Morning Commentary: Junk stages modest recovery after Tuesday sell-off; Mercer on tap

By Paul A. Harris

Portland, Ore., Nov. 28 – Junk was up about ¼ of a point on Wednesday after taking a beating on Tuesday, a New York-based bond trader said.

Bonds of cable operator Altice USA were improved on the back of good earnings and notable subscriber numbers, a trader said.

The Altice France SA 8 1/8% senior secured notes due February 2027 were up a point on Wednesday at 96 3/8 bid.

Issues that have come since mid-October tend to be lagging issue prices, the trader said.

The RegionalCare Hospital Partners Holdings, Inc. and LifePoint Health, Inc. 9¾% senior notes due December 2026 were 98¾ bid, 99 offered.

That has been one of the most active deals, the trader remarked, noting that investors understood that participating in the $1,425,000,000 bond deal, which priced at par on Nov. 14, might help them garner a more favorable allocation of the concurrent term loan.

Hence the RegionalCare/LifePoint bonds immediately became offered, with hedge funds shorting the paper.

Activity in other high-profile deals that have come since mid-October has been muted. However, the issues are trading below their new issue prices.

Both tranches sold by Uber Technologies Inc. on Oct. 18, the Uber 7½% notes due November 2023 and the Uber 8% notes due November 2026, were 97¼ bid, 98 offered on Wednesday.

Uber sold both at par in a novel $2 billion two-part private placement, executed in such a fashion in order to limit the circulation of the San Francisco-based ride sharing company’s private financial information, market sources said.

In the energy sector, which represents 15% of the high-yield index, the barrel price of West Texas Intermediate crude oil for January 2019 delivery hovered above the $50 mark on Wednesday morning (down 67 cents, or 1.3%, at $50.89). Meanwhile, the Vantage Drilling International 9¼% senior secured first-lien notes due November 2023 (Caa1/B) were 99½ bid, par offered on low volume.

The deal recently traded at 99¼ bid, 99¾ offered.

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.

The EP Energy LLC/Everest Acquisition Finance Inc. 8% senior secured 1.5-lien notes due February 2025 were also better on Wednesday, after having lost ground on Tuesday, the trader said.

Muted new issue activity

Although Wednesday saw a surge of new issue news in the investment-grade bond market, junk new issue activity was muted.

Mercer International Inc. plans to price a $350 million offering of senior notes due Jan. 15, 2025 (current ratings Ba3/BB-) on Thursday.

The acquisition financing deal, via left bookrunner Credit Suisse, was scheduled to be marketed by means of a late Wednesday morning conference call with investors.

And Algeco Global Finance plc set price talk in a €125 million add-on to both tranches of its senior secured notes due 2023.

A €100 million add-on to the 6½% senior secured fixed-rate notes and a €25 million add-on to the Euribor plus 625 basis points floating-rate notes are both talked at 98 to 98.5.

The two-tranche deal is expected to price on Wednesday.

Tuesday outflows

The daily cash flows of the dedicated high-yield bond funds were negative on Tuesday, according to a trader.

High-yield ETFs sustained $180 million of outflows on the day.

Actively managed high-yield funds saw $70 million of outflows on Tuesday, the source added.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.