Morning Commentary: Junk holds in as equities drop; Altice Luxembourg, Twin River active

By Paul A. Harris

Portland, Ore., May 6 – Announcements of stiffer tariffs on Chinese goods, which sent share prices lower at Monday's open, failed to get a solid grip on junk bonds, according to a trader.

Some on-the-run high-yield names were as much as ¼ point lower, with some higher beta paper down as much as ½ point.

However, with cash on the sidelines needing to be put to work, better buyers were out front on Monday morning, the trader said.

The new Altice Luxembourg SA 10½% senior notes due May 2027 (Caa1/B-) were doing very well on Monday morning, at 101½ bid, the trader said.

The bonds came at par Friday in a tranche sized at $1.6 billion.

New Twin River Worldwide Holdings, Inc. 6¾% senior notes due June 2027 (B3/B) were 101 5/8 bid on Monday. That deal also came at par on Friday in an issue that was upsized to $400 million from $350 million.

CDK Global, Inc.'s 5% senior notes due May 2029 (Ba1/BB+) were par ¾ bid on Monday. The issue priced at par last Thursday.

Turning back the calendar a bit farther, the United Rentals (North America), Inc. 5¼% senior notes due Jan. 15, 2030 (Ba3/BB-) were 99¾ bid, par ½ offered on Monday morning, down half a point from Friday. The $750 million issue came at par on April 26.

Oil prices also sagged on Monday. The barrel price of West Texas Intermediate crude for June 2019 delivery was down 26 cents, or 0.42%, at $61.68 at midmorning.

The high-yield energy bellwether, California Resources Corp.'s 8% senior secured second-lien notes due December 2022, was down over a point, at 75½ bid, 76½ offered.

New issue activity muted

Although there were no new issue announcements on Monday, the May 6 week got underway to an active deal calendar.

Ausdrill Finance Pty Ltd., of Australia, is selling $500 million seven-year senior notes (Ba2/BB). Early price indications are in the high 6% area.

MGM China Holdings Ltd., a Macau-based subsidiary of MGM Resorts International, is selling $1.25 billion of senior notes (Ba3/BB-) in two tranches: five-year non-call-two notes with initial talk in the 5½% area and seven-year non-call-three notes with initial talk in the 6% area.

VistaJet Malta Finance plc was scheduled to start a roadshow for its $525 million offering of five-year senior notes. Initial guidance is 9%, a trader said.

Meanwhile Pharmaceutical Product Development, LLC is expected to roll out a $900 million offering of unsecured notes during the week ahead, an investor said.

JPMorgan will lead the deal, and the use of proceeds includes a dividend, the investor added.

Mixed Friday flows

The daily cash flows of the dedicated high-yield bond funds were mixed on Friday, the most recent session for which data was available at press time, a trader said

High-yield ETFs saw $80 million of inflows on the day.

However actively managed funds sustained $27 million of outflows on Friday, according to the trader.

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