Morning Commentary: Power Solutions lower; Churchill Downs brings $400 million drive-by

By Paul A. Harris

Portland, Ore., March 20 – With a bit of heaviness having taken hold of the junk market in the early going on Wednesday, new bonds sold in the Monday Power Solutions megadeal relinquished some of their post-break premiums, a New York-based trader said.

The Power Solutions (Panther BF Aggregator 2 LP/Panther Finance Co.) 6¼% senior secured notes due May 2026 (Ba3/B+/BB) were 101½ bid, down ¼ point. Those bonds, which priced Monday at par in a $1 billion tranche, were 101¾ bid, 102 offered on Tuesday.

The Panther 8½% unsecured notes due May 2027 (B3/B/B-) were wrapped around par on Wednesday morning, the trader said.

The unsecured bonds, which came at par in a tranche sized at $1.95 billion, were par ¾ bid, 101¼ offered on Tuesday.

Some of the selling appeared to have been undertaken by flippers, who had been selling small lots of the paper as it rallied on Tuesday and became more vigorous sellers on Wednesday, the trader said.

Away from recent issues, the bonds of Inmarsat plc were up almost 3 points in active trading on news that the London-based satellite communications company received a $3.3 billion takeover bid from Apax Partners and Warburg Pincus, supported by the Canada Pension Plan Investment Board and Ontario Teachers’ Pension Plan Board, the trader said.

The Inmarsat Finance plc 6½% senior notes due October 2024 were 103 bid, 103¼ offered on Wednesday, up about 3 points, the source added.

Churchill Downs driving by

An active new issue market opened to news that Churchill Downs Inc. plans to price $400 million of eight-year senior notes (expected ratings Ba3/B+) in a quick-to-market Wednesday trade.

Initial guidance has the debt refinancing deal coming to yield 5½% to 5 5/8%, a trader said.

The Wednesday session should also see Viasat, Inc. price its previously announced $500 million offering of eight-year senior secured notes (B1/BB+), which are in the market with price talk in the 5¾% area.

Viasat rode into the market on $250 million of reverse inquiry, a trader said.

In a deal flying at- or just above radar-altitude, Freedom Mortgage Corp. is expected to sell $350 million of five-year senior notes (B2/B-) on Wednesday.

Initial price talk has the notes coming with a yield in the high 10% area.

There is $100 million of reverse inquiry helping to bring Freedom Mortgage to market, the trader said.

And Kosmos Energy Ltd. is expected to sell $600 million of seven-year senior notes (expected ratings BB-/BB) on Wednesday. The deal, with initial guidance in the 7% area, is playing to a mix of high-yield and emerging markets accounts, sources say.

Meanwhile Kodiak Gas Services LLC is expected to price $400 million of eight-year senior notes (B-) before the end of the week.

Initial guidance has the deal shaping up with a yield in the 8½% to 8¾% area.

Tuesday inflows

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

High-yield ETFs saw $136 million of inflows on the day.

Actively managed high-yield funds saw $238 million of inflows on Tuesday, the trader said.

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