Morning Commentary: Junk opens weaker; Chesapeake Energy bonds plummet as market eyes restructuring

By Paul A. Harris

Portland, Ore., Feb. 8 – High-yield bonds were weaker on Monday against a backdrop of continued selling in global equities and falling energy prices, according to a trader on the East Coast of the United States.

Cash bonds were down ½ point to 1 point, the trader said.

Energy bonds were down 1 to 2 points.

High-yield ETFs were sharply lower.

The iShares iBoxx $ High Yield Corporate Bd (HYG) was 90 cents, or 1.24%, lower at mid-morning in New York at $76.51 per share. SPDR Barclays High Yield Bond ETF (JNK), at $31.90 per share, was down 40 cents, or 1.24%.

The freshly minted Manitowoc Foodservice, Inc. 9½% senior notes due Feb. 15, 2024 (Caa1/B) were at par ¼ bid on Monday morning.

The deal price at par on Friday in a $425 million issue.

Chesapeake plummets

The bonds of Chesapeake Energy Corp. were plummeting on Monday on a report by Debtwire that the company has retained restructuring firm Kirkland and Ellis, the trader said.

Some bonds in the company’s capital structure have fallen as much as 40 points, the source added.

The Chesapeake Energy 3¼% senior notes set to mature on March 15, 2016, just over a month hence, were trading in the 70s, at least 20 points lower on the day, the trader said.

Manitowoc Crane, Solera eyed

In the primary market, Manitowoc Co., Inc. (Manitowoc Crane) is on deck with an upsized and restructured $260 million offering of 5.5-year senior secured second-lien notes (B1/B+).

Late last week the deal was talked with a 12¾% coupon, discounted to approximately 95.3, resulting in an all-in yield of 14%.

The deal size was increased from $250 million.

The maturity was decreased to 5.5 years from eight years.

There are also covenant changes.

The offering is set to price Monday.

Elsewhere Solera, LLC and Solera Finance, Inc. plan to start an international roadshow on Wednesday for a $2.03 billion equivalent offering of eight-year senior notes.

The leveraged buyout deal is coming in tranches of euro-denominated and dollar-denominated notes, with tranche sizes to be determined, and is set to price during the week of Feb. 22.

Goldman Sachs is the left bookrunner. Citigroup, Jefferies, Macquarie, Nomura and UBS are the joint bookrunners.

Outflows

The cash flows of the dedicated high-yield funds were sharply negative on Friday, according to the trader.

High-yield ETFs saw $406 million of outflows on the day.

Actively managed funds sustained $205 million of outflows on Friday.

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