Morning Commentary: Junk opens a touch weaker; KIK offer oversubscribed; recent issues holding in

By Paul A. Harris

Portland, Ore., Aug. 18 – Cash bonds were 1/8 point to ¼ point weaker heading into the New York midday on Tuesday, a trader said.

With oil prices basically unchanged, energy names were not getting hit too hard, the source added.

However weakness in the Chinese financial markets overnight was pressuring commodities names, the trader said.

The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) was 0.14 lower at 86.24 per share, heading into midday.

The SPDR Barclays High Yield Bond ETF (JNK) was 0.04 lower at 37.09 per share.

Among big liquid high-yield issues, the Sprint Corp. 7 7/8% senior notes due September 2023 ($4.25 billion outstanding) were a touch better on the day at 95¾ bid, 96¼ offered.

Sprint’s stock was up big yesterday, the trader said, adding that the media space has been topical lately and some names are making comebacks, with investors taking an outlook that they could be oversold.

The primary market generated a few news flashes on Tuesday.

Hill-Rom Holdings Inc. talked its $425 million offering of eight-year senior notes (B1/BB-) to yield in the 5¾% area.

Official talk comes at the tight end of the 5¾% to 6% whisper and tight to initial guidance in the high 5% to low 6% context, sources say.

The deal appears to be going well, the trader said.

Books close at noon ET on Tuesday, and the deal is set to allocate thereafter.

Elsewhere Oneok Inc. talked its $500 million offering of non-callable eight-year senior notes (Ba1/BB+) to yield in the 7¾% area.

Books close at 3 p.m. ET on Tuesday, and the public offering is set to price thereafter (see related stories in this issue).

Meanwhile KIK Custom Products Inc.’s $390 million offering of eight-year senior notes (Caa2/CCC) is heard to be two-times oversubscribed, the trader said, adding that with pricing having moved substantially higher than initial guidance, there is a buzz in the market about the deal.

To recap, on Monday KIK talked the deal to price at a discount with an all-in yield of 10½%, 100 basis points wide of initial guidance in the mid-9% context, market sources say.

Books are scheduled to close at 2 p.m. on Tuesday.

In addition to price talk, covenant changes also surfaced on Monday.

Recent deals holding in

Recent issues continued to turn in strong secondary market performances on Tuesday, the trader said.

Post Holdings, Inc.’s 7¾% notes due March 15, 2024 and the 8% notes due July 15, 2025 were both 102½ bid, 103 offered.

The bonds came last week in a $1.2 billion overall transaction that saw both tranches price at par, at the wide ends of talk that had widened significantly from earlier guidance.

Elsewhere the Infor (US), Inc. 5¾% first-lien senior secured notes due Aug. 15, 2020 (B1/B+) were 99¾ bid, par ½ offered on Tuesday morning.

The upsized $500 million issue (from $400 million) priced at 99.00 to yield 5.986% a week ago.

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