Howden, Allied wrap big week in junkland; Charter falls on earnings miss, Altice drops in sympathy

By Paul A. Harris and Abigail W. Adams

Portland, Me., Feb. 2 – In an active Friday session in the junk new issue market, two companies priced a combined three tranches of notes for an overall total of $2.5 billion, concluding the biggest week in over two years.

Howden Group (B2/B) priced an upsized $1.5 billion two-tranche offering of secured and unsecured notes and Allied Universal priced an upsized $1 billion issue of seven-year senior secured notes (B3/B).

Friday’s issuance raised the weekly tally to $12.1 billion, the biggest week since the week of Nov. 8, 2021, when $14.4 billion priced.

Meanwhile, it was a volatile day in the secondary space as the latest U.S. nonfarm payrolls report rattled markets.

The market had a strong open prior to the release of the report.

However, a wave of selling hit after the nonfarm payrolls report reflected a surge in hiring and wage growth which further dashed market hopes for sooner-rather-than-later rate cuts, a source said.

Treasury yields surged following the report with the 10-year Treasury once again shooting above the 4% threshold to close the day up 14.4 basis points at 4.023%.

While the secondary space was heavy following the report, it firmed into the close with the CDX swinging back into positive territory, a source said.

In specific names, Copeland’s 6 5/8% senior secured notes due 2030 (Ba3/BB-/BB+) were traded in heavy volume following the add-on of the previous session with the notes moving with a strong premium to their reoffer price.

While the market remains new issue focused, earnings-related news sparked large movements in the space.

Charter Communications, Inc. subsidiary CCO Holdings, LLC’s senior notes (B1/BB-) sank 1 to 2 points in heavy volume after Charter’s earnings disappointed.

Altice USA Inc. subsidiary CSC Holdings, LLC’s senior notes were taking a hit in sympathy with the notes down 1 to 3 points in active trade.

Charter’s earnings were a foreboding sign for the ailing cable company, a source said.

A busy week

On Friday, both companies in the primary space priced their deals at the conclusions of brief roadshows.

Both upsized their placements substantially.

Executions were sharp, with one tranche pricing through talk, one pricing at the tight end, and one pricing in the middle of talk.

Howden Group (B2/B) made an upsized $1.5 billion two-part placement of high yield notes.

The deal, which upsized from $1.25 billion, featured an upsized $1 billion tranche (from $750 million) of Howden UK Refinance plc/Howden US Refinance LLC seven-year senior secured notes (B2/B) that priced at par to yield 7¼%, at the tight end of talk.

It also featured a $500 million tranche of Howden UK Refinance 2 plc/Howden US Refinance LLC eight-year senior unsecured notes (Caa1/CCC+) that priced at par to yield 8 1/8%, 12.5 basis points inside of talk.

Elsewhere, Allied Universal priced an upsized $1 billion issue of Allied Universal Holdco LLC seven-year senior secured notes (B3/B) at par to yield 7 7/8%.

The deal, which doubled in size from $500 million, priced in the middle of yield talk in the 7 7/8% area. Initial guidance was in the low-8% area.

Friday’s $2.5 billion of issuance took the week’s tally to $12.1 billion, the biggest week since the week that began on Nov. 8, 2021, and priced $14.4 billion.

The week ahead is not expected to be as big as the past week, a trader said.

However, having said it, the source related expectations of three deals coming out of Goldman Sachs, during the Feb. 5 week, in addition to two apiece from Barclays and JPMorgan, and possibly one from BofA.

Copeland at a premium

Copeland’s 6 5/8% senior secured notes due 2030 were moving in heavy volume following the add-on of the previous session.

While slightly weaker on Friday, the notes continued to trade with a ¼ to 3/8 point premium to their reoffer price.

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

There was $46 million in reported volume.

Copeland priced an upsized $500 million, from $450 million, tap of the 6 5/8% notes at 100.75 to yield 6.486% on Thursday.

The issue price came at the rich end of the 100.5 to 100.75 price talk.

Charter’s earnings

Charter subsidiary CCO Holdings’ senior notes were pressured on Friday with the notes down 1 to 2 points in active trade after Charter released disappointing earnings.

The 7 3/8% senior notes due 2031 sank 1 3/8 points to close the day at par 1/8, according to a market source.

There was $31 million in reported volume.

The 4¼% notes due 2034 sank 1½ points to close the day at 78¾ with the yield 7¼%.

The 4½% notes due 2032 were also down 1½ points to 83¼ with the yield rising to 7¼%.

There was $20 million in reported volume.

Charter stock ranked as the worst performer in the S&P 500 on Friday after the company reported earnings with a decline in internet subscribers that took the market by surprise, a source said.

Charter reported a loss of 61,000 internet customers when analysts were expecting an increase.

CSC Holdings drops

Charter’s earnings dropped Altice subsidiary CSC Holdings’ senior notes, which had heavy selling as the market braced for a similar trend in Altice’s numbers.

CSC Holdings’ recently priced 11¾% senior guaranteed notes due 2029 (B2/B) were off 1 to 1½ points in active trade.

The notes opened the session on a 101-handle.

They were trading in the par ½ to 101 context by the close, a source said.

There was $26 million on the tape.

CSC Holdings priced the $2.05 billion issue at par on Jan. 18.

CSC’s 7½% senior notes due 2028 (Caa2/CCC+) fell 2 to 3 points with the notes trading in the 64½ to 65½ context.

The yield jumped to 20½%.

There was $13 million in reported volume.

The 5¾% senior notes due 2030 were also off about 3 points.

The 5¾% notes closed the day wrapped around 50½ with the yield about 20½%.

There was $14 million in reported volume.

Charter’s earnings were a foreboding sign for CSC with Altice already cash-strapped and heavily leveraged, a source said.

However, its recent capital raise was a boon to the company’s credit profile and gave it enough liquidity to manage its debt load for the time being, the source said.

Altice USA is expected to report earnings on Feb. 14.

Fund flows

The high-yield ETFs sustained $295 million of daily cash outflows on Thursday, the most recent session for which data as available at press time, according to a market source.

Actively managed high-yield funds had $117 million of inflows on the week.

News of Thursday’s daily flows trails a Thursday afternoon report that the combined funds had $2.4 billion of net inflows in the week to the Wednesday, Jan. 31 close, the source said.

That was the 12th inflow in the past 13 weeks, an interval during which the combined funds had $19 billion of net inflows.

Thus far in 2024 the combined junk funds have had $2.8 billion of net inflows, according to the market source.

Indexes

The KDP High Yield Daily index was off 15 bps to close Friday at 50.59 with the yield now 6.82%.

The index gained 10 bps on Thursday, was unchanged on Wednesday, shed 7 bps on Tuesday and inched up 1 bp on Monday.

The index fell 11 bps on the week.

The ICE BofAML US High Yield index was down 25.7 bps with the year-to-date return now 0.015%.

The index added 25.3 bps on Thursday, was down 6.9 bps on Wednesday and 2.8 bps on Tuesday and gained 14.9 bps on Monday.

The index gained 4.8 bps on the week.

The CDX High Yield 30 index gained 13 bps to close Friday at 105.94.

The index added 27 bps on Thursday, lost 45 bps on Wednesday and 17 bps on Tuesday after adding 14 bps on Monday.

The index was down 8 bps on the week.

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