Morning Commentary: NCR bonds rally on news of Veritas takeover talks; Cornerstone eyed

By Paul A. Harris

Portland, Ore., July 19 – The high-yield bond market opened ¼ point higher on Tuesday morning, sources said.

With the S&P 500 stock index up 1.44% at mid-morning, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was up 0.74%, or 55 cents, at $75.32.

Bonds of NCR Corp. traded sharply higher on news that the company has been in exclusive takeover talks with Veritas Capital.

The entire stack of the Atlanta-based business technology company’s bonds was generally 2 points to 3 points higher on the morning, according to a sellside source in New York.

The NCR 5 1/8% senior notes due April 2029 were 88½ bid, 89½ offered, up 2 points to 3 points on the bid side, the source said.

The longer maturity NCR 5¼% senior notes due October 2030 were 88 bid, 89 offered.

All of the bonds have change-of-control provisions, the sellsider noted.

Among more recent issues, a round lot of Garden SpinCo Corp. (Neogen Corp.) 8 5/8% senior notes due July 2030 (B2/BB) changed hands at 103 5/8 on Tuesday morning, down ¼ point, the sellsider said, noting that they had traded at 103 7/8 on Monday.

Those notes were wrapped around 104 late last week.

The $350 million issue priced on July 6 at par, the only dollar-denominated new issue since the conclusion of the Independence Day holiday weekend.

In the primary market, Camelot Return Merger Sub Inc. upsized its offering of six-year non-call two-year senior secured notes (B2/B) to $710 million from $600 million and talked them with an 8¾% coupon, discounted to approximately 90.3, to yield in the 11% area (wide to early yield guidance of 10½%).

The deal, backing the buyout of Cornerstone Building Brands, Inc. by Clayton, Dubilier & Rice, is set to price on Wednesday.

With the upsize of the notes offering, a concurrent first-lien term loan was downsized to $300 million from $410 million.

There is only one other offering presently in the market.

Patagonia Holdco LLC is on the road with a $500 million offering of seven-year senior secured first-lien notes (B1/B+) supporting the buyout of Lumen Technologies' Latin American operations by Stonepeak.

Initial guidance specifies a 7½% coupon at OID 86.

Pricing is set for the week ahead.

Monday outflows

The dedicated high-yield bond funds sustained $872 million of daily cash outflows on Monday, according to a market source.

High-yield ETFs saw $641 million of outflows on the day.

Actively managed high-yield funds sustained $231 million of outflows on Monday, the source said.

The combined funds are tracking $1.36 billion of net outflows for the week that will conclude with Wednesday's close, according to the market source.

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