Morning Commentary: New Intelsat hugs issue price; new issue drive-by window reopens

By Paul A. Harris

Portland, Ore., Sept. 6 – High-yield bonds issued Wednesday by Intelsat SA were actively trading on Thursday, following active trading late Wednesday, sources said.

However, the new Intelsat Jackson Holdings 8½% senior notes due October 2024 (Caa1/CCC+) were not trading particularly well, according to a trader, who marked them at par bid, par 1/16 offered.

The deal never traded above par ¼, said the trader, who noted that the bonds traded 60 times in the early going on Thursday.

A buyside source had the bonds locked at par.

The upsized $2.25 billion deal (from $2 billion) priced Wednesday at par.

The deal was driven to market by reverse inquiry, according to the trader.

It was said to be two-times oversubscribed.

Elsewhere in the secondary market, the bonds of Tesla Motors Inc., lately under pressure from short players leaning on the paper, were unchanged early Thursday, trading in the mid 80s, a trader said.

The stock was up more than 3½% on Thursday in what the trader characterized as a “dead cat bounce.”

Drive-by window reopens

Following Intelsat's Wednesday quick-to-market placement of $2.25 billion senior notes – the first post-Labor Day drive-by – three more drive-by issuers appeared on Thursday.

Cheniere Energy Partners, LP is in the market with $1.1 billion of senior notes due 2026 (Ba2/BB).

Initial guidance has the deal coming with a yield in the 5¾% area.

Avolon Holdings Ltd. plans to price $750 million of five-year senior bullet notes.

Initial guidance has the deal coming to yield in the 5¼% area.

And Eldorado Resorts Inc. plans to price $600 million of eight-year senior notes (B3/B).

JPMorgan is leading all three of Thursday's drive-by deals.

Wednesday outflows

The daily cash flows of the dedicated high-yield bond funds were decidedly negative on Wednesday, a trader said.

High-yield ETFs sustained $554 million of outflows on the day.

Actively managed funds saw $155 million of outflows on Wednesday, the trader said.

As the market awaits the weekly cash flows report from fund tracker Lipper US Fund Flows, the dedicated junk funds are tracking $500 million of outflows to Wednesday's close, the trader said.

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