Morning Commentary: Levi Strauss to market €450 million; dollar primary market awaits reactivation

By Paul A. Harris

Portland, Ore., Feb. 21 – The dollar-denominated primary market awaited reactivation on Tuesday, trailing the extended Presidents Day holiday in the United States, sources said.

That should change.

Word circulated from dealers that there are dollar-denominated offerings expected soon, including a couple of deals from BofA Merrill Lynch and one or two offerings from JPMorgan later this week.

Meanwhile Levi Strauss & Co. plans to start a Europe-only roadshow on Wednesday for a €450 million offering of 10-year senior notes (existing ratings Ba2/BB+).

BofA Merrill Lynch is the left bookrunner. Goldman Sachs, JPMorgan, Deutsche Bank, SunTrust, Scotia and Wells Fargo are the joint bookrunners.

The San Francisco-based apparel maker plans to use the proceeds, together with cash on hand, to purchase its 6⅞% senior notes due 2022.

Sprint firm on Softbank news

In the secondary market, bonds of Sprint Corp. remain a couple of points higher trailing a Friday news report that Japan's SoftBank Group, which owns a majority of Sprint's shares, is contemplating selling part of its Sprint stake in a move that would pave the way for a merger between Sprint and Deutsche Telekom-owned T-Mobile, ostensibly combining the third and fourth largest U.S. wireless carriers, the trader said.

Among recent issues, NGL Energy Partners LP's 6 1/8% senior notes due March 1, 2025 (B2/BB-/B+) continued to straddle new issue price at 99¾ bid, par ¼ offered.

The $500 million issue priced at par last Thursday, upsized from $450 million.

That's the most recent dollar-deal to clear the unusually quiet primary market.

Elsewhere, improving energy prices don't appear to be creating much in the way of tailwinds for bonds in the high-yield energy sector, the trader said.

Although the barrel price of West Texas Intermediate crude was up 1.4%, or 75 cents, at $54.15 on Tuesday morning, energy names were not much changed, the trader said.

The sentiment seems to be that energy prices have made their moves, for the time being. And those moves are already priced into the bonds.

A decline in the yield of the 10-year Treasury could bring higher quality, spread-sensitive energy issuers off the sidelines, sources say.

However the yield of the 10-year was moving up, not down, on Tuesday morning.

Mixed Friday flows

The daily cash flows of the dedicated high-yield bond funds were mixed but essentially flat on Friday, the trader said.

High-yield ETFs saw $8 million of inflows on the day.

Actively managed funds sustained $15 million of outflows on Friday.

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