Morning Commentary: Junk opens week stronger; athenahealth, Medline bonds trade higher

By Paul A. Harris

Portland, Ore., May 23 – The high-yield bond market opened ¼ point better as the pre-Memorial Day week got underway, according to market sources.

With the Dow Jones industrial average up 1.5% at mid-morning, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was 0.33% better, up 25 cents, at $76.71.

Traders saw conspicuous activity in a couple of distressed bonds that came during the past six months supporting high-profile leveraged buyouts in the health care sector.

The athenahealth Group Inc. (Minerva Merger Sub, Inc.) 6½% senior notes due February 2030 changed hands at 86½ on Monday morning, up a point.

Those bonds came in a $2.35 billion issue last January in support of the $17 billion buyout of the health care related cloud computing vendor by Bain Capital and Hellman & Friedman.

Meanwhile the Medline Industries, LP (Mozart Debt Merger Sub Inc./Medline Borrower, LP) 5¼% senior notes due October 2029 traded at 82 on Monday morning, up 1 point to 2 points.

Those bonds came in a $2.5 billion issue late last September in support of the $30 billion buyout of the medical supplies business by Blackstone, Carlyle and Hellman & Friedman.

In an otherwise muted secondary market, the activity in these bonds was conspicuous, according to traders, who were scrambling for background at mid-morning.

Away from those active names, trading was generally quiet, sources said.

The most recent issue to clear the market, the Carnival Corp. 10½% senior notes due June 2030 (B2/B), was wrapped around par on Monday morning, although there appeared to be no activity in the paper, a trader said.

Those bonds, which came at par in a $1 billion issue last Wednesday, were par ½ bid, 101 offered on Friday.

The new issue market stood idle on Monday morning, and the active forward calendar was empty.

There was no clear indication that the becalmed primary market will reactivate ahead of the holiday weekend, sources said.

Fund flows

The daily cash flows of the dedicated high-yield bond funds were nearly flat on Friday, according to a market source.

High-yield ETFs saw $226 million of inflows on the day.

However, actively managed high-yield bond funds were negative on the day, sustaining $229 million of outflows on Friday, the source said.

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