Morning Commentary: Junk bond deals eyed for week ahead; lower November supply expected

By Cristal Cody

Tupelo, Miss., Nov. 1 – A few junk bond deals are being eyed to price in the week ahead with marketing expected to continue on Friday.

Blackboard Inc. is offering $243 million of five-year second-lien notes (Caa2/CCC) and a $500 million bank loan.

Price talk on the notes is in the low 10% original issue discount area, a market source said.

LPL Financial Holdings Inc. is in the deal pipeline with $400 million of senior notes due 2027.

On Friday, Wesco Aircraft Holdings, Inc. will continue to hold a roadshow for a new deal being marketed.

The company plans to price $1,575,000,000 of notes that includes $1 billion of seven-year senior secured notes (B3/B) and $575 million of eight-year senior unsecured notes (Caa2/ CCC+) in the upcoming week, a source said.

Early guidance on the seven-year notes is in the high 7% area. Guidance on the eight-year senior unsecured notes is in the 350 basis points area behind the secured notes.

The junk bond market has seen $4.5 billion of new issues price week to date.

The high-yield primary market saw $20 billion of issuance in October, and a slightly lower pace is expected in November with $17 billion of supply forecast, according to a BofA Merrill Lynch research note on Friday.

This week, primary action quieted following the Federal Reserve’s third rate cut of the year on Wednesday.

The junk bond market entered the week little changed but “things have started to unravel following the FOMC decision,” according to the BofA Merrill Lynch note. “HYG slumped 3/4s of point in the 24 [hours] following the event, retracing two weeks of improving prices. HY spreads bounced 10 bps off their recent tights in the 380s on [Wednesday] and were bound to add even more on [Thursday].”

The Federal Reserve trimmed rates by 25 bps following the monetary policy meeting.

Meanwhile, high-yield funds inflows slowed to $300 million for the week, mostly due to a $650 million outflow on Wednesday, the note said.

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