Morning Commentary: Junk bonds open flat to weaker; Pinnacle brings $350 million drive-by

By Paul A. Harris

Portland, Ore., Jan. 11 – High-yield bonds were flat to slightly weaker as the new week got underway, according to a trader based on the East Coast of the United States.

There was a dearth of news, the sources added.

High-yield ETFs were higher heading into mid-morning. The iShares iBoxx $ High Yield Corporate Bd (HYG) was up 33 cents, or 0.41%, at $79.85 per share. SPDR Barclays High Yield Bond ETF (JNK), at $33.58 per share, was up a dime, or 0.30%.

The Microsemi Corp., Inc. 9 1/8% senior notes due April 15, 2023 (B2/B+) were continuing to trade well in the secondary.

The notes were 103¼ bid heading into the mid-morning, according to the trader. They were seen 102¼ bid on Friday.

The $450 million deal, the year’s first syndicated issue, priced at par on Thursday, driven to market by a significant amount of reverse inquiry, according to sources.

Pinnacle Foods drive-by

The year’s second dollar-denominated deal surfaced as the week got underway.

Pinnacle Foods Inc. is expected to price a $350 million offering of high-yield notes in a quick-to-market Monday transaction.

The deal, via lead bookrunner BofA Merrill Lynch, is being whispered in the low 6% yield context and is being driven on $1 billion of reverse in inquiry, a trader said.

Information on structure of the notes was not immediately available, sources said.

Proceeds will be used to help fund the acquisition of Boulder, Colo.-based health and wellness products manufacturer Boulder Brands Inc. in a transaction valued at about $975 million. The acquisition is expected to close during the first quarter of this year.

The financing also includes a $550 million incremental term loan (BB+), which was launched last week via arrangers Bank of America Merrill Lynch, Barclays and Credit Suisse Securities (USA) LLC.

The company had received a commitment for an up to $900 million incremental term loan for the acquisition but is opting to issue $350 million in notes instead of using all term loan debt.

Atalian eyes first euro deal

Paris-based Atalian rolled out the year’s first euro-denominated offering as it began a European roadshow for a €125 million add-on to its 7¼% senior notes due Jan. 15, 2020 (B2/B).

Pricing is set for the midweek period.

Global coordinator Credit Suisse will bill and deliver. BNP Paribas is also a global coordinator. SG is a bookrunner.

The commercial services and supplies company plans to use the proceeds to repay debt.

The original €250 million issue priced at par in January 2013.

Friday outflows

The cash flows of the dedicated high-yield bond funds were negative on Friday, a trader said.

High-yield ETFs saw $192 million of outflows on the day.

Actively managed funds sustained $80 million of outflows on Friday.

Bank loan funds, meanwhile, saw $190 million of outflows, including $22 million of outflows from bank loan ETFs.

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