Morning Commentary: Howden, Allied Universal wrap up big week in primary; Charter dives

By Paul A. Harris

Portland, Ore., Feb. 2 – After opening the Friday session 1/8 of a point higher, the junk bond market was off at least ¼ of a point at mid-morning, according to a bond trader in New York.

With rates backing up, and the major U.S. stock indexes turning in mixed performances at that time, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was down 0.52%, or 40 cents, at $77.14.

Bonds of Charter Communications sustained price drops on news that the company disclosed on its earnings call that it lost 61,000 internet customers in the quarter that ended on Dec. 31.

With its stock (Nasdaq: CHTR) off 14%, the Charter Communications Operating, LLC/Charter Communications Operating Capital Corp. crossover 6.65% senior secured notes due February 2034 (Ba1/BBB-) were down 1 to 2 points, changing hands Friday morning at 103¼, the trader said.

The CCO Holdings, LLC/CCO Holdings Capital Corp. 4¼% senior notes due January 2034, straight junk (B1/BB), was down a point on the morning at 79¼ bid.

The company said that its quarterly free cash flow of $1.06 billion decreased from $1.14 billion in the prior year, chalking up the decrease to higher capital expenditures.

Among recent issues, the Husky Injection Molding Systems Ltd./Titan Co Borrower, LLC 9% senior secured notes due February 2029 (B3/B-) were par ¾ bid, 101¼ offered on Friday morning, after going out at 101 on Thursday, the trader said.

The heavily oversubscribed $1 billion issue priced at par on Wednesday, doing well despite tightening talk, the trader remarked.

However, the Ineos US Finance LLC 7½% senior secured notes due April 2029 (Ba3/BB/BB+) changed hands Friday morning at 99½, in a single trade.

The notes came at par in a $725 million issue on Wednesday, with pricing reeled in from early guidance of 7¾% to 8%.

Thus tightened, the market deemed it too rich, sources say.

“They tightened it to death,” said the trader, who added that once it broke for trading in the secondary market it never again saw par.

The new issue market was open for business Friday morning.

Howden Group (B2/B) upsized a two-part offering of high-yield notes to $1.5 billion from $1.25 billion, launching an upsized $1 billion tranche (from $750 million) of Howden UK Refinance plc/Howden US Refinance LLC seven-year senior secured notes (B2/B) at 7¼%, tight talk, and a $500 million tranche of Howden UK Refinance 2 plc/Howden US Refinance LLC eight-year senior notes (Caa1/CCC+) at 8 1/8%, inside of talk.

Meanwhile, Allied Universal talked its $500 million offering of Allied Universal Holdco LLC seven-year senior secured notes (B3/B) to yield in the 7 7/8% area.

Both Howden and Allied Universal are teed up to price ahead of the weekend.

Should both issuers place those full amounts, the week’s issuance will total $11.6 billion, according to Prospect News data.

That would make the Jan. 29 week the biggest in more than two years, since the week of Nov. 15, 2021 which saw $11.9 billion.

The week ahead is not expected to be as big, said the trader.

However, having said it, the source related expectations of three deals coming out of Goldman Sachs during the Feb. 5 week, in addition to two apiece from Barclays and JPMorgan, and possibly one from BofA.

© 2015 Prospect News.
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