Morning Commentary: United Rentals 6% notes maintain premium; ETFs see Tuesday outflows

By Paul A. Harris

Portland, Ore., Nov. 16 – The high-yield bond market opened unchanged on Wednesday, according to bond traders.

With a grim forecast for retail sales in the holiday season ahead pressuring stocks at mid-morning, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price down 0.16%, or 12 cents, at $74.43.

The freshly minted United Rentals (North America), Inc. 6% first-lien senior secured notes due December 2029 (Baa3/BBB-) maintained a premium to their issue price at par ¼ bid, par ¾ offered, a trader said.

The deal, which priced on the high-yield syndicate desk, its credit ratings notwithstanding, came at par to yield 5.999% in a highly oversubscribed $1.5 billion Tuesday sale.

Meanwhile, OpenText rolled out a benchmark offering of Open Text Corp. five-year senior secured notes (Ba1/BBB-/BBB) on Wednesday. The deal, backing the acquisition of Micro Focus, is coming in an investment-grade execution, with initial guidance in the 350 basis points area.

The issue will be traded on the investment-grade desk, the trader said.

Well away from the boundary area between investment-grade and speculative-grade bonds, the Carnival Corp. 10 3/8% senior priority notes due May 2028 (B2/B+) were down a point-plus on Wednesday morning and were wrapped around 103, the trader said, adding that they traded as high as 104 1/8 on Tuesday.

The Miami-based cruise operator’s $2.03 billion junk bond deal came at 98.465 to yield 10¾% on Oct. 18.

Carnival came to the convertibles market on Tuesday, pricing a $1 billion issue of 5¾% five-year convertibles, with proceeds to address its 2024 refinancing plan.

Carnival’s stock (NYSE: CCL) was down 14% at mid-morning on Wednesday.

The sole high-yield bond deal in the market is the Pegasus Merger Co./Tenneco Inc. $1 billion offering of six-year senior secured notes (B2/B-), an offer that kicked off at the beginning of November.

With the market anticipating news of covenant changes, the deal continues to face a significant amount of investor pushback, sources say.

ETFs see outflows

High-yield ETFs sustained $496 million of outflows on Tuesday, according to a market source.

Actively managed high-yield funds were positive on the day, posting $88 million of inflows on Tuesday, the source said.

The combined funds are tracking $2.15 billion of net inflows on the week that will conclude with Wednesday’s close, according to the market source.

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