Morning Commentary: Junk opens flat to lower; Airxcel sets price talk; funds see outflows

By Paul A. Harris

Portland, Ore., Jan. 24 – High-yield bonds opened flat to down as much as ¼ point in early Tuesday trading, according to a bond trader.

High-yield ETFs were flat at mid-morning.

The iShares iBoxx $ High Yield Corporate Bd (HYG) was off 0.02%, or 2 cents, at $87.18 per share. The SPDR Barclays High Yield Bond ETF (JNK), at $36.77 per share, was up a penny, or 0.03%.

The new United Airlines, Inc. bonds were wrapped around new issue price.

The United Continental Holdings, Inc. 5% senior notes due Feb. 1, 2024 (BB-/BB) were 99 7/8 bid, par 3/8 offered at mid-morning, the trader said.

The downsized $300 million issue (from $500 million) priced at par on Monday.

Meanwhile the Baffinland Iron Mines Corp. 12% senior secured notes due Feb. 1, 2022 (Caa1/B-) were 97½ bid, 99 offered, unchanged, the trader said.

The $350 million deal, which had been in and out of the new issue spotlight for nearly a month, priced at 97.5 to yield 12.69% on Monday.

Airxcel talk 8½% to 8¾%

In the primary market Airxcel, Inc. talked its $300 million offering of five-year senior secured notes (B1/B) to yield 8½% to 8¾%.

Books close at 2 p.m. ET on Tuesday, and the deal, via Jefferies LLC, is set to price shortly thereafter.

At least two other deals are expected to price on Tuesday.

Hexion Inc. is in the market with a $460 million offering of five-year first-priority senior secured notes to yield in the 10½% area.

Official talk comes tighter than initial guidance in the high 10% to 11% area.

The deal is set to price on Tuesday, a timing change that kept it in the market one day longer than expected, sources say. Earlier timing had the deal set to clear the market on Monday.

And Ferrellgas Partners has been shopping a $150 million add-on to its 8 5/8% senior notes due July 15, 2020 (existing ratings Caa1/CCC+).

The deal is shaping up in the 99.5 area and should price on Tuesday, the trader said.

The offering was announced on Monday and had been seen as possible Monday or Tuesday business, a sources said.

Monday outflows

The cash flows of the dedicated high-yield bond funds were negative on Monday, the trader said.

High-yield ETFs saw $58 million of outflows on the day.

Actively managed high-yield funds sustained $205 million of outflows on Monday.

However, in the world of floating-rate debt, cash flows remain firmly positive.

Dedicated bank loan funds saw $210 million of inflows on Monday, the trader said.

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