Morning Commentary: Camelot/Cornerstone trades at premium to new issue; inflows eyed

By Paul A. Harris

Portland, Ore., July 21 – The high-yield bond market opened unchanged on Thursday and was unchanged to perhaps slightly better at mid-morning, according to a bond trader in New York.

With the Dow Jones industrial average up 0.3% at mid-morning, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was up 0.32%, or 25 cents, at $76.33.

Bonds priced Wednesday in support of the Cornerstone Building Brands, Inc. buyout – the first dollar-denominated deal to clear the market in two weeks – maintained a premium to their new issue price on Thursday, the trader said.

The Camelot Return Merger Sub Inc. 8¾% senior secured notes due August 2028 (B2/B) were 91½ bid on Thursday morning.

The upsized $710 million issue (from $600 million) priced at 90.296 to yield 11% on Wednesday, and were 92 bid, 92¼ offered at the Wednesday close, so were somewhat off those highs in typical new deal trading volume (a few trades), the trader said.

The Camelot/Cornerstone deal, which came in support of the buyout of Cornerstone by Clayton, Dubilier & Rice, was the first dollar deal to price since Neogen Corp. priced $350 million of Garden SpinCo Corp. 8 5/8% senior notes due July 2030 on July 6.

Elsewhere, bonds priced in support of Brookfield Business Partners' buyout of CDK Global Inc. earlier in the summer, before volatility dried up the new issue calendar, continue to straddle their new issue price, the trader said.

The Central Parent Inc./Central Parent Merger Sub Inc. (CDK Global) 7¼% senior secured first-lien notes due June 2029 (B1/B+) were 99½ bid, par ¼ offered on Thursday morning, the source said.

Those bonds came at par on June 9, during a week that saw a whopping $11.1 billion of issuance in 15 tranches.

Turning to financial headlines, news of a $1 billion stock offering from Carnival Corp. sent the Miami-based cruise line's stock into a 13%-plus tumble by mid-morning on Thursday.

However, Carnival's bond prices improved, the trader said, spotting the Carnival 10½% senior secured second-priority notes due February 2026 at 89¾ bid, 90¾ offered.

Those bonds were 87½ bid, 88 offered on Wednesday, the source added.

With just one announced high-yield offering in the market there was no fresh primary market news on Thursday, sources said.

Patagonia Holdco LLC is on the road with a $500 million offering of seven-year senior secured first-lien notes (B1/B+) supporting the buyout of Lumen Technologies' Latin American operations by Stonepeak.

Initial guidance specifies a 7½% coupon at OID 86.

Pricing is set for the week ahead.

However, one deal has taken a place aboard the shadow calendar.

Avient Corp. plans to sell $900 million of senior notes in a possible July transaction via J.P. Morgan Securities LLC, according to a high-yield portfolio manager, who added that initial guidance has that deal coming to yield in the high 7% area.

Meanwhile, $3 billion of bonds backing the LBO of Tenneco Inc. by Apollo, which had been expected July business, has been pushed back into the post-Labor Day period, sources say.

Wednesday inflows

The high-yield ETFs saw exceptionally large daily cash inflows of $1.03 billion on Wednesday, according to a market source.

Meanwhile, the actively managed high-yield funds were flat to slightly negative on the day, sustaining $18 million of outflows on Wednesday, the source said.

As the market awaits a report on the weekly cash flows of the various asset classes from Refinitiv Lipper, expected later on Thursday, the funds are tracking $900 million of net outflows for the week that concluded with Wednesday's close, according to the market source.

© 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.