Morning Commentary: Junk opens flat; La Liga secured euro paper trades to premium

By Paul A. Harris

Portland, Ore., May 16 – The high-yield bond market opened unchanged on Monday, traders said.

At mid-morning the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was down 0.14%, or 11 cents, at $76.70 but was outperforming the S&P 500 index, which was off 0.55%.

The primary market remained quiet.

The absence of a new issue calendar is prodding some investors to look more closely at a ravaged secondary market, if only to test the resolve of sellers, a trader remarked.

The most recent new issue news came on Friday in Europe where there was an €850 million placement of senior secured notes due May 2029 (Ba3//BB) that came in support of the capitalization of Spanish soccer organization La Liga by CVC Capital Partners.

Both tranches were trading at premiums to their new issue prices on Monday morning, according to a buyside source.

The Loarre Investments Sarl (La Liga) 6½% fixed-rate notes due May 2029 (Ba3//BB) were 96¾ bid, 97¼ offered. The €500 million tranche priced at 96.605 to yield 7 1/8%.

The Euribor plus 500 basis points floating-rate notes (Ba3//BB) were 97 bid, 97½ offered. The €350 million floating-rate tranche priced at 97.

The most recent dollar deal came a week ago, but it, too, was continuing to trade at a premium to new issue price on Monday morning, a trader said.

The Frontier Communications Holdings, LLC 8¾% first-lien secured notes due May 2030 (B3/B/BB+) were unchanged to slightly better on the morning, having changed hands at 101¾ (yielding approximately 8¼%), a trader said.

The only deal to clear the new issue market in over two weeks, the upsized $1.2 billion issue (from $800 million) priced April 9 at par.

Frontier's new 8¾% first-lien notes came with 2¾% more coupon, superior security and four months more duration than the Frontier Communications Holdings 6% second-lien notes due January 2030, which priced at par last October.

In the wake of the new deal, the second-lien paper took what appears to be an outsized hit.

On Monday, the second-lien notes traded at 79, yielding just shy of 10%, the trader said, adding that Frontier's second-lien notes traded at 79½ on Friday.

ETFs see inflows

High-yield ETFs saw $476 million of daily cash inflows on Friday, according to a market source.

However actively managed high-yield funds sustained $313 million of outflows on that day.

The combined funds have seen $33.8 billion of year-to-date net outflows to Friday’s close, the market source said.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.