Morning Commentary: Junk softens in early Thursday trading; Community Health bonds plummet

By Paul A. Harris

Portland, Ore., Oct. 27 – The high-yield bond market was trading slightly lower in line with equities on Thursday, according to a portfolio manager.

High-yield ETFs were lower.

The iShares iBoxx $ High Yield Corporate Bd (HYG) was down 0.22%, or 19 cents, at $86.83 per share. The SPDR Barclays High Yield Bond ETF (JNK), at $36.60 per share, was down 0.23%, or 8 cents.

Bonds of Community Health Systems, Inc. were sharply lower on the day, as was the company’s share price, the portfolio manager said.

The FWCT-2 Escrow Corp. (Community Health Systems) 6 7/8% senior notes due Feb. 1, 2022 were 79 bid on Thursday after having traded in the 85 context on Wednesday, the investor said, adding that Community Health, with $7 billion of outstanding debt, appeared to be “imploding” following the company's earnings call reporting that revenues in the third quarter fell by 9.6% and total admissions dropped 12.4% during the same period.

Cooper-Standard sets talk

In the primary market Cooper-Standard Holdings Inc. talked its $400 million offering of 10-year senior notes (B2/B) to yield 5 5/8% to 5 7/8%, according to a buyside source, who added that the deal is playing to $1.1 billion of orders.

Official talk comes tight to the 5¾% to 6% initial guidance.

Books close at 2:30 p.m. ET on Thursday, and the deal is set to price thereafter.

BofA Merrill Lynch is leading the offering.

Advanced Disposal on tap

Advanced Disposal Services Inc. is expected to price $425 million of eight-year senior notes (Caa1/B-) on Thursday following a conference call with investors, according to a buyside source, who added that the deal is well oversubscribed.

Early guidance has the deal coming in the low 6% area.

Deutsche Bank Securities Inc. is the left bookrunner.

Owens-Illinois euro deal

Owens-Illinois Group, Inc. announced in a Thursday press release that it intends to sell €600 million senior notes due 2024.

The glass container manufacturer, which is based in Perrysburg, Ohio, and Schiedam, Netherlands, plans to use the proceeds to repay its outstanding term loan B, which had $568 million outstanding as of Sept. 30, and for general corporate purposes.

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