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Morning Commentary: In thin late-summer trading, investors eye deeply distressed Key Energy bonds
By Paul A. Harris
Portland, Ore., Aug. 25 – Trading in high-yield bonds remained muted on Thursday as investors work to clean up balance sheets ahead of an anticipated September calendar, a New York trader said at mid-morning.
“People are looking for offers and trying to put cash to work,” the trader said.
Against a backdrop of flat equity prices high-yield ETFs were better on the morning. The iShares iBoxx $ High Yield Corporate Bd (HYG) was up 0.21%, or 18 cents, at $86.68 per share. The SPDR Barclays High Yield Bond ETF (JNK), at $36.56 per share, was up a nickel, or 0.14%.
Investors were taking a careful look at the deeply distressed bonds of troubled Key Energy Services, Inc., which announced Wednesday that it will file for voluntary relief under Chapter 11.
Of note, the reorganization plan would cut the company's debt to $250 million from $1 billion, the trader recounted.
The Key Energy Services 6¾% senior notes due March 1, 2021 were 30 bid, 35 offered on Thursday morning, said the trader, who added that there had been no real movement in the price.
Activity in recent issues has been muted, the trader said.
The Sinclair Television Group, Inc. 5 1/8% senior notes due March 15, 2027 (B1/B+) were par ¼ bid, par ¾ offered on Thursday morning.
The upsized $400 million issue of 10.5-year paper (from $350 million) priced at par on Aug. 15.
The NRG Yield, Inc. 5% senior notes Sept. 15, 2026 (Ba2/BB+) were 99¾ bid, par ¼ offered.
The oversubscribed deal priced at par, also on Aug. 15.
Meanwhile the primary market remained becalmed on Thursday morning.
However, given the recent sturdiness of the stock market, as well as piles of investor cash to be put to work and the ongoing quest for yield, a big September in the new deal market is coming into view, market sources say.
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