Morning Commentary: Downsized ADT notes on deck; junk funds see big Wednesday inflows

By Paul A. Harris

Portland, Ore., March 21 – ADT Corp. was on deck as spring got underway in the high-yield new issue market on Thursday.

The Boca Raton, Fla.-based security services company downsized its notes offering to $1.5 billion from $2.75 billion as it withdrew a proposed $1.25 billion tranche of eight-year senior unsecured notes.

The remaining first priority senior secured notes (Ba3/BB-) come in two evenly split tranches.

A $750 million tranche of five-year secured notes comes with price talk in the 5¼% area. Initial talk was in the 5½% area.

A $750 million tranche of seven-year secured notes is talked in the 5¾% area. Initial talk was in the 6% area.

Elsewhere, Kosmos Energy Ltd. set price talk for its $600 million offering of seven-year senior notes (expected ratings BB-/BB) in the 7¼% area.

Official talk comes wide of initial talk in the 7% area, a trader said.

The deal, which is heard to be playing to a mix of high-yield and emerging markets accounts, could price on Thursday, sources say.

Meanwhile market watchers are scratching around for news on Freedom Mortgage Corp.'s somewhat stealthy $350 million offering of five-year senior notes (B2/B-).

They may have a while longer to wait, according to a trader, who told Prospect News on Thursday morning that the execution appears to be coming in the manner of a true private placement, and terms may not be widely circulated.

That deal, via J.P. Morgan Securities LLC, was heard to be in the market with early guidance in the high 10% area.

Funds see big inflows

Cash flows of the dedicated high-yield bond funds were strongly positive on Wednesday, the final day of the present weekly reporting period, according to a trader.

High-yield ETFs saw $506 million of inflows on the day.

Actively managed high-yield funds saw $488 million of inflows on Wednesday, the trader said.

As the market awaits a Thursday afternoon report on the weekly flows of the combined high-yield funds, they are tracking $1.8 billion of inflows for the five sessions encompassed by the March 14 open and Wednesday's close, the trader said.

Power Solutions up

Bonds sold Monday in the Power Solutions megadeal, which broke smartly into aftermarket trading on Tuesday, then slipped a bit on Wednesday, retraced some of that lost ground on Thursday morning, a trader said.

The Panther BF Aggregator 2 LP/Panther Finance Co. 6¼% senior secured notes due May 2026 (Ba3/B+/BB) were 101 5/8 on Thursday morning, versus 101½ on Wednesday morning. That paper, which priced at par in a $1 billon tranche, traded at 101¾ bid, 102 offered on Tuesday.

The Panther 8½% unsecured notes due May 2027 (B3/B/B-) traded at par 3/8 on Thursday, whereas it had been wrapped around par on Wednesday. The unsecured notes, which priced at par in a $1.95 billion tranche, were par ¾ bid, 101 offered on Tuesday.

Meanwhile, recently robust oil prices seem to be playing in front of a congregation of believers, a trader said.

West Texas International crude (WTI) continued to trade above the $60 per barrel mark at mid-morning on Thursday.

The WTI barrel price was $60.27, up 4 cents or 0.07% on the day.

Bonds of Murphy Oil Corp. were higher on news that the Arizona-based oil and gas producer is selling two of its Malaysian assets to PTT Exploration and Production PCL, of Thailand, for $2.13 billion in cash, with $750 million of the sale proceeds to be used to repay debt.

The Murphy Oil 5 1/8% notes due December 2042 were sharply higher on Thursday at 92½, after trading in the high 80s on Wednesday, a New York-based junk bond trader said.

Murphy said it will be more closely focused on the Eagle Ford basin in Texas and the Gulf of Mexico going forward.

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