Morning Commentary: Charter Communications bonds buck drooping junk market, tick higher

By Paul A. Harris

Portland, Ore., Oct. 26 – Amid continued capital markets turbulence, with the Dow Jones industrial average down more than 400 points at mid-morning, the high-yield bond market was down ¼ point, according to a trader in New York.

There were plenty of bids-wanted-in-competition (BWIC) lists, most of them from high-yield ETFs, and all the usual suspects were trading lower, the source added.

High-yield ETFs were lower at mid-morning. The iShares iBoxx $ High Yield Corporate Bd (HYG) was off 0.44%, or 37 cents, at $84.24 per share.

Bonds of Charter Communications, Inc. were bucking the market trend trailing an earnings report, which specified that the cable and internet giant has been signing up more internet customers than analysts anticipated and shedding fewer cable TV customers than analysts feared.

The Charter Communications Operating, LLC/Charter Communications Operating Capital Corp. 5¾% senior secured notes due April 2048 were up 1 3/8 points on the morning at par 7/8 bid, the trader said.

Recent issues tended to be holding in, the trader said.

The United Rentals (North America) Inc. 6½% senior notes due December 2026 (Ba3/BB) were par bid, par ½ offered, unchanged on the morning.

The $1.1 billion issue priced at par in a Wednesday drive-by.

Netflix, Inc.’s new dollar-denominated 6 3/8% senior bullet notes due May 2029 (Ba3/BB-) were also unchanged at par bid, par 1/8 offered.

The 6 3/8% notes came at par on Tuesday in an $800 million tranche that was part of a $2.06 billion equivalent deal, which also included a €1.1 billion tranche of the paper that priced at par to yield 4 5/8%.

The Netflix euro-denominated 4 5/8% notes were straddling their new issue price at 99¼ bid, par ¼ offered, on Friday morning, according to a market source in London.

Friday deals

The new issue market had a trio of deals teed up to price ahead of the weekend.

INTL FCStone Inc. is in the market with a $350 million offering of five-year senior secured notes (Ba3/BB-) talked to yield 8½% to 8¾%, including an original issue discount.

Official talk comes tight to initial guidance in the mid-to-high 8% area, a trader said.

BMO Capital Markets, BofA Merrill Lynch, Jefferies LLC and Capital One Securities Inc. are the joint bookrunners.

KLX Energy Services Holdings, Inc. talked its $250 million offering of seven-year senior secured notes (B3/B) to yield 10½% to 10¾%.

Official price talk comes well wide of initial guidance in the mid-to-high 9% area, sources say.

Meanwhile there was no fresh news late in the week on the GEP Haynesville LLC $600 million offering of five-year senior notes (B3/B), which were also expected to price on Friday, sources said.

Initial talk had that deal coming to yield 8½% to 8¾%. However, pricing is likely to have moved into the 9% context, a trader said, adding that the order book was heard to be in decent shape.

Both the KLX Energy Services and GEP Haynesville bonds may be undergoing covenant changes, sources say.

Thursday outflows

The daily cash flows of the dedicated high-yield bond funds were negative on Thursday, although not remarkably negative when compared to recent cash flows in the asset class, a trader said.

High-yield ETFs sustained $73 million of outflows on the day.

Actively managed high-yield funds saw $50 million of outflows on Thursday, the source said.

News of the daily flows trails a Thursday afternoon report that the combined funds sustained $2,364,000,000 of outflows on the week to Wednesday's close, according to Lipper US Fund Flows.

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