Junk opens flat on Tuesday; Toll Brothers, L Brands on deck; funds see big inflows Monday

By Paul A. Harris

Portland, Ore., Oct. 27 – Junk bonds opened unchanged to a touch weaker on Tuesday, sources said.

High yield ETFS were lower at mid-morning.

The iShares Trust - iShares iBoxx $ High Yield Corporate Bond ETF (HYG) was at $85.55 per share, down 19 cents.

The SPDR Series Trust - SPDR Barclays High Yield Bond ETF (JNK) was 7 cents lower at $36.49 per share.

Dedicated high-yield funds saw big cash inflows on Monday, according to an investor.

Actively managed funds saw $725 million of inflows on the day while ETFs saw $367 million of inflows.

ETFs were nevertheless relatively inactive heading on Tuesday through mid-morning, according to a New York-based trader who tracks them closely.

Meanwhile the cash flows of the dedicated bank loan accounts were negative on Monday, at $60 million of outflows.

Primary market reopens

The lights went on in the recently dormant primary market on Tuesday morning with the announcement of a pair of drive-by bullet deals.

L Brands Inc. plans to price a $400 million offering of 20-year senior notes (Ba1/BB+) Tuesday.

The deal is being guided in a high 6% to low 7% yield range, according to a trader.

BofA Merrill Lynch, Citigroup and J.P. Morgan are the joint bookrunners.

The Columbus, Ohio-based specialty retailer plans to use the proceeds for general corporate purposes including capital expenditures, dividends and share repurchases.

And Toll Brothers Finance Corp. plans to price a $350 million offering of 10-year senior notes (Ba1/BB+/BBB-) this afternoon.

The deal, which will be transacted on the investment-grade desk, is in the market with initial guidance in the low 5% yield range, according to an investor.

Citigroup, Deutsche Bank, Mizuho and SunTrust are joint bookrunners for the general corporate purposes deal.

Toll Brothers Finance is a subsidiary of Toll Brothers, Inc., a Horsham, Pa.-based luxury residential home builder.

Valeant unchanged to slightly lower

A day after Valeant Pharmaceuticals International Inc. gave reassurances about its business and accounting practices on a conference call with investors and requested that the Securities and Exchange Commission investigate Valeant’s accuser, short-seller Citron Research, the bonds were unchanged to slightly lower, sources said.

VRX Escrow Corp.’s 5 3/8% senior notes due March 15, 2020 were at 86˝ bid, 87 offered, down ˝ point from Monday’s close, a trader said.

An investor, meanwhile, was marking Valeant paper unchanged on the day at mid-morning.

Valeant’s debt had dropped on Monday as many tranches lost around 2 points after investors were unimpressed with the company’s defense.

On Oct. 21 Citron called into question Valeant’s business and accounting practices, as well as Valeant’s business relationship with Philidor Rx Services, LLC.

The issues were raised in a report titled “Valeant: Could this be the Pharmaceutical Enron?”

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