Morning Commentary: Junk firms into mid-morning; Fortrea bonds keep premium

By Paul A. Harris

Portland, Ore., June 15 – After opening the Thursday session slightly lower, the junk bond market felt firmer at mid-morning, according to a bond trader in New York.

With the S&P 500 stock index up 0.35% at mid-morning, the iShares iBoxx $ High Yield Corporate Bd (HYG) was a quarter better, up 0.34%, at $75.01.

Among recent issues, the Fortrea Holdings Inc. 7½% senior secured notes due July 2030 (Ba3/BB/BB+) clung to premiums at 101¼ bid, 101¾ offered, according to the trader, who remarked that the paper feels as though it’s headed higher.

The $570 million issue priced at par on Monday, playing to an order book that was more than six-times oversubscribed, sources said.

The Calumet Specialty Products Partners, LP/Calumet Finance Corp. 9¾% senior notes due July 2028 (Caa1/B-) were wrapped around their new issue price.

The $325 million issue priced at par on Monday.

In the primary market, sails luffed as the Thursday session got underway, with new issue activity expected to remain muted ahead of the Juneteenth three-day holiday weekend set to commence following Friday’s close, sources said.

A pair of dollar-denominated deals are expected to price on the heels of the holiday weekend recess.

Windsor Holdings III, LLC is on the high-yield road with a $1.8 billion offering of seven-year senior secured notes (B2//BB+) backing the buyout of Univar Solutions Inc. by Apollo.

The deal comes with initial talk in the 8½% area, having arrived in the market with $1 billion of reverse inquiry behind it, according to a sellside source.

Also, HighPeak Energy Inc. is shopping a $575 million offering of five-year senior notes (B3/B+/B+). Initial talk is 11½% to 12%, including a discount.

The dollar-denominated primary market sleep-walked through the past week with just two deals pricing: the above-mentioned Fortrea and Calumet deals.

That lean deal volume surprises the New York bond trader, who asserted that there is a decent shadow calendar in place and building.

The primary market could get busy in the week ahead, the trader said.

Meantime, the lights should flicker up on Friday in the even sleepier euro-denominated new issue market.

Sweden’s Assemblin is expected to complete its €480 million sale of Apollo Swedish Bidco AB six-year senior secured floating-rate notes (B2/B/B) ahead of the Friday close in London. It comes with initial spread talk of Euribor plus 500 basis points and initial price talk of 96 to 97.

Fund flows

High-yield ETFs sustained $178 million of daily cash outflows on Wednesday, according to a market source.

Actively managed high-yield funds, meanwhile, saw $38 million of inflows on the day.

As the market awaits an expected Thursday afternoon report on the weekly cash flows of the various asset classes, from Refinitiv Lipper, the combined high-yield funds are tracking a modest $160 million of net inflows for the week that concluded with Wednesday’s close, according to the market source.

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