Morning Commentary: TMX bonds up a point; funds see Thursday inflows; primary quiet

By Paul A. Harris

Portland, Ore., Aug. 17 – Junk bonds opened flat on Friday against a backdrop of thin liquidity, according to a trader, who remarked that trading dynamics were typical of a late-summer Friday.

High-yield ETFs were flat on the morning. The iShares iBoxx $ High Yield Corporate Bd (HYG) was up 2 cents, or 0.01%, at $85.96 per share, at mid-morning.

The bonds of TMX Group were up a point on the day, according to an investor.

The TMX Finance LLC/TitleMax Finance Corp. 11 1/8% senior secured notes due April 2023 were 103 bid, 103¼ offered on Friday morning, versus 102 bid, 102½ offered on Thursday, the source said, adding that the company recently reported decent numbers.

Looking at recent, conspicuously leveraged merger and acquisition deals, the Verscend Holding Corp. 9¾% senior notes due August 2026 (Caa2) were 102¼ bid on Friday, the investor said.

The downsized $1.1 billion issue (from $1.15 billion), backing Verscend’s acquisition of Cotiviti Holdings, Inc., priced at par on Aug. 10.

The BMC Software (Banff Merger Sub, Inc.) 9¾% senior notes due September 2026 (Caa2/CCC+) were 99¾ bid, par ¼ offered.

The $1,475,000,000 issue priced at par on Aug. 9.

Both Verscend and BMC Software were conspicuously leveraged transactions, prompting investors to demand concessions in the covenant packages contained in the original offering documents, the source remarked.

Primary quiet

The primary market was quiet on Friday morning.

Heading into late week, the active forward calendar featured just one deal. Starwood Property Trust, Inc. intended to sell $300 million of five-year senior bullet notes (Ba3/BB).

The deal was shopped on a Tuesday investor call and was set to price on Wednesday.

Initial talk was 5% to 5 1/8%; however, pricing moved wider and the company elected to shelve the offering, according to a market source.

Starwood Property sought to tap the new issue market to repay secured debt and help fund its purchase of the GE Energy Project Finance debt business from General Electric.

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