Secondary retests lows; Carvana reclaims 97-handle; CommScope up; HY funds out $1.1 billion

By Paul A. Harris and Abigail W. Adams

Portland, Me., May 5 – While the domestic high-yield primary market remained dormant on Thursday, the European market continued to generate some news.

Loarre Investments Sarl is expected to bring an €850 million offering of seven-year senior secured notes (Ba3//BB) and Europcar Mobility Group announced plans for a €150 million offering.

Meanwhile, the secondary space was retesting its lows on Thursday after taking a round-trip following Wednesday’s “head fake” rally, a source said.

Buyers jumped into the market late Wednesday after Federal Reserve chair Jerome Powell said a 75 basis points rate increase was not on the table.

However, sellers were in full force on Thursday as the market further digested Powell’s comments and the latest economic data on inflation.

While the market had a firm tone at the open, it crumbled following the latest unit labor costs survey.

“Once that number hit, it was the beginning of the end,” a source said.

Despite, Powell’s assurance the Federal Reserve Open Market Committee was not considering a 75 bps rate increase, market players are still expecting it, a source said.

Treasuries were in a tailspin alongside equity markets with the 10-year Treasury yield climbing as high as 3.106% before settling at 2.916% and the five-year note hitting as high as 3.062% before settling at 3.01%.

Despite the pressure on the market, the selling activity in the secondary space remained orderly with some opportunistic buyers stepping in, a source said.

Carvana Co.’s 10¼% senior notes due 2030 (Caa2/CCC) continued to dominate trading activity with the notes returning to a 97-handle after nearly clawing their way back to par.

The market continued to focus on earnings with reports mixed.

CommScope, Inc.’s senior notes were a bright spot during a brutal session with the network infrastructure provider’s capital structure on the rise after a surprise earnings beat.

However, Colt Merger Sub, Inc.’s (Eldorado Resorts Inc.) 8 1/8% senior notes due 2027 (Caa1/CCC+) were under pressure in heavy volume following earnings.

Outflows continued to pressure the secondary space with high-yield mutual and exchange-traded funds losing $1.102 billion in the week through Wednesday’s close, according to the Refinitiv Lipper US Fund Flows report.

Europe’s primary

Before tumult began taking hold in the capital markets in the United States, during the New York morning, the European high-yield new issue market generated some news on Thursday.

Loarre Investments Sarl is canvassing accounts ahead of an expected €850 million offering of seven-year senior secured notes (Ba3//BB) to support the capitalization of Spanish soccer organization La Liga by CVC Capital Partners.

The deal features fixed-rate notes and floating-rate notes.

And Europcar Mobility Group disclosed plans to place a minimum of €150 million of notes mirroring the EC Financing plc 3% sustainability-linked senior notes due Oct. 15, 2026 (B1/expected B).

The deal could upsize to €200 million, according to a company press release.

Carvana drops

In the recently priced secondary market, Carvana’s 10¼% senior notes due 2030 continued to dominate activity in the space with the notes retesting their lows after almost clawing their way back to par on Wednesday.

The 10¼% notes returned to a 97-handle and were changing hands at 97 3/8 heading into the close.

There was $89 million in reported volume.

The notes closed the previous session at 99½, par.

The used car e-commerce company’s 10¼% notes have struggled since pricing at par on April 27.

The $3.275 billion issue has been under water since breaking for trade, trading as low as 96¾ last Friday.

“That’s a big hit,” a source said of the losses in the name.

However, with negative free cash flow and negative EBITDA, investors must truly believe in the growth story.

The deal struggled during bookbuilding and only crossed the finish line after a large anchor order from Apollo Global Management was heard to have taken down nearly half the issue.

The large coupon on the notes makes the issue difficult to short, a source said.

However, the debt will also be hard to service.

CommScope gains

CommScope’s capital structure was on the rise on Thursday with its senior notes jumping 2 points after earnings.

CommScope’s 7 1/8% senior notes due 2028 (B3/CCC+) were the most active issue in the capital structure.

The notes climbed 2¾ points to close Thursday at 83¼ with the yield now just shy of 11%.

There was $27 million in reported volume.

CommScope’s 8¼% senior notes due 2027 climbed 2 5/8 points to close the day at 88½ with a yield of 11½%.

There was $11 million in reported volume.

The 6% senior notes due 2025 were also up 2 5/8 points to close the day at 90¾ with a yield of 9.511%.

There was $9 million in reported volume.

The 4¾% senior secured notes due 2029 (Ba3/B) gained 1½ points to end at 85 3/8 with the yield now 7 3/8%.

CommScope reported a large earnings beat and rising sales and revenue.

Eldorado under pressure

Colt Merger Sub’s (Eldorado Resort) 8 1/8% senior notes due 2027 were under pressure in heavy volume following earnings.

The 8 1/8% notes fell 1¼ points to close Thursday at 102 with the yield 7 3/8%.

There was $24 million in reported volume.

The notes were under pressure after Caesars Entertainment Inc. reported earnings.

The gaming and hospitality company reported increasing losses and decreasing adjusted EBITDA quarter-over-quarter, according to a market source.

The 8 1/8% notes priced as part of a $6.2 billion three-tranche megadeal backing Eldorado’s acquisition of Caesars in June 2020.

The merged entity continues to operate under the name Caesars.

Indexes

The KDP High Yield Daily index fell 29 points to close Thursday at 58.33 with the yield now 6.53%.

The index rose 14 points on Wednesday and 13 points on Tuesday after sinking 36 points on Monday.

The ICE BofAML US High Yield index shaved off 13.4 bps with the year-to-date return now negative 8.506%.

The index was off 6.6 bps on Wednesday, rose 28.2 bps on Tuesday and fell 58.5 bps on Monday.

The CDX High Yield 30 index returned to a 101-handle on Thursday with the index falling 124 bps to close Thursday at 101.59.

The index gained 50 bps on Wednesday, 50 bps on Tuesday and 24 bps on Monday.

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