Morning Commentary: Junk lower amid weaker equities; Warner Music euro tranche prices tight

By Paul A. Harris

Portland, Ore., Oct. 13 – High-yield bonds were ¼ to ½ point lower amid overall weakness in the equity markets at midmorning on Thursday, traders said.

ETFs were selling but long-only bids were filling in, a New York-based trader said.

The iShares iBoxx $ High Yield Corporate Bd (HYG) was down 0.43%, or 37 cents, at $86.51 per share. The SPDR Barclays High Yield Bond ETF (JNK), at $36.45 per share, was down 0.36%, or 13 cents.

Bonds of Valeant Pharmaceuticals International Inc. were softer ahead of next week's earnings report. The Valeant 5 7/8% notes due 2023 were 83 bid at midmorning Thursday, according to a trader, who added that they traded at 85 on Wednesday.

Bonds of Sprint Corp., which initially rose on news that the company has undertaken a $3.5 billion three-part senior secured notes securitization deal, were off a point on Thursday, the trader said.

The cash flows of the dedicated high-yield funds were positive on Wednesday. High-yield ETFs saw $83 million of inflows on the day. Actively managed funds saw $60 million of inflows on Thursday.

Warner euro tranche prices

In the primary market Warner Music Group Corp. priced an upsized €345 million tranche of eight-year senior secured notes (expected ratings Ba3/B) at par to yield 4 1/8% on Thursday morning.

The issue size was increased from €340 million.

The yield printed at the tight end of yield talk in the 4¼% area.

Warner Music's $630 million of overall issuance of the senior secured notes due 2024 also includes a $250 million tranche set to price later Thursday in the United States.

Meanwhile Lions Gate Entertainment Corp.'s $520 million offering of eight-year senior notes (B2/B-) are teed up to price at 5 7/8% later Thursday, inside of the 6% to 6¼% price talk.

The deal is doing OK, say traders.

Investors wanted a six-handle but are hanging in, with the book around four-times oversubscribed.

Horizon Pharma roadshow

Horizon Pharma plc began a roadshow on Thursday for a $300 million offering of eight-year senior notes.

The deal, which is being led by BofA Merrill Lynch, comes with 8½% initial yield guidance and is expected to price on Tuesday.

Proceeds, along with $375 million of bank debt that the Dublin-based biopharmaceutical company is putting in place, will be used to help fund acquisition of Raptor Pharmaceutical Corp. and refinance existing debt.

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