Morning Commentary: Advisor Group on deck; euro 2%-handle deals trade to premiums

By Paul A. Harris

Portland, Ore., July 31 – New issue activity in the high-yield bond market was muted ahead of an anticipated announcement regarding interest rates from the Federal Reserve Bank's Federal Open Market Committee on Wednesday, market sources said.

Advisor Group Inc. (AG Merger Sub II, Inc.) is on deck with a downsized $350 million offering of eight-year senior notes (Caa1/B-) that was marketed on a roadshow during the July 22 week.

The deal, which is downsized from $400 million, is talked with a 10¾% coupon at a discount to yield 11½% to 11¾%, and set to price Wednesday.

Along with Tuesday’s price talk there were document changes, sources said.

After a torrid Tuesday in Europe, activity there was also muted ahead of the Fed.

Belgium's House of HR NV talked a €50 million add-on to the House of Finance NV 4 3/8% senior secured notes due July 15, 2026 at 101.75 to 102.

Two-handle deals trade up

In the face of notable volatility on Tuesday, two issuers succeeded in placing junk bonds bearing interest at 2¼% or lower.

That's because a big demand for paper superseded the volatility, sources said.

Both “two-handle” issues were trading at premiums on Wednesday, according to an investor.

The Ardagh Group SA (Ardagh Packaging Finance plc and Ardagh Holdings USA) 2 1/8% senior secured notes due August 2026 (Ba3/BB) were 100.65 bid on Wednesday morning.

The upsized €440 million issue (from €350 million) priced at par, at the tight end of talk.

Meanwhile the Iqvia Inc. 2¼% senior notes due January 2028 (Ba3/BB) were up about ¾ of a point in the secondary market on Wednesday, the investor said.

The €720 million issue priced at par, coming through price talk that had been set in the 2½% area.

Turning to some of Tuesday's dollar-denominated deals, the Ardagh 4 1/8% senior secured notes due August 2026 (Ba3/BB), and the 5¼% unsecured notes due August 2027 (B3/B) were both trading at par ¼ bid, par ½ offered on Wednesday morning, the investor said.

Both were priced at par in issues sized at $500 million and $800 million, respectively.

Junk was flat to slightly better ahead of the Fed.

The CDX HY32 index of high-yield credit default swaps was 107.757 basis points bid, 107.838 bps offered, up 0.028 bps, according to a hedge fund manager.

Crude oil prices were better on Wednesday.

The barrel price of West Texas Intermediate crude for September 2019 delivery was 18 cents higher at $58.23, 0.31% better on the day.

The California Resources Corp. 8% senior secured second-lien notes due December 2022, a big liquid issue employed by high-yield bond investors for the purpose of tracking crude oil prices in the index, were 69½ bid, 70¼ offered, the hedge fund manager said.

Those bonds were 68½ bid, 69½ offered on Tuesday, the hedge fund manager added.

Mixed Tuesday flows

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

High-yield ETFs sustained $85 million of outflows on the day.

However actively managed funds saw $45 million of inflows on Tuesday, the source said.

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