Morning Commentary: Getty Images downsizes, sets talk; McDermott notes get hammered

By Paul A. Harris

Portland, Ore., Feb. 13 – News of a $168 million adverse charge related to its stake in the Cameron LNG project sent McDermott International, Inc.’s bonds sliding on Wednesday, according to a bond trader in New York.

The McDermott International 10 5/8% notes due May 2024 fell 7½ points to 85 bid, said the trader, noting that the paper was 92 bid, 93 offered on Tuesday.

The adverse charge is due to unfavorable labor productivity and increases in subcontract, commissioning and construction management costs, McDermott stated in a Wednesday press release.

The adverse charge is expected to impact McDermott's statements of operations for the three months and year ended Dec. 31, 2018.

Away from those headlines junk had a firm footing at mid-morning, the trader said.

With the Dow Jones industrial average up 0.75%, high-yield ETFs were flat. The iShares iBoxx $ High Yield Corporate Bd (HYG) was down a nickel, or 0.06%, at $85.19 per share.

Among recent issues, the Ascend Learning, LLC 6 7/8% mirror notes due Aug. 1, 2025 (Caa2/CCC) were 96½ bid, 96¾ offered on Wednesday morning.

The upsized $350 deal (from $300 million) priced Tuesday at 95, at the rich end of talk in the 94.5 area, and played to a decent order book, sources said.

Last week's megadeals continue to turn in strong secondary market performances as well, sources say.

The Clear Channel Outdoor Holdings, Inc. 9¼% senior subordinated notes due February 2024 (Caa1/CCC+/CCC+) were 103½ bid, 104 offered on Wednesday.

Those bonds traded Tuesday at 103¼ bid, 103½ offered.

The upsized $2,235,000,000 (from $2.2 billion) deal priced last Thursday at par, playing to $7 billion of orders.

Recently minted CommScope Inc. secured bonds (Ba1/BB) were trading at 101 bid, 101½ offered; $2.75 billion of that secured paper priced in two tranches last Thursday in a three-part deal that also included $1 billion of unsecured notes due March 2027 (B1/B+).

The CommScope unsecured notes were 102¼ bid, 103¼ offered on Wednesday, the trader said.

Getty slashes talk

In a conspicuously quiet primary market, Getty Images Inc. downsized its offering of eight-year senior notes (CCC+) to $300 million from $400 million, shifting $100 million of proceeds to a concurrent secured loan.

At its previous $400 million size the bond deal was heard to have been oversubscribed by as much as four-times at the initial price talk of 10½%, a trader said.

However, the Seattle-based visual communications company slashed talk on the deal to the 10% area on Wednesday, the trader said, adding that such a dramatic reduction in the coupon could be relied upon to negatively impact the demand for the notes.

The deal is expected to price Wednesday afternoon.

The new deal market is poised to become more active as potential issuers clear capital markets blackout periods related to earnings reports for the last quarter of 2018, sources say.

Tuesday ETF inflows eyed

High-yield ETFs saw a whopping $697 million of inflows on Tuesday, according to a trader.

Actively managed high yield funds saw $30 million of inflows on the day, the source added.

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