Morning Commentary: High-yield bond market quiet; Abengoa bonds slide after creditor filing

By Paul Deckelman

New York, Nov. 25 – Activity, as expected, was restrained in Junkbondland on Wednesday morning ahead of Thursday’s Thanksgiving Day holiday in the United States.

Although the Securities and Financial Markets Association has recommended an early close on Friday, in addition to Thursday’s complete fixed-income market shutdown in the United States, traders said that Wednesday was also expected to be a shortened session, if unofficially.

A high-yield investor confirmed this, declaring that “as expected, a quiet start to the day.”

He said that Spanish engineering, telecommunications construction and energy company Abengoa SA “was the big news of the day as it filed for creditor protection in Spain after an agreement with Spanish industrial company Gonvarri to back its capital increase fell apart.”

A market source said that Abengoa Finance SAU’s 7¾% notes due 2020 – which had been trading around the 41 bid mark last week, slid to 16½ bid at the opening on Wednesday and lost another point in morning trading, sliding to 15½ bid, with over $6 million traded.

Abengoa Yield plc’s 7% notes due 2019 dropped to 86½ bid from levels around 91 earlier this week, but only on a couple of round-lot trades.

Gonvarri had emerged as a potential savior of the troubled company earlier this month, agreeing on a preliminary basis to invest some $377 million into Abengoa in exchange for a 28% stake.

However, Abengoa’s hopes for the capital infusion were dashed on Tuesday night, as Gonvarri backed out of the deal.

Abengoa was left with no choice but to announce that it had started talks with creditors on insolvency proceedings.

Observers said this raises the possibility of a potentially long – and messy – restructuring ahead.

Elsewhere, a market source said that high-yield exchange-traded funds took in $49 million more on Tuesday than left them.

But he said that actively managed funds saw a $54 million net deficit on the session.

Loan participation funds meanwhile saw $194 million more leave those funds than come into them on Tuesday.

© 2015 Prospect News.
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