Morning Commentary: New Hanesbrands 9% trades at 101¾; ETFs see $1.38 billion outflows

By Paul A. Harris

Portland, Ore., Feb. 13 – Junk opened unchanged on Monday, according to a bond trader in New York.

With the S&P 500 stock index up 0.38% at mid-morning, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was up a dime, or 0.13%, at $74.88.

Bonds that were priced on Friday with a hefty coupon from Hanesbrands, Inc. were slightly off their highs on Monday morning but maintained a nice premium to their new issue price, the trader said.

The Hanesbrands 9% senior notes due February 2031 (B1/BB-) changed hands on Monday morning at 101¾, the source said.

They broke to 102, and thus were 1/8 of a point to ¼ of point weaker as the Feb. 13 week got underway, the source said.

Hanesbrands came to the market trailing weak earnings and a decision to withhold its dividend to shareholders so it could use the money to pay down debt, indicating the clothing maker had not yet righted the ship, a portfolio manager said, explaining why the company’s rate was notably high.

Also, Hanesbrands came to address a pair of 2024 maturities, and so was in need of the cash, the investor added.

The Hanesbrands deal was heard to have ridden into market on reverse inquiry in excess of the offering size. And while price talk was hovering between 9¼% and 9 1/8%, the order book was around 4.5-times oversubscribed, sources said.

Elsewhere, the new TransDigm Inc. 6¾% senior secured notes due August 2028 (Ba3/B+), a deal that also came on Friday, was ¼ of point off late Friday afternoon highs on Monday morning, the trader said, spotting the bonds at par 5/8.

That deal also played to huge demand, sources said.

Away from recent issues, the Chemours Co. 5¾% senior notes due November 2028 were up ¼ of a point at 88 1/8 bid, and the company’s stock was up 4.74%, after the company posted break-even numbers in its earnings call, the trader said.

And the bonds of Stagwell, the Midas Opco Holdings LLC 5 5/8% senior notes due August 2029, were one of the most active names on the morning, on no apparent news, the source added.

Turning to new issues, the market awaits official price talk and timing on the Skill Bidco APS $765 million equivalent offering of five-year senior secured notes (B/B+) backing the buyout of Scan Global Logistics by CVC Capital Partners, an acquisition that is not backed by committed financing.

Early price discussions were in the 10½% to 11% area, sources say.

Meantime the ADT Inc. subsidiary ADT Security Corp. announced it would undertake the partial redemption of its 4 1/8% senior notes due 2023 (slightly more that $600 million outstanding), and EnerSys announced it would redeem all $300 million of its 5% senior notes due 2023.

Neither company disclosed financing details, which means they might turn up in the high-yield new issue market in order to raise the cash, the trader said.

Fund flows

High-yield ETFs sustained $1.38 billion of daily cash outflows on Friday, according to a market source.

Actively managed high-yield funds were positive on the day, posting $176 million of inflows on Friday, the source said.

The combined funds are tracking $2.34 billion of net outflows on the week that will conclude with Wednesday's close, according to the market source.

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