Morning Commentary: High yield feels heavy heading into weekend; new Digicel bonds gain

By Paul A. Harris

Portland, Ore., March 8 – Junk opened the Friday session down 1/8 point and continued lower into the mid-morning, traders said.

Some bonds were down 3/8 of a point to ½ point, a New York-based bond trader related.

With the major U.S. stock indexes opening lower for the fifth consecutive session, high-yield ETFs were also lower on the morning. The iShares iBoxx $ High Yield Corporate Bd (HYG) was down 0.31%, or 26 cents, at $84.97 per share.

Energy prices were also lower, creating a drag on the high-yield index, a trader said.

The barrel price of West Texas Intermediate Crude for April 2019 delivery was down 3.11%, or $1.76, on the morning, to $54.90.

High-yield energy bellwether California Resources Corp.'s 8% senior secured second-lien notes due December 2022 were down 1½ points on the morning at 73 bid, with better sellers at the wheel.

New Digicel trades well

Among recent issues, bonds priced Thursday by Digicel were trading well on Friday morning.

The new Digicel Holdings (Bermuda) Ltd. and Digicel International Finance Ltd. 8¾% senior secured first-lien notes due May 2024 (B1//B) were par ½ bid, par 5/8 offered.

The upsized $600 million issue (from $500 million) priced at par, on top of downwardly revised talk.

Another Thursday deal, the Archrock, Inc. 6 7/8% senior notes due April 2027 (B3/B), was hanging in just above new issue price at par 1/8 bid, off from earlier highs of par ¼ bid, par 3/8 offered, the trader said.

The $500 million issue priced at par, in the middle of yield talk.

Bonds of Bausch Health Americas Inc., formerly known as Valeant Pharmaceuticals International, Inc., were lower on Friday, according to a New York-based trader, who noted that it was not immediately apparent why.

The Bausch Health Americas 8½% senior notes due Jan. 31, 2027 (B3/B-) were down 3/8 of a point, the trader said. A $1 billion add-on to that issue priced at 103.25 on Feb. 22.

The Valeant Pharmaceuticals International 9% senior notes due December 2025 were ½ point lower on the morning.

Meanwhile the bonds of Avantor Inc. were continuing what has been a steady price appreciation following early February news that the Radnor Township, Pa.-based chemical materials maker filed to raise $100 million in an IPO.

The Avantor 9% senior notes due October 2025 were 107¼ bid on Friday morning, according to a trader, who noted that those bonds traded at par when they began their ascent.

The Avantor 9% notes have been active every day, the trader remarked.

Quiet primary

The new issue market, which generated a reasonably steady stream of news throughout the first full week of March, was quiet on Friday.

One deal was marked on the active new issue calendar as expected Friday business.

Milwaukee-based crane-maker Manitowoc Co. Inc. marketed a $300 million offering of seven-year senior secured second-lien notes (B2/B) during the past week.

Initial guidance was in the low 8% area, and the second-lien notes had been expected to clear the market ahead of Friday’s close, sources recounted.

However, there was no fresh news on the deal Friday morning, they added.

Thursday inflows

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

High-yield ETFs saw $189 million of inflows on the day.

Actively managed high-yield funds saw $30 million of inflows on Thursday, the source added.

News of those daily cash inflows follows a Thursday afternoon report that the combined funds sustained a hefty $1.9 billion of net outflows during the week to Wednesday's close, the first negative weekly flow in a month, sources say.

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