Morning Commentary: High yield down a quarter point, ex-energy, but recent issues holding above par

By Paul A. Harris

Portland, Ore., Aug. 7 – Cash bonds were ¼ point lower, ex-energy, heading into the Friday midday, according to a high-yield bond trader on the East Coast of the United States.

However recent issues appeared to be holding in, the trader said.

Vista Outdoor, Inc.’s 5 7/8% senior notes due 2023 (Ba3/BB+) were 101 bid on Friday morning.

The $350 million issue, which was upsized from $300 million, priced at par on Thursday, at the tight end of talk, and inside of initial guidance.

Recently priced bonds of Party City, meanwhile, eased from Thursday highs, although they remain above par.

The Party City 6 1/8% notes due 2023 (B3/CCC+) were 101 1/8 bid on Friday morning, versus 101½ bid on Thursday morning, the trader said.

The $350 million issue priced at par on Wednesday.

A portfolio manager who declined to play the Party City deal said that it appeared to be pretty rich, given a yield of 6 1/8% and six-times leverage.

First Data Corp.’s first-lien senior secured notes due 2023 (B1/BB-/BB) were par ¾ bid, 101¼ offered on Friday morning and appeared to be doing well, the trader said.

The massively upsized $1.21 billion issue (from $675 million) priced at par on Wednesday.

Energy under pressure

The high-yield energy sector remained under significant pressure Friday morning, with the barrel price of West Texas Intermediate crude oil hovering just above $44, down 64 cents on the day.

The benchmark California Resources Corp. 6% senior notes due 2024 were 76¼ bid on Friday, down 1¼ points from the day before.

Mixed flows

Dedicated high-yield funds saw mix cash flows on Thursday.

High-yield ETFs sustained $428 million of outflows.

However asset managers took in $100 million on the day.

Quiet primary

The final session of the first week of August got underway to a thin calendar, with no more deals expected to price before the end of the week.

The calendar for the Aug. 10 week sports just two deals.

AMAG Pharmaceuticals is marketing a $450 million offering of eight-year senior notes (B+).

And KIK Custom Products Inc. is scheduled to begin a roadshow on Monday for a $390 million offering of eight-year senior notes (Caa2).

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