Morning Commentary: Ascend Learning brings $300 million; junk softens as crude slides

By Paul A. Harris

Portland, Ore., Feb. 11 – Continued volatility in energy and weak crude oil prices created a drag on junk bond activity as the Feb. 11 week got underway, a New York-based trader said.

With the barrel price of West Texas Intermediate crude oil for March 2019 delivery down 2.11%, or $1.11, at $51.61 at mid-morning, the California Resources Corp. 8% senior secured second-lien notes due December 2022, a big liquid issue employed by high-yield bond investors for the purpose of tracking crude oil prices in the index, were down 1¼ points, the trader said.

Other on-the-run energy names were also lower on the morning.

EP Energy Corp.’s bonds were down a point.

The Denbury Resources Inc. 7½% senior secured second-lien notes due February 2024 were likewise down a point.

The Southwestern Energy Co. 7½% senior notes due April 2026 were down half a point at 102½ bid, the trader said.

With stock indexes in the United States trading flat at mid-morning, high-yield ETFs were flat to slightly weaker. The iShares iBoxx $ High Yield Corporate Bd (HYG) was down 7 cents, or 0.08%, at $84.72 per share.

Among recent issues, the Match Group 5 5/8% senior notes due February 2029 were wrapped around par in active trading, the source said

The notes priced at par in an upsized $350 million issue (from $300 million) on Friday.

The CommScope Inc. 5½% secured notes due March 1, 2024 (Ba1/BB) were trading at par ½ on Monday morning.

The unsecured paper, the CommScope 8¼% senior notes due March 1, 2027 (B1/B+), was 101¾ bid, 102¼ offered, the trader said.

Both the secured and unsecured paper came at par in a $3.75 billion three-part deal that priced last Thursday.

Ascend Learning on tap

In the primary market, Ascend Learning, LLC plans to price $300 million of notes mirroring its existing senior notes due Aug. 1, 2025 (existing ratings Caa2/CCC+) on Tuesday afternoon.

The indicative coupon is 6 7/8%, the same as the notes in the existing issue.

Initial price talk is 93 to 94, a trader said.

Barclays is the left lead bookrunner.

The Burlington, Mass.-based provider of educational content, software and analytics solutions plans to use the proceeds to fund a dividend to its shareholders and put cash on its balance sheet.

Ascend Learning takes a spot on a sparsely populated active calendar.

Getty Images Inc. is on the road with a $400 million offering of eight-year senior notes (CCC+) set to price in the middle part of the week ahead.

Initial price talk has the deal coming to yield in the 10½% area.

However other opportunistic issuers – some clearing their earnings blackout periods – are expected to step forward as the week progresses, sources say.

Investors have cash to put to work in junk and are on the lookout for another build-up of the new issue calendar, sources say.

Mixed Friday flows

The daily cash flows of the dedicated high-yield bond funds were mixed on Friday, a trader said.

High-yield ETFs sustained $248 million of outflows on the day.

However actively managed high-yield funds were flat to moderately positive with $20 million of inflows on Friday, the trader said.

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