Morning Commentary: Credit inches higher; Consol Energy bonds rally; Diamond Resorts sets roadshow

By Paul A. Harris

Portland, Ore., July 27 – The high-yield bond market opened flat to slightly better on Wednesday, according to a trader based in New York.

Credit was up 1/8 point, with commodities names, including steel and energy, rebounding, sources said.

The bonds of Consol Energy Inc. were active, according to the trader.

The Consol Energy 5 7/8% senior notes due April 15, 2022 were 88 bid, 88¼ offered at mid-morning, up a couple of points from 86 bid, 86½ offered on Tuesday. And there were a lot of buyers, the source said.

Crude oil prices, meanwhile, remained on the decline, with the barrel price of West Texas Intermediate crude for September 2016 delivery down 1.77%, or 76 cents, at $42.16 at mid-morning.

The bonds of Sprint Corp. were up a couple of points trailing better-than-expected earnings reported on a Tuesday call. Sprint reported $8.01 billion of revenue, surpassing analysts' expectations of $7.99 billion.

Among recent issues, the new Navient Corp. 6 5/8% senior notes due July 26, 2021 (Ba3/BB-/BB) were active on Wednesday morning, getting as high as 102 bid, the trader said.

The upsized $750 million bullet deal (from $500 million) priced at par on Tuesday, tearing through initial guidance of 7%, and coming at the tight end of official talk in the 6¾% area.

The new dollar-denominated bonds of Ineos Group Holdings SA, the 5 5/8% senior notes due Aug. 1, 2024 (B3/B-), were quiet but not doing too poorly, wrapped on either side of par, the source said.

The $500 million issue came at par as part of an €1.11 billion equivalent deal that also featured €650 million of 5 3/8% notes with the same maturity and which also priced at par.

ETFs were flat on the morning, and were trying to sell, the trader said, surmising that it was a hangover for Tuesday's softness.

The iShares iBoxx $ High Yield Corporate Bd (HYG) was off 3 cents, or 0.04%, at $85.40 per share at mid-morning. The SPDR Barclays High Yield Bond ETF (JNK), at $36.06 per share, was down a penny, or 0.01%.

The primary

The new issue market was relatively quiet on Wednesday morning.

Athens, Greece-based FAGE International SA, along with Johnstown, N.Y.-based FAGE USA Dairy Industry Inc., are on deck with a $420 million offering of 10-year senior notes (B1/BB-) set to price Wednesday.

The deal was talked on Tuesday to yield 5¾% to 6% and was four to five times oversubscribed at that level, according to a market source.

However unofficial talk on the deal is tightening, the source added. The latest buzz on the Street has the deal shaping up at 5 5/8% to 5¾%.

Meanwhile Diamond Resorts International, Inc. plans to start a roadshow on Monday for its $600 million offering of eight-year senior notes (Caa1/CCC+) via left bookrunner RBC and joint bookrunners Barclays and Jefferies.

Proceeds will be used to help fund the acquisition of Diamond Resorts by Apollo Global Management LLC for $30.25 per share, or $2.2 billion (see related story in this issue).

Mixed Tuesday flows

The daily cash flows of the dedicated high-yield bond funds were mixed on Tuesday, according to a portfolio manager.

High-yield ETFs sustained $207 million of outflows on the day. However actively managed funds were slightly positive, seeing $5 million of inflows on Tuesday.

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