Morning Commentary: Junk flat at open; Calumet Specialty, Shutterfly, Telesat on deck

By Paul A. Harris

Portland, Ore., Sept. 27 – High-yield bonds were unchanged to possibly 1/8 of a point better in early Friday trading, according to a New York-based trader.

Against a backdrop of mixed performances from the major U.S. stock indexes, high-yield ETFs were flat at mid-morning. The iShares iBoxx $ High Yield Corporate Bd (HYG) was down 2 cents, or 0.02%, at $87.15 per share.

Issues that recently priced were also turning in mixed performances, although paper with higher credit quality tended to be better.

The AMN Healthcare, Inc. 4 5/8% senior notes due October 2027 (Ba2/BB-) were wrapped around 101 at par 7/8 bid, 101¼ offered, the trader said.

The $300 million issue priced at par in a Thursday drive-by, at the tight end of yield talk.

Beacon Roofing Supply, Inc.'s new 4½% senior secured notes due November 2026 (B1/BB) were also wrapped around 101, the trader said, spotting them at par ¾ bid, 101¼ offered.

The $300 million issue priced at par in a quick-to-market Wednesday trade, at the tight end of yield talk.

The Mercer International Inc. add-on to its 7 3/8% senior notes due Jan. 15, 2025 (Ba3/BB-) was 103 bid, 104 offered on Friday. The $200 million tap came at 102.75 on Thursday, in the middle of talk.

The big Inmarsat plc buyout deal was also trading well heading into the weekend, the trader said.

The Inmarsat 6¾% senior secured notes due October 2026 (B1/B+) were 101½ bid, 102 offered on Friday morning.

The $2,075,000,000 issue – which grew by $950 million from proceeds shifted from the term loan, in two stages – priced at par on Monday, at the wide end of the 6½% to 6¾% talk, and well wide of initial guidance.

Venturing out along the speculative grade credit spectrum, where issuers have lately braved stiff resistance, on the part of junk bond investors, the Howden (Granite Holdings US Acquisition Co.) 11% senior notes due 2027 (Caa1/B-) were 96 bid, 97 offered on Friday, basically wrapped around the issue price, the trader said.

The $300 million issue priced at 96.176 to yield 11¾% on Wednesday, with the yield printing 25 basis points beyond the wide end of final talk, and well wide of earlier guidance, amid a raft of covenant changes, sources said.

However, the Howden deal got done, where others, including Stelco Holdings Inc. and Peabody Energy Corp., recently withdrew their struggling bond offers from the market.

Friday primary

The new issue market promised to be active on Friday ahead of what will be an extended holiday for some market participants, with the Rosh Hashana holidays commencing on Monday.

Telesat Canada and Telesat LLC are on deck with a $500 million offering of eight-year senior notes (B3/B) talked to yield 6½% to 6¾%, tighter than initial guidance in the 7% area.

Shutterfly Inc. expects to price its upsized $785 million offering (from $500 million) of seven-year senior secured notes (B1/B), with final talk specifying an 8½% coupon at an issue price of 95.

And Calumet Specialty Products Partners, LP is expected to close the books on its $550 million offering of 5.5-year senior notes (Caa1/B-/B-), talked to yield 11%.

Mixed Thursday flows

The daily cash flows of the dedicated high-yield bond funds were mixed on Thursday, according to a market source.

High-yield ETFs saw $67 million of inflows on the day.

Actively managed high-yield funds were flat to slight negative on Thursday, sustaining $15 million of outflows on the day, the source said.

News of Thursday’s daily flows follows a Thursday afternoon report that the combined funds sustained $258 million of net outflows in the week to the Wednesday, Sept. 26 close, according to Lipper US Fund Flows.

That represented a significant reversal in the retail cash tides of the high-yield asset class, according to a market source, who said that over the course of the previous two weekly reporting periods the funds saw a combined total of $5.2 billion of net inflows.

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