How will the expiration of the tender offers impact the liquidity and pricing of the 9.750% Senior Notes due 2029 and 8.375% Subordinated Notes due 2035?
The expiration of the cashâtender offers means that every note that was successfully tendered is now slated to be retired by BreadâŻFinancial. With the 9.750âŻ% Senior Notes dueâŻ2029 and the 8.375âŻ% FixedâRateâReset Subordinated Notes dueâŻ2035 having a measurable chunk of their outstanding principal removed from the market, the overall float of each series has shrunk. In practice this reduces dayâtoâday trading volume â a smaller pool of bonds means fewer transactions and a tighter bidâask spread for the remaining issues. Dealers will likely tighten pricing to compensate for the reduced inventory, especially on the 2035 subordinated issue, which typically trades with lower liquidity than the senior 2029 bond.
From a pricing perspective the supply contraction should support the remaining notes, pushing prices modestly higher (yields lower) if demand stays steady. However, the market will also reâprice the credit risk associated with the retirements: if a sizable portion of the debt is being removed, BreadâŻFinancialâs leverage improves and the credit profile looks better, further reinforcing price support. Traders should watch the postâexpiration price action for a shortâterm âtenderâexitâ rally â a quick bounce in the 2029 senior notes and a more pronounced move in the 2035 subordinated notes â and consider adding to positions at the newlyâlower yields, while keeping an eye on dealer inventories that could cause temporary thinâmarket volatility. A stopâloss a few basis points above the preâtender high can protect against any shortârun overâextension, and any renewed issuance or secondaryâmarket buyâbacks would be the next catalyst to watch.