Morning Commentary: Buyers sluff off coronavirus jitters, pile into junk; Sprint soars

By Paul A. Harris

Portland, Ore., Feb. 12 – Buyers came out in force on Wednesday, high-yield bond traders said, marking the broad market up as much as a half a point.

Bonds of Sprint Corp. continued phenomenal moves higher, which got underway following Tuesday's news that the company's $26.5 billion merger with T-Mobile, a merger that will combine the third and fourth largest wireless carriers, cleared its last regulatory hurdle.

The Sprint Capital Corp. 6 7/8% notes due 2028 were up a point at 121 bid on Wednesday, after having soared 10 points to 20 points since the merger announcement, a trader said.

The Sprint Capital 8¾% notes due 2032 – a bullet, like the 2028 notes – were 140 bid, 140½ offered, up a point on Wednesday, after being up 20-plus points since the announcement.

Recent issues

Among recent issues, the Post Holdings Inc. 4 5/8% senior notes due April 2030 (B2/B+) were par ¾ bid on Wednesday, up half a point.

The upsized $1.25 billion issue (from $1 billion) priced at par on Tuesday.

The issue played to $2 billion of demand, market sources said.

The new Husky III Holding Ltd. 13%/13¾% PIK toggle notes due February 2025 (Caa2/CCC) – characterized by sources as an aggressive PIK toggle holdco deal backing a dividend and which weathered substantial investor pushback and underwent a lot of covenant changes – roared into the secondary market, a trader said.

The deal, sized at $460 million, was trading at 102¼ bid, 102½ offered on Wednesday morning after pricing late Tuesday at 98.

Elsewhere, the new HCA Inc. (HCA Healthcare, Inc.) 3½% senior bullet notes due September 2030 were turning in a meek enough performance on Wednesday, wrapped around issue price while the rest of the market appeared to be defying gravity.

The massively upsized $2.7 billion deal (from $1 billion) came at par on Tuesday.

All the juice had been squeezed from the new HCA paper, a trader lamented on Wednesday morning.

Away from headlines and recent issues, the sun shined on the oil patch Wednesday morning, with the barrel price of West Texas Intermediate crude for March 2020 delivery up 2.7%, or $1.35, at $51.29.

Deeply distressed high beta credits in the energy sector were up 1 to 2 points, a trader said.

Bonds of Transocean Ltd. (RIG) were up 2 points in active trading on Wednesday.

With little or no support from news headlines around the world, investors may be taking a view that coronavirus – which has been crimping fuel use related to transportation – may have peaked, the trader mused.

Quiet primary

Trailing a huge burst of issuance in the early part of the Feb. 10 week, the new issue market was relatively quiet on Wednesday.

Hecla Mining Co. is in the market with a $475 million offering of eight-year senior notes (existing ratings Caa1/B-), whispered at 7½% to 7¾% and slated to price Friday.

And Zayo Group Holdings Inc. may be situated on the apron with a megadeal: $1 billion seven-year senior secured notes (B1/B) and $2.1 billion eight-year senior unsecured notes (Caa1/CCC+), sources say.

Junk funds see inflows

The dedicated high-yield bond funds saw a whopping $969 million of net inflows on Tuesday, according to a market source.

High-yield ETFs saw $769 million inflows on the day.

Actively managed high-yield funds saw $180 million of inflows on Tuesday, the source said.

With only Wednesday’s daily fund flows numbers remaining to be tallied, the combined junk funds are tracking $2.4 billion of net inflows for the week that concludes with Wednesday’s close, the market source added.

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