Morning Commentary: New Mercer bonds trade at slight premium; market awaits G20 news

By Paul A. Harris

Portland, Ore., Nov. 30 – Junk was a little softer on Friday morning, in line with flat equity prices and weak oil prices, as the world awaited announcements on a possible trade agreement between China and the United States emanating from the G20 Summit in Buenos Aires, where president Donald Trump is expected to have dinner with Chinese president Xi Jinping, an investor said.

The CDX HY31 index of high-yield credit default swaps was 104.49 bid, 104.58 offered, 0.185 point lower on the morning.

High-yield ETF share prices were lower on the morning. The iShares iBoxx $ High Yield Corporate Bd (HYG) was down 15 cents, or 0.19%, at $83.61.

Bonds priced Thursday by Mercer International Inc. were trading at a slight premium on Friday.

The Mercer 7 3/8% senior notes due Jan. 15, 2025 (Ba3/BB-) were par bid, par ½ offered, the investor said.

The $350 million issue priced at par, at the wide end of yield talk in the 7¼% area.

Bonds of cable television system operator Altice were up a couple of points on news that Altice Europe NV subsidiary Altice France has entered into an exclusivity agreement regarding the sale of a 49.99% in SFR FTTH for €1.8 billion.

The Altice SA 7¾% senior notes due May 2022 were 95½ bid on Friday, according to the investor, who noted that they were 93¾ bid on Thursday.

SFR FTTH is the largest alternative fiber-to-the-home (FTTH) infrastructure wholesale operator in France.

Altice France will sell technical services to SFR FTTH for the construction, the subscriber connection and the maintenance of its FTTH network.

Crude oil weakness eyed

Oil prices continued to languish on Friday.

The barrel price of West Texas Intermediate crude for January 2019 delivery was 1.59% lower on the day at $50.63, down 82 cents, as oil appeared headed for November's end $30 lower than its mid-September peak just above $80, in intraday trading.

The Vantage Drilling International 9¼% senior secured first-lien notes due November 2023 (Caa1/B) were 99½ bid, par offered, unchanged on Friday morning.

The upsized $350 million issue (from $300 million) came at par in a conspicuously tight Nov. 14 execution that came on an accelerated timeline, and at the tight end of talk.

However, the California Resources Corp. 8% senior secured second-lien notes due December 2022, a big liquid issue employed by the market to track crude oil prices, were lower on the day at 76 bid, 77 offered, according to a hedge fund manager.

Those bonds were 77½ bid, 78½ offered on Thursday, the manager said.

Issues new to the market since the onset of Autumn tend to be lagging new issue prices, sources say.

Bonds with tighter covenants tend to be outperforming their counterparts with weaker covenants, the high-yield investor noted.

In the former category, the RegionalCare Hospital Partners Holdings, Inc. and LifePoint Health, Inc. 9¾% senior notes due December 2026 were 99¼ bid, par offered on Friday, unchanged.

That paper was seen at 98¾ bid, 99 offered on Wednesday.

The $1,425,000,000 deal priced at par on Nov. 14.

However, the Refinitiv 8¼% notes due November 2026 (Caa2/B-/B+) were 95 bid, 95½ offered on Friday morning.

The $1,575,000,000 tranche priced at par on Sept. 18, a week before the market began to widen, the investor remarked.

Mixed Thursday flows

The daily cash flows of the dedicated high-yield bond funds were mixed on Thursday, a trader said.

High-yield ETFs saw $95 million of inflows on the day.

However, actively managed high-yield funds sustained $10 million of outflows on Thursday, the source said.

News of Thursday’s daily flows follows a Thursday afternoon report that the combined high-yield funds sustained $1.2 billion of outflows in the week to Wednesday's close, according to Lipper US Fund Flows.

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