Morning Commentary: Junk starts week a touch weaker; Hill-Rom sets investor call; recent deals firm

By Paul A. Harris

Portland, Ore., Aug. 17 – Cash bonds were a touch softer heading into midday on the East Coast of the United States, a trader said.

Oil remains under pressure, with the barrel price of West Texas Intermediate crude below $42, at $41.93 per barrel.

California Resources Corp.’s 6% notes, a benchmark issue in the energy sector, were down half a point at 74¼ bid, 74¾ offered. They went out Friday at 74½ bid, 75¼ offered, according to the trader.

Recent deals hold in

Big, recently priced deals continued to turn in strong secondary market performances on Monday.

Post Holdings, Inc.’s 7¾% notes due March 15, 2024, the 8.5-year notes, were 102½ bid, 103 offered. The Post 8% notes due July 15, 2025 were 102 3/8 bid, 103 1/8 offered.

Both were off a touch – the long-duration bond more so than the short piece – on Monday morning, the trader said.

Both bonds priced last week in a $1.2 billion overall transaction that saw both price at par, at the wide ends of talk that had widened significantly from earlier guidance.

Meanwhile the Owens-Illinois, Inc. 5 7/8% notes due Aug. 15, 2023 were 101 bid, 102 offered on Monday. The notes priced at 99.219 to yield 6% last Tuesday in a $700 million tranche that came on top of talk.

The Owens-Illinois 6 3/8% notes due Aug. 15, 2025 were 101¼ bid, 102¼ offered on Monday, basically unchanged, the trader said. The notes came at par in a tranche sized at $300 million, also on top of talk.

Primary market

In the new issue market Hill-Rom Holdings Inc. scheduled a late Monday morning investor call to roll out a $425 million offering of eight-year senior notes.

Although the market awaits official word on when the deal will price, it is apt to be in the market overnight, according to a trader, who added that it is an August Monday, with a lot of people just getting back from vacations.

Goldman Sachs is the left bookrunner for the acquisition financing. JPMorgan, BofA Merrill Lynch and PNC are the joint bookrunners.

Elsewhere KIK Custom Products Inc. talked its $390 million offering of eight-year senior notes (Caa2/CCC) to price at a discount with an all-in yield of 10½%.

Talk comes 100 basis points wide of initial guidance in the mid-9% context, market sources say.

Books are scheduled to close at 2 p.m. ET on Tuesday.

In addition to price talk, covenant changes also surfaced on Monday.

Joint bookrunner Barclays will bill and deliver. BMO, Nomura and Macquarie are also joint bookrunners.

Mixed flows

The daily cash flow of the dedicated high-yield funds was mixed on Friday, according to the trader.

High-yield ETFs saw $96 million of inflows on the day.

Asset managers sustained $90 million of outflows on Friday.

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