Junk: Bread, Icahn price; Community Health struggles; OneMain flat; Venture Global falls

By Paul A. Harris and Abigail W. Adams

Portland, Me., Dec. 12 – In the junk bond primary market on Tuesday all eyes were on Bread Financial Holdings, Inc. and a drive-by offering from long-absent Icahn Enterprises LP and Icahn Enterprises Finance Corp.

Meanwhile, the secondary space continued to rally in the wake of the latest Consumer Price Index report with the market optimistic ahead of the Federal Open Market Committee’s Wednesday announcement.

There was an initial sell-off following the release of the latest CPI print, which came in largely as expected although it still reflected an uptick in inflation.

But then the market turned around with the cash bond market adding another ¼ point and the CDX index hitting the height of the year.

The market’s recent strength was “a little confounding,” a source said. “It’s just rip-roaring. There’s no slowdown at all.”

The market continued to rally as it priced in a soft-landing scenario with rate cuts in 2024.

However, some remain skeptical of the current consensus that no recession is on the horizon.

With the primary pipeline still hopping as issuers rush to price deals amid hot market conditions, new paper remained in focus in the secondary space.

However, the deals to price during Monday’s session saw lackluster performances in the aftermarket.

OneMain Finance Corp.’s 7 7/8% notes due 2030 (Ba2/BB/) fell flat in active trade with the notes wrapped around their discounted issue price.

Community Health Systems, Inc.’s new 10 7/8% senior secured notes due 2032 (Caa1/B-/B+) struggled with the notes closing the day below their issue price.

While the broader market remained strong, Venture Global LNG Inc.’s 9½% senior secured notes due 2029 and 9 7/8% senior secured notes due 2032 (B1/BB/BB) took a hit after hovering near their highest levels since pricing.

Primary

Bread Financial Holdings, Inc. priced an upsized $600 million issue (from $500 million) of 5.25-year senior notes (BB-/BB-) at par to yield 9¾%, in a Tuesday deal heard to have gone very well.

The yield printed at the tight end of talk, and was around three-times oversubscribed when price talk circulated the market on Tuesday morning, a trader said.

Meanwhile in drive-by action Icahn Enterprises LP and Icahn Enterprises Finance Corp. (IEP) priced a $500 million issue of five-year senior bullet notes (Ba3/BB) at par to yield 9¾%, on top of talk.

Tuesday’s deal represents Icahn’s first appearance in the high-yield primary market in over 2.5 years, a notably long interval considering that the company tapped the new issue market twice in 2021, twice in 2020 and twice in 2019.

During the unusually extended hiatus, IEP founder and controlling shareholder Carl Icahn found himself facing the sword of the activist shareholder which he, himself, wielded so conspicuously for decades.

Earlier this year Nathan Anderson, an activist short seller who runs Hindenburg Research, targeted IEP, asserting, among other things, that both Icahn and his enterprise were over-leveraged.

In the wake of the Hindenburg assertions the IEP share price has dropped more than 60%.

Notwithstanding the difficulties faced by the famous corporate raider in 2023, high-yield investors seemed constructive on the new deal to a trader fielding calls from clients, subsequent to the Tuesday morning deal announcement from sole bookrunner Jefferies.

It came as a drive-by, implying that reverse inquiry was sufficient to get it done, the trader said.

And the 9¾% coupon offers a concession to the current trading levels of the Icahn Enterprises LP/Icahn Enterprises Finance Corp. 4 3/8% senior notes due February 2029, which the trader spotted at 81¼ bid, on Tuesday morning, implying a yield of 9%.

The new 9¾% senior note comes due just two weeks prior to the Feb. 1, 2029 maturity of the 4 3/8% notes.

Elsewhere, the euro-denominated new issue market saw a deal price Tuesday.

Synlab AG parent company Ephios Subco 3 priced a €450 million issue of seven-year senior secured notes (B2/B+/B+) at par to yield 7 7/8%, tight to downwardly revised talk.

In its wake, euro high-yield market watchers were wondering aloud whether Synlab might be the final euro-denominated new issue to clear the market in 2023.

OneMain flat

In the secondary market, OneMain’s 7 7/8% senior notes due 2030 were wrapped around their discounted issue price in active trade on Tuesday.

The notes traded in a tight range of 99¼ to 99¾ throughout the session and stood poised to close wrapped around 99½, sources said.

There was $87 million in reported volume.

OneMain priced an upsized $700 million, from $400 million, issue of the 7 7/8% notes at 99.413 to yield 8% in a Monday drive-by.

The yield printed in the middle of yield talk in the 8% area.

Community Health struggles

Community Health’s new 10 7/8% senior secured notes due 2032 struggled in aftermarket activity with the notes closing the day below par.

The 10 7/8% notes traded as high as par ¼ during Tuesday’s session.

However, the notes closed the day at 99¼ bid, 99¾ offered, a source said.

There was $43 million in reported volume.

The pricing of the notes fell in line with the index, a source said.

However, the health care sector is one that the market is wary of.

Community Health Systems priced an upsized $1 billion, from $750 million, issue of the 10 7/8% notes at par to yield 10 7/8% in a Monday drive-by.

The yield printed at the tight end of yield talk in the 11% area.

Venture Global down

Venture Global’s 9½% senior secured notes due 2029 and 9 7/8% senior secured notes due 2032 were taking a hit on Tuesday after hovering near all-time highs for the past two weeks.

The 9½% notes were off 5/8 to ¾ point to break below a 102-handle.

They were trading in the 101 7/8 to 102 1/8 context heading into the market close, a source said.

There was $19 million in reported volume.

The notes closed the previous week on a 103-handle.

The 9 7/8% notes sank more than 1 point to close the day on a 101-handle.

They were trading in the 101 to 101¼ context heading into the market close, a source said.

There was $20 million in reported volume.

The notes closed the previous week on a 102-handle after brushing up on an all-time high of 103.

Indexes

The KDP High Yield Daily index gained 10 basis points to close Tuesday at 49.58 with the yield 7.29%.

The index was down 7 bps on Monday.

The ICE BofAML US High Yield index added 17.1 bps with year-to-date returns now 10.238%.

The index shaved off 4 bps on Monday.

The CDX High Yield 30 index rose 35 bps to close Tuesday at 104.30.

The index inched up 1 bp on Monday.

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