Morning Commentary: New Seadrill 8 3/8% notes trade higher; cash inflows continue

By Paul A. Harris

Portland, Ore., July 14 – The broad high-yield bond market opened 1/8 of a point better on Friday, traders said.

With the major U.S. stock indexes inching into the green at mid-morning, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was 31 cents lower at $75.35, down a substantial 0.4%.

Bonds priced Thursday by Seadrill Ltd. – the first dollar-denominated deal to clear the market thus far in July – saw price improvements in the secondary market, according to a bond trader in New York.

The Seadrill Finance Ltd. 8 3/8% senior secured second-lien notes due August 2030 (B2/BB/B+) were 101 bid, 101½ offered at mid-morning.

The upsized $500 million issue (from $450 million) priced at par.

The deal traded well from the break, going as high as 101¼ bid, 101¾ offered, the trader said.

As much as 50% of the well-oversubscribed issue was taken down by 10 accounts, the source said, adding that this set of lenders was mainly comprised of large asset managers...the “real-money accounts.”

In the wake of Thursday’s Seadrill execution, the primary market remained idle on Friday but is expected to reactivate during the week ahead.

Look for Brand Industries LLC to show up with a junk offering during the July 17 week, the trader said.

Another deal believed to be near at hand is the One Toronto Gaming $400 million offering of senior secured notes coming in support of the company’s effort to refinance its capital structure.

That refinancing effort also includes an $800 million term loan B, which launched early in the past week via left lead Barclays.

Inflows

The dedicated high-yield bond funds saw $271 million of net daily cash inflows on Thursday, according to a market source.

High-yield ETFs saw $171 million of inflows on the day. Those follow the big $1.585 billion of inflows that the junk ETFs saw on Wednesday.

Actively managed high-yield bond funds saw $100 million of daily inflows on Thursday, the source said.

News of Thursday’s daily flows follows a Thursday report that the combined high-yield funds sustained $379 million of net outflows in the week to the Wednesday, July 12 close, according to fund-tracker Refinitiv Lipper.

Most of the above mentioned $1.585 billion Wednesday inflow to the ETFs did not factor into the Thursday’s weekly fund flows report but will be carried into the flows that will be reported in the week to come, according to the market source.

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