Morning Commentary: Junk falls on Delta variant jitters; DirecTV markets $3.1 billion

By Paul A. Harris

Portland, Ore., July 19 – Investor concerns that the spreading Delta variant of the Covid-19 virus might disrupt global economic recovery sent stocks plummeting and generated a wide-based sell-off in high-yield bonds on Monday morning, a trader said.

The source marked the broad high-yield market 1 point lower on the morning, depending upon the name.

With crude oil prices down 6½% at mid-morning, energy bonds were getting destroyed, the trader said.

The recently minted Laredo Petroleum, Inc. 7¾% senior notes due July 2029 were off 9 points from the issue price at mid-morning, at 91 bid, having fallen from 92 bid earlier in the morning.

Those bonds were 97 bid, 97½ offered on Friday morning, sources said.

The $400 million issue priced at par last Tuesday.

The barrel price of West Texas Intermediate crude oil for August 2021 delivery was down a whopping 6.49%, or $4.77, at $67.06 at mid-morning.

Away from energy some bond fared better.

The First Student Bidco Inc./First Transit Parent Inc. 4% senior secured notes due July 2029 (Ba3/B+/BB+) were down ½ point at 99¾ bid.

The $800 million issue priced at par last Tuesday.

ADT Inc.'s 4 1/8% senior secured notes due August 2029 (Ba3/BB-) were down 3/8 of a point at 99¾ bid. The $1 billion issue priced at par last Thursday.

Among other recent issues, the CURO Group Holdings Corp. 7½% senior secured notes due August 2028 (B3/B-) and the MoneyGram International, Inc. 5 3/8% senior secured notes due August 2026 (B2/B+) were both down a point, the trader said.

DirecTV markets notes

Dealers braved the storm on Monday with a pair of roadshow announcements.

DirecTV Entertainment Holdings LLC started a roadshow for a $3.1 billion offering of six-year senior secured notes, in the market with early guidance of 6% to 6½%.

And British car-maker McLaren Automotive began marketing a $620 million offering of five-year senior secured notes (Caa1/CCC+/B), with initial guidance in the low 8% area.

One megadeal was already on the road.

McGraw-Hill Education, Inc./MAV Acquisition Corp. is marketing a $2.03 billion two-part high-yield notes offering backing the acquisition of McGraw-Hill Education by Platinum Equity Partners.

The offering includes $1.15 billion of seven-year senior secured notes (B2/B-) with initial guidance in the low 5% area, and $875 million of eight-year senior unsecured notes (Caa2/CCC) with initial guidance in the low 7% area. The roadshow was scheduled to wrap up on Monday.

Friday inflows

The dedicated high-yield bond funds saw $408 million of daily net inflows on Friday, according to a market source.

High-yield ETFs saw $218 million of inflows on the day.

Actively managed high-yield funds saw $190 million of inflows on Friday, the source said.

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