Morning Commentary: DJO bonds lifted by acquisition news; Ecore floaters at issue price

By Paul A. Harris

Portland, Ore., Nov. 19 – News that DJO Global Inc. is being acquired by Colfax Corp. from Blackstone for $3.15 billion in cash sent DJO bonds higher on Monday, a trader said.

The DJO Finco Inc., DJO Finance LLC and DJO Finance Corp. 8 1/8% second-lien notes due June 2021 were up 3½ points on the morning, the source reported.

Another trader had them up 3 points to 4 points, at 103 5/8 bid, 103 7/8 offered, on “super active” trading.

The bonds become callable on Dec. 20 at 104.063, this trader recounted.

The call premium drops to 102.031 in June 2019, and the bonds will likely be called out at that point, the source suggested.

Colfax plans to make a big pass at the debt capital markets to help fund the buyout.

The Annapolis Junction, Md.-based diversified technology company intends to bring between $2.4 billion and $2.7 billion of bonds and loans.

The debt financing is backed by a bridge loan. JPMorgan and Credit Suisse are the committed banks.

The acquisition is expected to close in the first quarter of 2018.

Elsewhere, news that Resolute Energy Corp. is set to be acquired by Cimarex Energy caused Resolute bonds to trade higher, a trader said.

The Resolute Energy 8½% senior notes due May 2020 were par ¾ bid, 101 offered at mid-morning, according to a trader, who added that they traded at 99¼ last week.

Bonds of Zayo Group Holdings Inc. moved higher on a story on Bloomberg reporting that the company has attracted takeover interest from Blackstone Group LP and Stonepeak Partners LP, traders said.

The Zayo Group, LLC/Zayo Capital, Inc. 5¾% senior notes due January 2027 were up 2½ points following the story, a trader said.

Away from headline news, a recent euro-denominated deal was holding in at new issue price, according to a London-based sellside source.

The Groupe Ecore Holding SAS (Luxembourg) Euribor plus 625 basis points senior secured floating-rate notes due November 2023 (B/BB-) were 98 bid on very little volume, the sellsider said.

The €255 million notes price at 98 last week.

The European high-yield primary market is highly unlikely to see any activity during the Nov. 19 week, the London sellsider said.

Quiet primary

Apart from junk bonds buffeted by headline news, the high-yield market was lower as the holiday-abbreviated Nov. 19 week got underway on Monday, a trader said.

High-yield ETFs were lower on the morning. The iShares iBoxx $ High Yield Corporate Bd (HYG) was down 0.26%, or 22 cents, at $83.05 per share.

Crude oil prices were also weaker. The barrel price of West Texas Intermediate crude for December 2018 delivery was down 0.3%, or 17 cents, at $56.29.

The California Resources Corp. 8% senior secured second-lien notes due December 2022, which generally tracks crude oil prices, was down 1½ points at 82½ bid at mid-morning.

Only one deal remains on the active new issue calendar.

Atlantica Yield plc had been expected to price a $300 million offering of senior notes due 2026 (BB/BB+) last week.

No official price talk surfaced. However early guidance was in the low-to-mid 6% area.

The eight-year notes, which are non-callable for three years, may be morphing into a six-year non-call-four structure, according to a trader, who added that the latest whisper on the deal is 7%.

The Nov. 19 week has just two full sessions and one foreshortened session ahead of the extended Thanksgiving holiday weekend in the United States, which gets underway following an early close on Wednesday.

Given market conditions, and a propensity to stage for the coming holiday, on the part of those able to do so, the U.S. new issue market, like its counterpart in Europe, is unlikely to generate much news prior to the final week of November, sources say.

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