Morning Commentary: L Brands lower after dividend cut; Atlantica Yield postpones deal

By Paul A. Harris

Portland, Ore., Nov. 20 – Bonds of L Brands, Inc. were lower after the company announced in an earnings call that it would halve its dividend to shareholders, a trader said on Tuesday.

The L Brands 5¼% senior notes due February 2028 were down 1½ points at 87¼ bid, 88¼ offered, the trader said.

The company, with brands including Victoria's Secret and Bath & Body Works, also reported on Monday that earnings numbers came ahead of profit expectations.

Elsewhere, junk remained under pressure on Tuesday against a backdrop of continued weakness in the stock market and falling oil prices.

High-yield ETFs were lower on the morning. The iShares iBoxx $ High Yield Corporate Bd (HYG) was down a quarter, or 0.3%, at $82.76 per share at mid-morning.

Big liquid issues were lower.

Intelsat bonds were down 1½ points, the trader said.

Crude oil prices had sustained a precipitous $3 fall at mid-morning.

The barrel price of West Texas Intermediate crude for December 2018 delivery was down a whopping 5.4%, or $3.09, at $54.11.

The California Resources Corp. 8% senior secured second-lien notes due December 2022, which generally track crude oil prices, was down 1½ points at 81½ bid on Tuesday morning.

That paper was trading in the mid-90s at the beginning of October, the trader noted.

However, against the big fall in oil prices the recently priced Vantage Drilling International 9¼% senior secured first-lien notes due November 2023 (Caa1/B) were holding in above issue price on Tuesday at par ¼ bid, the trader said, adding that those notes traded on Monday at par ¾.

The upsized $350 million issue (from $300 million) came at par in a conspicuously tight Nov. 14 execution that came on an accelerated timeline, and at the tight end of talk.

Elsewhere among recent issues the RegionalCare Hospital Partners Holdings, Inc. and LifePoint Health, Inc. 9¾% senior notes due December 2026 were down ¾ point on Tuesday at 97½ bid, 97¾ offered, according to the trader, who remarked that the paper, which also priced at par on Nov. 14 in a $1,425,000,000 issue, has been bouncing around.

Atlantica Yield withdraws

The sole nugget of primary market news on Tuesday was negative.

Atlantica Yield plc announced in a Tuesday press release that it will not proceed with its $300 million offering of senior notes.

The decision was a response to broader market conditions, the company stated.

Following Tuesday's close the Nov. 19 week will have just 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, no new issue activity is anticipated before the final week in November, according to market sources in Europe and the United States.

Mixed Monday flows

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

High-yield ETFs saw $466 million of inflows on the day.

However actively managed high-yield funds sustained a hefty $655 million of outflows on Tuesday, the source said.

© 2015 Prospect News.
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