Morning Commentary: High yield opens unchanged; new Scotts Miracle-Gro paper trades higher

By Paul A. Harris

Portland, Ore., Oct. 8 – Junk was unchanged heading into mid-morning, according to a trader in New York.

There was some ETF buying, but it might have been “clean-up buying” from Wednesday, the source said.

High-yield ETF share prices had eased,heading into mid-morning.

The iShares iBoxx $ High Yield Corporate Bd (HYG) share price was $84.50, down 25 cents.

SPDR Series Trust - SPDR Barclays High Yield Bond ETF (JNK) was trading at $36.07 per share, off a dime.

Scotts Miracle-Gro rises

The new Scotts Miracle-Gro Co. 6% senior notes due Oct. 15, 2023 (B1/B+) were well above new issue price on Thursday at 102¼ bid, 102¾ offered in trading that was somewhat active, the source said.

The first dollar-denominated junk deal to clear since Sept. 25, it priced at par on Wednesday in an upsized $400 million issue (from $300 million) and came at the tight end of talk, playing to $2.5 billion of orders when books closed, according to a market source.

Chemours bonds on the move

Chemours Co., the performance chemicals operation spun off from Dupont Co. in July, generated both good news and bad news in recent news cycles.

The good news is that Apollo Global Management LLC is eyeing Chemours as a possible acquisition for a consolidation move in the titanium-dioxide manufacturing sector.

The bad news is that Chemours is the responsible party in a lawsuit in Ohio by a woman who alleges that contamination from the Teflon plant in West Virginia caused her to develop kidney cancer. The jury awarded the Ohio woman $1.6 million, and there are more than 3,000 potential plaintiffs waiting in the wings, in the matter, according to reports.

Thursday morning trading in Chemours junk bonds reflected this “good news-bad news” dynamic, a trader said.

The Chemours 6 5/8% senior notes due May 2023 were seeing the most activity. They were trading between 67 and 69 heading into mid-morning after trading as high as 76 bid earlier in the session, following which they receded to 71 bid, 72 offered.

The Chemours 7% senior notes due May 2025 were also active, the trader said.

Chemours priced both bonds at par in an overall $2.5 billion equivalent early May transaction, which also included a €360 million tranche of 6 1/8% notes due May 2023.

Primary quiet

In the wake of Wednesday’s Scotts Miracle-Gro deal, the primary market was quiet on Thursday morning and could stay that way until Friday’s close, with dealers possibly electing to stay their hands until the conclusion of the upcoming three-day Columbus Day holiday weekend in the U.S. bond market, sources say.

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