Morning Commentary: Junk improves; Virgin Media, Tenet, Sinclair Broadcasting active

By Paul A. Harris

Portland, Ore., Aug. 20 – Junk inched up 1/8 of a point against a backdrop of weaker stock prices on Tuesday morning, according to a New York-based bond trader.

With the S&P 500 index down half a percent, high-yield ETFs were flat to slightly lower at mid-morning. The iShares iBoxx $ High Yield Corporate Bd (HYG) share price was down 2 cents, or 0.02%, at $86.33 per share.

Bonds issued earlier in August by Tenet Healthcare Corp. were active on Tuesday morning, the trader said.

The Tenet senior secured first-lien notes (Ba3/BB-) came in three tranches.

The two longer dated bonds were most active on Tuesday morning, the trader said.

The Tenet 4 7/8% notes due January 2026 were up ½ point on the morning at 101 7/8 bid.

The long tranche, the Tenet 5 1/8% notes due November 2027, were unchanged at 102¼ bid.

Less active was the shorter maturity tranche, according to the trader, who marked the Tenet 4 5/8% notes due 2024 unchanged at 102 bid, 102½ offered.

Of the three tranches, the shorter maturity 4 5/8% notes due 2024 – which Tenet added to its big August bond sale subsequent to announcing the deal and priced cheap to existing bonds – have been the outperformers, market sources say.

Each of the three tranches priced at par in a massive $4.2 billion transaction that took place on Aug. 12.

Also active Tuesday morning were the Virgin Media Secured Finance plc 5½% senior secured notes due May 2029 (Ba3/BB-/BB+), up about 3/8 of a point at 102½ bid on no particular news, the trader said.

And the Diamond Sports Group/Diamond Sports Finance Co. (Sinclair Broadcasting) 5 3/8% senior notes due August 2026 (Ba2/BB) were down ¼ point at 103 7/8 bid.

The primary market remained quiet on Tuesday, with sources saying that the traditionally dormant Dog Days of August are upon the new issue market, and no deals are expected until the market reconvenes after the extended Labor Day holiday weekend, which gets underway following the Aug. 30 close.

One syndicate official professed visibility on $20 billion to $25 billion of committed merger and acquisition financing business that needs to come to market between early September and the end of 2019.

There could also be a substantial amount of opportunistic debt refinancing during the late third quarter and four quarters of the year, provided that there is some stability in the global financial markets, sources say.

Mixed Monday flows

The daily cash flows of the dedicated high-yield bond funds were mixed on Monday, according to a market source.

High-yield ETFs saw $254 million of inflows on the day.

However actively managed funds sustained $74 million of outflows on Monday, the source said.

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