Morning Commentary: Junk flat in light trading; Jagged Peak above issue price; ETFs see inflows

By Paul A. Harris

Portland, Ore., April 27 – The high-yield market opened unchanged on Friday, according to a bond trader in New York City.

Trading activity was light at mid-morning, the source added.

High-yield ETFs were flat to slightly lower. The iShares iBoxx $ High Yield Corporate Bd (HYG) was down 6 cents, or 0.07%, at $85.74 per share.

Amid flat to weaker crude oil prices the new Jagged Peak Energy Inc. 5 7/8% senior notes due May 2026 (B3/B) were higher on the morning at par 3/8 bid, par 7/8 offered, having closed Thursday at par ¼ bid, par ¾ offered.

The upsized $500 million issue (from $400 million) came at par on Wednesday in an oversubscribed deal that priced at the tight end of the 5 7/8% to 6% yield talk and tight to early guidance in the 6% to 6¼% area.

Meanwhile the debut issue from WeWork Cos. Inc. continued to lag the new issue price on Friday, at 99 3/8 bid, 99 7/8 offered, the trader said.

They were seen at 99¾ bid, par offered on Thursday.

The WeWork 7 7/8% senior bullet notes due May 2025 (Caa1/B+/BB-) came at par in an upsized $702 million issue (from $500 million) on Wednesday in a deal said to be as much as five-times oversubscribed.

However, that notable level of demand has been called into question, given the bond's lackluster performance in the secondary market, sources say.

Although the deal marked WeWork's debut, it was said to have ridden into the market on a significant amount of reverse inquiry generated on a non-deal roadshow conducted by JPMorgan.

All-Europe primary

With the dollar-denominated new issue market laboring beneath luffed sails, as a result of an earnings season issuance blackout, much of the week's new issue news has come out of Europe.

Friday morning was no exception.

In drive-by action Perform Group Ltd. priced a £40 million add-on to its 8½% senior secured notes due Nov. 15, 2020 at 102.125 to yield 7.555%.

Deutsche Bank was the bookrunner for the debt refinancing deal.

Meanwhile German cable operator Tele Columbus AG launched an upsized €650 million amount of seven-year senior secured notes (expected ratings B2/BB-) with a 3 7/8% coupon at a discount to yield 4%.

The deal is upsized from €500 million.

Final terms are expected to surface on Friday.

Mixed Thursday flows

The daily cash flows of the dedicated high-yield bond funds were mixed on Thursday, according to a buyside source.

High-yield ETFs saw a substantial $297 million of inflows on the day.

However, actively managed funds were negative on Thursday, sustaining $125 million of outflows on the session, the source said.

The Thursday daily numbers trail a report that the dedicated high-yield funds sustained a whopping $2.489 billion of net outflows in the week to the Wednesday close, according to information posted Thursday afternoon on the internet by fund tracker Lipper US Fund Flows.

With the latest outflow, the funds have now seen eight losses and three gains in the past 11 weeks, according to a Prospect News analysis of the data.

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