Junk opens with firm tone; Valeant falls on subpoena news; Fortescue rises on production, guidance

By Paul A. Harris

Portland, Ore., Oct. 15 – Junk opened with a firm tone on Thursday, according to a trader in New York.

High-yield ETFs were basically flat at mid-morning on the East Coast of the United States.

The iShares iBoxx $ High Yield Corporate Bd (HYG) was trading at 84.71 per share, up 2 cents.

The SPDR Barclays High Yield Bond ETF (JNK) was a penny higher at 36.21 per share.

ETFs had been quiet in the early going on Thursday, and were quiet on Wednesday, the trader said.

Fund flows are expected to be strongly positive when Lipper-AMG releases its weekly fund flows reports later Thursday, the trader said, adding that the market was tracking $1.26 billion of inflows to dedicated high-yield funds as of Tuesday’s close.

Valeant drops on subpoena

Thursday trading was clustered around a couple of specific names in the early part of the morning, a trader said.

The bonds of Valeant Pharmaceuticals International, Inc. were very active across the structure, and were down a couple of points.

The VRX Escrow Corp. (Valeant Pharmaceuticals International) 5 7/8% senior notes due May 15, 2023 were at 94 bid, 95 offered on Thursday. They were at 96 bid, 97 offered on Wednesday, the trader added.

Valeant announced on Wednesday that it received a subpoena from the U.S. Attorney’s Office for the District of Massachusetts and a subpoena from the U.S. Attorney’s Office for the Southern District of New York, requesting documents related to its patient assistance programs, distribution, information provided to the Centers for Medicare and Medicaid services, and its pricing decisions.

Fortescue firms

The bonds of Fortescue Metals Group Ltd. were also active early Thursday, with its bonds up 3 to 5 points, said the trader.

The FMG Resources (Fortescue Metals) 9¾% senior secured notes due March 1, 2022 were at par ½ bid, 101 offered on Thursday morning, up from 97 bid, 98 offered on Wednesday.

The Australian company put up a strong quarterly report on Wednesday, posting better than expected production numbers and guidance, the trader recounted.

Improved operating cash flows enabled Fortescue to repurchase $384 million of its debt in the market.

Primary quiet

The primary market remained quiet on Thursday.

The sole deal on the high-yield road is Greatbatch Ltd.’s $360 million offering of eight-year senior notes (Caa1/B-), an acquisition financing via Credit Suisse and KeyBanc.

The market awaits official price talk.

Early guidance has the notes coming in a yield range of 8% to 8½%, a trader said.

The deal is set to price early in the week ahead.

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