday.

Investors were fleeing riskier assets on Monday with CCC credits particularly hard hit, a source said.

Rocket Mortgage active

Rocket Mortgage’s 2 7/8% senior notes due 2026 also erased their losses from the previous session in active trading on Tuesday.

The 2 7/8% notes gained about ½ point to return to a 91-handle.

They were changing hands in the 91 1/8 to 91 3/8 context heading into the close, a source said.

The yield on the notes was about 5.1%.

There was $17 million in reported volume.

CommScope down

While several names were posting gains on Tuesday, CommScope’s senior notes were not among them.

CommScope’s unsecured paper continued its downward momentum as investors eyed the impact inflation would have on the network technology company’s earnings.

CommScope’s 8¼% senior notes due 2027 fell 1½ points to close the day at 90 1/8, according to a market source.

The yield on the notes was 10.9%.

The 7 1/8% senior notes due 2028 were off 1 point to 84 with the yield now 10.7%.

CommScope is not scheduled to report earnings until early May.

However, companies with higher input costs are expected to disappoint this earnings season, a source said.

CommScope’s equity has also been the subject of several price target cuts and downgrades recently.

Outflows

The dedicated high-yield bond funds sustained $835 million of daily net outflows on Monday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs had $785 million of outflows on the day, the fifth consecutive large negative flow for that cohort, the source said.

Actively managed high-yield funds saw $50 million of outflows on Monday.

The combined funds are tracking $3.02 billion of outflows for the week that will conclude with Wednesday's close.

Indexes

The KDP High Yield Daily index gained 16 points to close Tuesday at 60 with the yield now 5.97%.

The index sank 46 points on Monday.

The ICE BofAML US High Yield index rose 32.1 bps with the year-to-date return now negative 6.39%.

The index was down 65.8 bps on Monday.

The CDX High Yield 30 index rose 3 bps to close Tuesday at 103.9.

The index sank 40 bps on Monday.

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