Junk issuance simmers down; secondary unfazed by Fed; Charter falls; Nielsen weaker

By Paul A. Harris and Abigail W. Adams

Portland, Me., Dec. 14 – New dollar-denominated junk bond issuance for 2022 may have run its course, sources said on Wednesday.

Meanwhile, the secondary space opened strong and closed weaker as the market awaited then digested the Federal Reserve Open Market Committee’s 2 p.m. ET announcement and chair Jerome Powell’s subsequent press conference.

The tone was hawkish and the economic forecast weak with a dot plot plan that places the Federal Fund target rate on a 5% handle for 2023 and a reduction of the GDP forecast to 0.5% growth in 2023 from the previous forecast of north of 1%.

While the market was firmer at the open and softer at the close, the cash bond market was either side of unchanged with no wild swings.

Liquidity in the secondary space continued to diminish with topical news and end-of-year rebalancing the driving forces of activity.

Charter Communications, Inc.’s capital structure was under pressure on Wednesday with its split-rated notes, and subsidiary CCO Holdings, LLC’s senior notes (B1/BB-), falling ½ to 1½ points following an investor meeting.

Neptune BidCo US Inc./Nielsen Holdings plc’s 9.29% senior secured notes due 2029 (B2/B/BB) were weaker in heavy volume after hitting a fresh high the previous session.

Primary wrapped?

With the caveat of “Never say never,” a syndicate banker reckoned that the late-year issuance window is already nearly shut.

It was no surprise that dealers declined to bring offerings Wednesday, ahead of the conclusion of the Federal Open Market Committee's December meeting, with investors keening for some indication of the central bank's inflation-fighting strategy for early 2023 and beyond, in order to price risk assets, the source reasoned.

It's possible that the primary market will open up on Thursday, the banker said.

Friday (Dec. 16) is less promising, as Fridays, even away from the holidays, are generally quiet days in the dollar-denominated bond market.

As to the week ahead, Dec. 19 to Dec. 23, any new junk bond offering would be conspicuous, indeed, given the backdrop of 2022's historic issuance drought, according to the syndicate banker.

Year-to-date issuance stood at $105.7 billion at Wednesday's close, the lowest amount of yearly issuance since 2008 according to Prospect News data.

Although in most years the high-yield primary goes quiet after Dec. 21, pre-Christmas executions, are not unheard of.

For example, on Dec. 23 2014, with the seasonal bells already starting to ring, Texas industrial services provider Signature Group Holdings, Inc. (SGH Escrow Corp.) priced a then-sizable $300 million issue of 10% senior secured notes to fund its purchase of assets from Aleris Corp.

However, such a sleigh bells deal, this year, is unlikely, the banker said.

Noting that 2022 has indeed been challenging in the junk bond market – replete with spiking rates, hung deals and year-to-date returns that are squarely in the red – people are more than ready for the curtain to come down, said the banker.

Charter under pressure

Charter’s capital structure was under pressure on Wednesday with its split-rated notes and subsidiary CCO Holdings’ junk rated notes falling in heavy volume.

CCO’s 6 3/8% senior notes due 2029 were the most actively traded tranche in the debt pile and in the secondary space.

The notes fell ½ point to close Wednesday at 96 with the yield 7 1/8%.

There was $39 million in volume.

The 4½% senior notes due 2030 were also off ½ point to close the day at 85¾ with the yield just shy of 7%.

There was $26 million in trade.

Charter’s split-rated 5¼% senior notes due 2053 (Ba1/BBB-) were down 5/8 point to close at 83 5/8 with the yield just shy of 6½%.

There was $23 million in reported volume.

Charter was under pressure after the company unveiled a $5.5 billion network upgrade plan at its Investors Day on Tuesday.

Investors “didn’t like what they heard,” a source said.

Nielsen weaker

Nielsen’s 9.29% senior secured notes due 2029 were weaker in active trading on Wednesday although the notes continued to trade at a strong premium to their issue price.

The 9.29% notes were off about ½ point and were changing hands in the 97¾ to 98 context heading into the market close, according to a market source.

There was $15 million in reported volume.

The notes were pulling back after hitting a fresh high on Tuesday with the notes trading up to 98½.

Nielsen priced a $1.96 billion issue of 9.29% senior secured notes due 2029 (B2/B/BB) at 92.294 to yield 11% in early November.

Fund flows

High-yield EFTs had $104 million of daily cash inflows on Tuesday, the most recent session for which date was available at press time, according to a market source.

However actively managed high-yield funds were negative no the day, sustaining $139 million of outflows on Tuesday, the trader said.

With only Wednesday's daily fund flows numbers remaining to go into the tally, the combined funds are tracking $42 million of net inflows for the week to Wednesday's close, according to the market source.

Indexes

The KDP High Yield Daily index added 4 points to close Wednesday at 53.06 with the yield now 6.98%.

The index gained 42 points on Tuesday and 6 points on Monday.

The ICE BofAML US High Yield index inched up 5 bps with the year-to-date return now negative 9.07%. The index gained 66 bps on Tuesday and 17.1 bps on Monday.

The CDX High Yield 30 index shaved off 2 bps to close Wednesday at 101.95.

The index jumped 99 bps on Tuesday and 18 bps on Monday.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.