Morning Commentary: Avaya bonds crushed amid ‘going concern’ rumors; new Avients at 103

By Paul A. Harris

Portland, Ore., July 29 – With the high-profile U.S. stock indexes all opening in the green on Friday morning, the high-yield bond market notched ¼ point higher, according to traders.

With the S&P 500 stock index up 1.09% at mid-morning, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was up 0.29%, or 22 cents, at $78.18.

The new issue market sat idle.

In the one-deal-per-week summer primary market, this week’s deal continues to sail, sources say.

The new Avient Corp. 7 1/8% senior notes due August 2030 (Ba3/BB-) were up ¼ point on the morning, a sellside source said, adding that a round lot traded at 103.

They went out a 102¾ on Thursday, the source noted.

The heavily oversubscribed $725 million issue priced at par on Wednesday, tighter than talk and on an accelerated timeline.

Avient was the biggest deal to clear the market since June 16 when Entegris Escrow Corp. (Entegris Inc.) priced $895 million of 5.95% senior notes due June 2030. Although inactive on Friday morning, the Entegris 5.95% notes changed hands on Thursday at 98½ in round lot trading, the sellsider said.

While the broad high-yield market was enjoying a summer Friday in the sun, Avaya Inc. struggled mightily, with the Avaya 6 1/8% senior secured notes due September 2028 down 15 points to 20 points on the morning, changing hands at 46½, the sellside source said, adding that those bonds traded at 66½ on Wednesday.

Its stock (NYSE: AVYA) was down nearly 50% on the morning.

Amid announcements that the Santa Clara, Calif.-based communications technology company replaced its CEO and introduced dramatic cost-cutting measures, investors have begun to question Avaya's path forward as a going concern, a bond trader said on Friday morning.

In late June the company undertook the refinancing of $350 million convertible debt due June 2023 by means of a private placement of a $250 million 8% senior secured convertible, in addition to a $350 million first-lien term loan, both maturing in 2027.

The loan, which came at 90 when factoring a 10-point upfront fee, was trading Friday in the low 70s, traders said.

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