Cincinnati Bell skyrockets on buyout news; Calpine, Bausch, CenturyLink active

By Paul A. Harris and Abigail W. Adams

Portland, Me., Dec. 23 – The domestic high-yield primary market remained closed on Monday with new deal activity believed to be concluded for 2019.

However, an active pipeline is anticipated for the new year.

While equity markets were again strong on Monday, the high-yield secondary space was largely flat as activity ground to a halt.

End-of-year illiquidity has officially taken hold of the market, sources said.

Cincinnati Bell Inc.’s junk bonds (B3/B-) were the outperformers of Monday’s session with the notes making large gains in active trading following news the telecommunications service provider would be acquired.

Several recent issues continued to be actively traded in the secondary space, although with little movement in price.

Calpine Corp.’s recently priced 5 1/8% senior notes due 2028 remained volume leaders although the notes continued to be wrapped around par.

Bausch Health Cos. Inc.’s two tranches of senior notes (B3/B/B) and CenturyLink, Inc.’s 5 1/8% senior notes due 2026 (B2/B+/BB) continued to see activity although the notes were largely moving sidewise.

Quiet ahead of holidays

The high-yield new issue market was quiet as the Christmas week got underway.

Following a highly active post-Thanksgiving primary market, $19 billion in 32 junk-rated, dollar-denominated bond tranches compressed into 14 market sessions, participants appeared to be looking toward holiday plans, on Monday, as telephone calls went unanswered and voicemail picked up.

Given late 2019 market conditions, January should be an active month, as prospective issuers attempt to access the market ahead of a big February earnings blackout, sources say.

Cincinnati Bell’s buyout

Cincinnati Bell’s junk bonds were in focus with the notes making large gains on news the company would be acquired by Brookfield Infrastructure.

The telecommunications company’s 7% senior notes due 2024 rose 4 points to 105, according to a market source.

With more than $25 million in reported volume, the 7% notes were among the most actively traded in the secondary space.

Cincinnati Bell’s 8% senior notes due 2025 skyrocketed more than 9 points to 106 5/8 with almost $10 million in reported volume.

News broke on Monday that Cincinnati Bell was being acquired by Toronto-based global infrastructure company Brookfield Infrastructure Partners in a $2.6 billion transaction, which includes debt.

The deal is expected to close in 2020 and is subject to regulatory and shareholder approval.

Brookfield infrastructure Partners is an investment grade company.

Recent Issues

Several recent issues continued to see active trading in the secondary space, although with little movement in price.

Calpine’s 5 1/8% senior notes due 2028 were among the most actively traded issues with $11 million in reported volume. However, the notes remained wrapped around par.

The 5 1/8% notes have largely traded in the par bid, par 3/8 context since breaking for trade.

Calpine priced a $1.4 billion issue of the 5 1/8% notes at par on Dec. 19 – one week after pricing a $1.25 billion issue of 4½% notes due 2028.

While there were only a few prints on the tape on Monday, the 4½% notes were better received in the aftermarket and were changing hands in the par ½, 101 context, sources said.

Calpine’s offering of 5 1/8% notes is expected to be the last deal to price in 2019.

Bausch Health’s newly priced tranches also continued to see activity although they were largely trading sidewise.

The 5% senior notes due 2028 continued to trade around 102 with about $10 million in reported volume, according to a market source.

The 5¼% senior notes due 2030 continued to trade around 103.

Bausch Health priced an upsized $2.5 billion in two tranches in a drive-by on Dec. 17.

The deal included a $1.25 billion tranche of the 5% notes and a $1.25 billion tranche of the 5¼% notes, both of which priced at par.

CenturyLink’s 5 1/8% senior notes due 2026 also remained active although the notes were largely unchanged.

They continued to trade in the 101 7/8, 102¼ context with about $9 million in reported volume, sources said.

Bausch, Calpine and CenturyLink were among the opportunistic issuers that took advantage of market conditions and tapped the high-yield market in mid- to late December.

Indexes

Indexes were large flat on Monday after all posted cumulative gains on the week last week.

The KDP High Yield Daily index rose 3 bps to close Monday at 71.74 with the yield now 4.96%.

The index saw a cumulative gain of 36 bps on the week last week.

The ICE BofAML US High Yield index rose 4.8 bps with year-to-date returns now 14.275%.

The index saw a cumulative gain of 77.7 bps on the week.

The CDX High Yield 30 index rose 2 bps to close Monday at 109.54. The index saw a cumulative gain of 56 bps on the week.

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