DISH selling continues, restructuring eyed; Atlas Air, Weatherford lower in junkland

By Paul A. Harris and Abigail W. Adams

Portland, Me., March 24 – The dollar-denominated primary market was dormant on Friday, the 16th consecutive session since the last dollar deal was priced, according to a bond trader who added that the present run of inactivity in the primary market is just one day shy of the one that took place during the Covid shutdown in March 2020.

Meanwhile, the secondary space closed a volatile week with a heavy tone with the cash bond market falling 3/8 to ½ point as credit spreads continued to widen.

While the market pared its losses into the close as equities rallied and Treasuries stabilized, the risk aversion sparked by the turmoil in the banking sector and the rally in rates has taken its toll on the high-yield market.

High-yield credit spreads hit their widest of the year on Friday with the ICE BofAML US High Yield index spread to worst hitting 537 basis points.

The Federal Open Market Committee’s Wednesday announcement did little to provide clarity to the market.

While there were dovish overtones to the Fed’s announcement, there was no indication the Fed was considering rate cuts, which the market has priced in.

“People don’t know what to think,” a source said.

Few were making moves on Friday although there was some selling in weaker credits, a source said.

DISH Network Corp.’s capital structure continued to take a hit as market players speculate the company may need to undergo a restructuring to meet its short-dated maturities.

Rand Parent, LLC’s 8½% first-lien senior secured notes due 2030 (Ba1/BB/BB+), backing the buyout of Atlas Air, hit a new all-time low on Friday with the notes falling to a 90-handle.

Weatherford International Ltd.’s 8 5/8% senior notes due 2030 (B3/CCC+) were lower in active trade with the notes giving back some of their gains from the past three sessions.

DISH selling continues

DISH’s capital structure continued to take a hit on Friday as market players speculate the company will need to undergo a restructuring to meet short-dated maturities.

The company’s 5 7/8% senior notes due Nov. 15, 2024 (B3/B) sank 1½ points to close Friday wrapped around 83, according to a market source.

The yield climbed to 9 3/8%.

With $18 million in reported volume, the notes were the most actively traded of Friday’s session.

DISH’s 11¾% senior secured notes due 2027 (Ba3/B+) broke below a 92-handle to trade down to 91¾ early in the session.

They recouped some of their losses to close the day down 3/8 in the 92 to 92 3/8 context, a source said.

The yield climbed to 14 1/8%.

There was $12 million in reported volume.

DISH’s capital structure has experienced heavy selling over the past month with the company still reeling from a ransomware attack that is expected to result in a loss of subscribers.

The attack is expected to take a toll on the company’s fundamentals as it still struggles to build out its wireless network.

The 5 7/8% notes were trading on a 93-handle and the 11¾% notes on a 101-handle in late February prior to the ransomware attack and the dramatic repricing of markets post-Silicon Valley Bank’s collapse.

DISH has raised $3.5 billion in the high-yield market since November through the issue of its 11¾% senior secured notes due 2027.

However, proceeds from the capital raise were earmarked for the buildout of its wireless network as the maturities of the $1 billion outstanding of its 2.375% convertible notes due March 15, 2024 and $2 billion outstanding of its 5 7/8% senior notes due Nov. 15, 2024 loom.

“They’ll need to do a restructuring of some sort,” a source said.

Atlas Air’s new low

Atlas Air’s 8½% first-lien senior secured notes due 2030 sank to a new low on Friday with the leveraged buyout deal continuing to claim the title of the worst performing deal of 2023.

The 8½% notes were down 1½ points.

They traded as low as 89¾ in intraday activity but pared their losses into the close to end the day in the 90 to 90½ context, a source said.

The yield climbed to 10½%.

There was $12 million in reported volume.

Rand Parent priced an $850 million issue of the 8½% notes at par on Feb. 9 with proceeds funding a portion of the Apollo-led buyout of Atlas Air.

Weatherford lower

Weatherford’s 8 5/8% senior notes due 2030 were lower in active trade on Friday with the notes giving back some gains made over the past three sessions.

The 8 5/8% notes fell 1 point to close the day in the 97¾ to 98¼ context, a source said.

The yield was about 9%.

There was $12 million in reported volume.

The notes have been on an uptrend over the past four sessions after hitting their lowest level since early January on Monday.

The notes opened the week on a 96-handle but climbed back to a 98-handle the previous session.

Weatherford’s notes have been on a strong downtrend in March as crude oil futures plunged below $70.

However, crude oil futures pared their losses over the past three sessions to again hit $70 on Thursday.

However, West Texas Intermediate crude oil futures were off on Friday to close the day at $69.20, a decrease of 76 cents or 1.09%.

Fund flows

High-yield ETFs had $525 million of daily cash inflows on Thursday, according to a market source.

Actively managed high-yield funds were negative on the day, posting $120 million of outflows on Thursday, the source said.

News of Thursday's daily cash flows follows a Thursday afternoon report that the combined funds sustained $902 million of net outflows during the week to the Wednesday, March 22 close, according to fund-tracker Refinitiv Lipper.

Indexes

The KDP High Yield Daily index fell 19 points to close Friday at 50.95 with the yield 7.47%.

The index gained 9 points on Thursday, 12 points on Wednesday, 20 points on Tuesday and 3 points on Monday.

The index posted a cumulative gain of 25 points on the week.

The ICE BofAML US High Yield index fell 42 bps with the year-to-date return now 1.841%.

The index gained 2.1 bps on Thursday, 29 bps on Wednesday and 57.7 bps on Tuesday after falling 12.8 bps on Monday.

The index posted a cumulative gain of 34 bps on the week.

The CDX High Yield 30 index gained 52 bps to close Friday at 99.33.

The index sank 77 bps on Thursday and 81 bps on Wednesday, jumped 152 bps on Tuesday and was unchanged on Monday.

The index posted a cumulative gain of 46 bps on the week.

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