Morning Commentary: Junk sags; new issues maintain premiums; Entertainment One prices inside talk

By Paul A. Harris

Portland, Ore., Dec. 4 – High-yield bonds in the energy space and beyond were feeling weaker following word that the Organization of Petroleum Exporting Countries is unlikely to agree to curb production, further exacerbating a global oil glut, a trader said heading into mid-morning on the East Coast of the United States.

Reflecting the OPEC news, the barrel price of West Texas Intermediate crude oil was $40.03 at mid-morning, down $1.05, the source added.

High-yield ETFs were lower in early morning trading.

The iShares iBoxx $ High Yield Corporate Bd (HYG) was 15 cents lower at $82.70 per share.

SPDR Barclays High Yield Bond ETF (JNK) was down 6 cents at $35.10 per share.

New issues maintain premiums

In the face of overall weakness in the high-yield market, recent issues continued to perform well, the trader said.

The HCA Inc. add-on to the 5 7/8% senior bullet notes due Feb. 15, 2026 (B1//BB) was par ¾ to 101¼, heading into mid-morning.

The $500 million deal priced at par ¼ to yield 5.837% on Thursday.

Aramark's new 5 1/8% senior notes due Jan. 15, 2024 (B2/BB-) were par 5/8 bid, 101 offered Friday morning.

The upsized $400 million issue (from $300 million) priced at par on Thursday.

The new Group 1 Automotive, Inc. 5¼% senior notes due Dec. 15, 2023 (Ba2/BB) were trading either side of par on Friday morning, the trader said.

The upsized $300 million issue (from $250 million) priced at par on Thursday.

Ball Corp.'s dollar-denominated 4 3/8% senior bullet notes due Dec. 15, 2020 (Ba1/BB+/BB+) were 101 bid, 101½ offered.

The $1 billion tranche priced at par on Wednesday as part of an upsized €2,043,752,359 three-part deal (from €1.5 billion) that also featured euro-denominated five- and eight-year paper.

The Churchill Downs Inc. add-on to its 5 3/8% senior notes due Dec. 15, 2021 (B1/BB) was 101½ bid, 102 offered heading into the Friday mid-morning.

The upsized $300 million deal priced at 101 to yield 5.095% on Wednesday.

Entertainment One prices

In an otherwise quiet Friday morning primary market, Entertainment One Ltd. priced a £285 million issue of seven-year senior secured notes (B1/B+) at par to yield 6 7/8%.

The yield printed 12.5 basis points below the tight end of the 7% to 7¼% yield talk (see related story in this issue).

Meanwhile, two deals are on the active calendar.

Earlier in the week both had been expected to clear before the Friday close.

ClubCorp Holdings, Inc. was set to wrap up the roadshow for its $400 million offering of eight-year notes on Friday.

Official price talk has yet to circulate, according to a trader, who said that guidance has bumped up to around 8% from earlier whispers in the high 7% range.

Also in the market is NGL Energy Partners LP with a $300 million offering of five-year senior notes.

Formal talk on the deal from the battered energy sector has yet to be announced.

However the whisper in the market has backed up to 11½% to 12%, from initial guidance in the 9% area, sources say.

Given that Friday produced fresh negative news bearing upon the energy sector, it is doubtful that the deal will come Friday, the trader said.

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