DISH, Hughes drop; bonds sell off as spring Fed cut hopes erased; Spirit Airlines steady

By Cristal Cody

Tupelo, Miss., Feb. 13 – DISH DBS Corp.’s paper stayed mostly mum on Tuesday after parent EchoStar Corp. terminated a second exchange offer on Monday, while subsidiary Hughes Satellite Systems Corp.’s 6 5/8% senior notes due 2026 (Caa3/CCC+) turned volatile in heavy supply.

The bonds were down over 1¼ points going into the close and went out around ½ point lower on just under $15 million of volume.

“That puts it in the top 30 most active,” a trader said.

DISH’s bonds headed out mostly unchanged to less than 1 point lower in light action.

DISH’s 7¾% senior notes due 2026 (Caa2/CC) softened about ¾ point on Tuesday.

Overall secondary market action was “really quiet” as the New York area came under heavy snow, and the focus stayed mostly on new junk notes from TransDigm Inc., a source said.

Stocks slid in a wide sell-off that spread to corporate bonds after the Labor Department reported the Consumer Price Index increased a seasonally adjusted 0.3% in January, up from a 0.2% increase in December.

Market analysts expected a 0.2% increase.

The S&P 500 index closed down 1.37% with the iShares iBoxx High Yield Corporate Bond ETF off 62 cents, or 0.8%, at $76.57.

The CBOE Volatility index jumped 13.78% to 15.85.

The benchmark 10-year Treasury note yield climbed 14 basis points to 4.31%.

“Bit of a surprise in the CPI,” a source noted. “No rate cut.”

Tuesday’s report obliterated expectations of a spring rate cut by the Federal Reserve.

BNP Paribas Securities analysts pushed back their expectations of a May rate cut and lowered the expected size to 100 bps from 150 bps, according to a note on Tuesday.

“While Fed Chair Powell said inflation prints do not necessarily need to be as good as in H2 2023 to initiate a rate-cutting cycle, we think the composition of January CPI will be particularly worrying to hawkish FOMC participants,” BNP analysts said. “We have therefore pushed back our expectation of the first cut of the cycle to June.”

In other distressed trading on Tuesday, Spirit Airlines Inc.’s 8% senior secured notes due 2025 (Caa2//BB-) were easily among the “top 15 most active” in the junk and distressed space, a trader said.

The bonds slipped about 1/8 point on more than $30 million of volume but were largely unchanged from Friday.

The issue has held onto gains from Thursday when the company reported it remains focused on completing a court-blocked merger with JetBlue Airways Corp. with an appeal hearing set for June.

DISH, Hughes lower

While DISH’s bonds stayed largely on the sidelines in the secondary market on Tuesday, it was a different story for subsidiary Hughes Satellite’s paper, according to market sources.

The company’s 6 5/8% senior notes due 2026 (Caa3/CCC+) were down over 1¼ points at just under 65½ bid going into the close on Tuesday on $14.5 million of volume at the time.

The bonds were quoted after the close at 65½ bid, 66½ offered on just under $15 million of volume, down from around 66 bid, 67 offered on Monday.

In DISH’s bonds, “nothing too exciting” was seen over the day with the paper unchanged to down less than 1 point in the name, a trader said.

DISH Network Corp.’s most active tranche was the much less distressed 11¾% senior secured notes due 2027 (Caa1/B) that were off about ½ point at 103½ bid, 104½ offered.

DISH DBS’ 7¾% senior notes due 2026 (Caa2/CC) that were part of the company’s first terminated bond exchange offer went out softer at 60½ bid, 61½ offered. The bonds were quoted in the prior session at 61¼ bid, 62¼ offered.

EchoStar on Monday announced the termination of exchange offers for two tranches of convertible bonds after the minimum tender conditions were not met. Last month, EchoStar terminated exchange offers and consent solicitations for four tranches of senior notes from DISH after widespread pushback from creditor groups.

Englewood, Colo.-based satellite owner EchoStar also owns companies that include Boost Mobile, Sling TV and HughesNet.

Spirit Airlines moves

Spirit Airlines’ 8% senior secured notes due 2025 (Caa2//BB-) softened on the day but remained “up a bit” from Thursday, a trader said.

The notes went out after the close at 71½ bid, 72½ offered, little changed so far this week after the issue picked up over 5 points following the company’s earnings report last week.

By late afternoon, the bonds had slipped about 1/8 point and were trading in the 71½ bid to 72¾ bid range on more than $30 million of volume, a source reported.

The issue has rebounded from a low of 47½ bid, 48½ offered after the U.S. District Court of the District of Massachusetts blocked Spirit Airlines’ $3.8 billion merger with JetBlue Airways on Jan. 16.

The companies filed a notice of appeal that will be heard in June by the U.S. Court of Appeals for the First Circuit.

The Miramar, Fla.-based low-cost airline on Thursday reported improved fourth-quarter and 2023 losses.

Distressed indices improve

S&P U.S. High Yield Corporate Distressed Bond index one-day total returns rose to 0.37% on Monday from 0.15% on Friday and minus 0.53% in the same session last week.

Month-to-date total returns climbed to 1.45% in the prior session from 1.07% on Friday and negative 0.72% in the same day a week ago.

Year-to-date total return losses narrowed on Monday to minus 0.73% after closing out Friday at negative 1.1% and the week-ago session at minus 2.86%.

The BarclayHedge distressed securities index had estimated January returns of 1.29% as of Tuesday, up from returns of 1.03% in January 2023. The index tracked data from seven funds in January in distressed debt, equity and corporate trade claims.

In December, index returns totaled 2.74% from 17 funds reporting. The distressed index ended 2023 with 2.14% of returns after closing out 2022 with 6.64% of losses.

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