Morning Commentary: LABL, Option Care on deck; new Kosmos Energy notes trade to premium

By Paul A. Harris

Portland, Ore., Oct. 22 – Junk bonds opened the Friday session unchanged, sources said.

Against a backdrop of mixed performances among the U.S. stock indexes, at mid-morning, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was softer at $86.98, down 7 cents, or 0.08%.

Trading activity in high-yield bonds was muted on both sides of the Atlantic, with investors continuing to focus on recent issues.

In the United States, around 80% of secondary market volume is in recent new issues, a trader said.

Five-year senior secured notes (B1/BB-) priced Tuesday by Polynt-Reichhold continue to maintain premiums to their new issue prices, sources said.

The dollar-denominated 5 3/8% notes closed Thursday at 101¼ bid, 101½ offered, the trader said.

The upsized $760 million tranche (from $750 million) priced at par.

Both euro-denominated tranches, the 4 3/8% fixed rate notes and the Euribor plus 437.5 basis points floating-rate notes, were up a point, a source said.

Both came at par in tranches sized €325 million apiece.

The more recently minted Kosmos Energy Ltd. 7¾% senior notes due May 2027 (B3/B+/B) were 101 bid, according to a trader, who saw a small Friday trade.

The $400 million issue, which came at par on Thursday, was heard to be three-times to 3.5-times oversubscribed, enabling the company to tighten pricing by 50 bps from the midpoint of initial guidance, and price the deal 12.5 bps inside of official talk.

Among investors who took interest in the Kosmos deal, about 70% were emerging markets accounts, the trader said.

Kosmos Energy has extensive operations in the waters off the West African coast.

On deck

Two deals are on deck to price on Friday. Both are heard to be oversubscribed.

LABL, Inc. set price talk in its $1.21 billion two-part offering of notes backing the acquisitions of Multi-Color Corp. and Fort Dearborn Co. by Clayton Dubilier & Rice, LLC.

Wider-than-guidance official talk surfaced on both tranches, along with document changes.

The offering features $750 million of seven-year senior secured notes (B2/B-) talked in the 6% area, versus initial talk of 5½% to 5¾%

The offering also features $460 million of eight-year senior unsecured notes (Caa2/CCC+) talked to yield 8% to 8¼%, versus initial talk of 7¾% to 8%.

The deal was heard to be oversubscribed with demand skewed to the secured tranche.

Meanwhile, Option Care Health, Inc. talked its $500 million offering of eight-year notes (B3/B-) to yield in the 4½% area, inside of initial guidance in the high 4% area.

Thursday inflows

The dedicated high-yield bond funds saw a hefty $729 million of net daily inflows on Thursday, according to a market source.

Much of that amount was taken in by the high-yield ETFs, which saw $634 million of inflows on the day.

Actively managed high-yield funds saw $95 million of inflows on Thursday, the source said.

News of Thursday's daily flows trails a Thursday afternoon report from Refinitiv Lipper that the combined funds saw $2.3 billion of net inflows in the week to the Wednesday, Oct. 20 close, the largest weekly inflows seen since the week to April 7, according to the market source.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.