Odeon prices, AMC notes lower; Albertsons jumps on merger news; Baytex junk bonds active

By Paul A. Harris and Abigail W. Adams

Portland, Me., Oct. 14 – AMC Entertainment Holdings, Inc.’s indirect subsidiary Odeon Finco plc brought new paper into the high-yield bond sphere on Friday.

Meanwhile, volatility continued in the secondary space although the swings between high and low were less severe than on Thursday, a source said.

The high-yield market notched nominal gains at the open but closed on weak footing as selling resumed in risk assets following Thursday’s algorithm-driven rally in equities, sources said.

While the market was weak, trading volumes were muted with topical news a driving force of activity during Friday’s session.

Albertsons Cos., Inc.’s senior notes continued their upward momentum as Kroger announced its acquisition of the grocery store chain for $24.6 billion.

The notes will be rolled into Kroger’s capital structure with an investment-grade rating one of Kroger’s goals.

AMC’s 10% senior secured second-lien notes due 2026 (Caa3/CCC-) continued their downtrend following the pricing of the latest offering.

Baytex Energy Corp.’s 8¾% senior notes due 2027 (B3/B+) were improved in heavy volume after a leadership change.

While Twitter Inc.’s bonds were inactive, market chatter continues around one of the market’s most bizarre takeover sagas with the company’s 5% senior notes due 2030 offering plenty of upside if the deal goes through.

Friday at the cineplex

In Friday's dollar-denominated market Odeon Finco plc, an indirect subsidiary of AMC Entertainment Holdings, Inc., priced a $400 million issue of five-year senior secured notes (B3/B) at 92 to yield 15.066%.

The coupon, price and yield came in line with final talk. However, the discount came much deeper than initial discussions which had the bonds pricing at 95 to 96.

The deal played to a significant amount of reverse inquiry, a sellsisde source said.

Aftermarket activity in the bonds was extremely thin, according to the sellsider who took a call from Prospect News shortly after 4:30 p.m. ET on Friday.

Albertsons takeover

Albertsons’ capital structure continued to make gains after Kroger announced its acquisition of the grocery store chain for $24.6 billion.

The notes were up 2 to 5 points, adding to the strong gains made Thursday on a news report that a merger announcement was imminent.

Albertsons’ 3½% senior notes due 2029 (Ba3/BB) traded as high as 86 on Friday.

However, the notes came in and were changing hands in the 84½ to 85 context heading into to the market close, a source said.

There was $15 million in reported volume.

The notes were changing hands on a 79-handle prior to Thursday’s report that a takeover was imminent.

Albertsons’ 5 7/8% senior notes due 2028 traded up to a 96-handle early in the session.

However, the notes gave back some gains and were changing hands in the 95 to 95 3/8 context heading into the market close, a source said.

The notes were wrapped around 91 prior to news of the takeover breaking on Thursday.

The 4 7/8% notes due 2030 jumped 5 points to close Friday at 89½.

The bonds were trading with yields of 6½% to 6¾%, a source said.

Albertsons’ junk bonds will be rolled into Kroger’s capital structure following the merger with closing expected in early 2024.

While new debt will be issued to fund the takeover, Kroger is committed to achieving its goal of an investment-grade rating.

Albertsons’ bonds will rank pari passu with Kroger’s triple-B debt with the market expectation that Albertsons’ debt will be lifted to investment grade, Prospect News reported. (See related article in this issue)

However, there are still risks involved with the closing with the acquisition likely to attract antitrust attention, a source said.

AMC loses

Losses continued to mount for AMC’s 10% senior secured second-lien notes due 2026 as subsidiary Odeon Finco priced a new offering.

The 10% senior notes fell another 2 points.

They traded as low as 56 during Friday’s session with the yield cracking 30%, a source said.

The notes have fallen almost 6 points since Odeon’s latest offering was announced.

Baytex active

Baytex’s sleepy 8¾% senior notes due 2027 were among the most actively traded issues during Friday’s session with the notes logging gains following a leadership change.

The 8¼% notes were up ½ point to close Friday at 101¼, according to a market source.

There was $20 million in reported volume, which was nearly 10x its average, a source said.

The Calgary-based oil and gas company recently announced a new president and chief executive officer, a source said.

Twitter chatter

Twitter’s senior notes sat idle as the market continued to watch developments in one of the most bizarre takeover sagas in the market’s history.

Twitter's recent claim that billionaire and Tesla Inc. chief executive officer Elon Musk, and his $44 billion bid for the social media company, are under investigation by the government did not really register much in the trading of Twitter's bonds, according to a New York-based high-yield bond trader.

Musk's on-again/off-again acquisition is riven with deal-risk, the trader said.

Almost nobody wants the deal to happen, the source remarked. Tesla's shareholders certainly don't want it to happen. The government may not want it to happen. Who knows if Musk truly wants it to happen?

The only people who want it to happen are the Twitter board and Twitter's shareholders.

The Twitter, Inc. 5% senior notes due March 2030 have been marching toward par, the trader said.

They were 98 5/8 bid, 98 7/8 offered on Friday morning, the source said, noting that there is a 101 change of control in effect if the deal goes through, so there are still three points to four points left on the table.

Basically, people are tired of getting burned in this situation, the trader said.

Fund flows

High-yield ETFs sustained $85 million of daily cash outflows on Thursday, the most recent session for which data was available at press time, according to a market source.

Actively managed high-yield funds saw positive cash flows on the day, posting $21 million of inflows on Thursday, the source said.

News of Thursday's daily flows trailed a Thursday afternoon report that the combined funds sustained $713 million of net outflows during the week to the Wednesday, Oct. 12 close, according to fund-tracker Refinitiv Lipper.

Although in the previous week, to Oct. 5, the funds saw $1.87 billion of net inflows, all of that total and more went into the ETFs, the source said.

The actively managed funds actually sustained $22 million of outflows in the week to Oct. 5.

The actively managed funds have now seen eight consecutive weeks of negative flows, according to the market source.

Indexes

The KDP High Yield Daily index gained 8 points to close Friday at 51.17 with the yield 8.05%.

The index fell 11 points on Thursday, 7 points on Wednesday and 44 points on Tuesday.

The index posted a cumulative loss of 54 basis points on the week.

The ICE BofAML US High Yield index was up 12.9 basis points with the year-to-date return now 14.324%.

The index was down 21.7 bps on Thursday, 8 bps on Wednesday and 77 bps on Tuesday.

The index posted a cumulative loss of 93.8 bps on the week.

The CDX High Yield 30 index fell 50 bps to close Friday at 96.35.

The index was up 43 bps on Thursday and 6 bps on Wednesday after falling 45 bps on Tuesday.

The index was down 46 bps on the week.

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