Morning Commentary: Junk opens lower; recent deals trade mixed; MultiPlan on deck

By Paul A. Harris

Portland, Ore., Aug. 17 – High yield opened 1/8 of a point lower amid gyrating equities, with sellers at the wheel on Tuesday, sources said.

Liquidity in junkland is well below normal, with major players tending to be away on mandatory two-week vacations, a trader said.

Recent issues are turning in mixed performances, with a number of spotlight deals lagging new issue prices, the source said.

The new American Axle & Manufacturing, Inc. 5% senior notes due October 2029 (B2/B+) were 99 1/8 bid, 99 3/8 offered in active trading on Tuesday morning.

The $600 million issue priced at par in a Monday drive-by.

Monday’s biggest new issue, Southwestern Energy Co.'s 5 3/8% senior notes due March 2030 (Ba3/BB-/BB), hung above new issue price on Tuesday morning at par bid, par ¼ offered in very active trading.

The upsized $1.2 billion issue (from $1 billion) priced at par on Monday, at the tight end of talk, playing to $2.3 billion of orders.

Turning back a few more calendar pages, the Royal Caribbean Cruises Ltd. 5½% senior bullet notes due August 2026 (B2/B) were down half a point on the morning at 99¼ bid.

The $1 billion issue priced at par last Wednesday.

The Carvana Co. 4 7/8% senior notes due September 2029 were 99½ bid, 99¾ offered on Tuesday morning.

The $750 million issue priced at par last Thursday.

Meanwhile the Crocs, Inc. 4 1/8% senior notes due August 2031 (B1/BB-) continue to trade at a premium to new issue price, at par bid, par ¼ offered, according to the trader, who saw one small trade on Tuesday morning.

The $350 million issue priced at par last Thursday.

In an otherwise quiet primary market MultiPlan Corp. talked its $775 million offering of seven-year senior secured notes (Ba3/B+) to yield in the 5½% area, in line with initial guidance in the mid-5% area.

The deal is set to price on Tuesday.

With liquidity low, owing to vacationing market players, the new issue market appears to have drifted into the late summer latitudes, typical of the run-up to the extended Labor Day holiday weekend, the traditional summer-fall terminus in the bond market, which gets underway following the Sept. 2 close.

In the interim the primary is expected to see a limited amount of activity as the market stages for a forecasted $60 billion September blowout, sources say.

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