Morning Commentary: Dean Foods, Weight Watchers, Hertz trade lower following earnings

By Paul A. Harris

Portland, Ore., Feb. 27 – Earnings reports propelled high-yield bond trading on Wednesday morning, according to a New York-based trader.

Dairy products supplier Dean Foods Co. slid when the Dallas-based company reported a wider-than-expected fourth-quarter loss and suspended its dividend.

The Dean Foods 6½% senior notes due March 2023 fell 4½ points post-earnings to 74¼, the trader said.

In its report to investors, Dean Foods said it is exploring strategic alternatives and listed an outright sale of the company or a merger, as well as asset sales, among its strategic options.

Bonds of Weight Watchers International, Inc. shed value on Wednesday, following the earnings report it made after Tuesday’s close, the trader said.

The company reported adjusted fourth-quarter earnings of 46 cents per share, well short analysts' expectations of 60 cents per share. Sales figures were also a big miss. And projections for 2019 revenue also fell short of analysts’ expectations.

The Weight Watchers International 8 5/8% senior notes due December 2025 fell 2 points on Wednesday to 93¾, the trader said.

Although a mostly upbeat earnings report from Hertz Corp. initially saw its stock getting some traction on Wednesday, the bonds were slightly lower, the trader said.

The Hertz 5½% senior notes due October 2024 were down 3/8 of a point at 86.

The Florida-based rental car company reported a loss of 55 cents per share in the fourth quarter of 2018, narrower than the 90 cents per share loss analysts were expecting.

Recent issues

Among recent issues, bonds printed last week by Bausch Health continued to trade at premiums to new issue prices.

Bausch Health Cos., Inc.’s new 5¾% secured notes due August 2027 (Ba2/BB-) were 101 bid, 101¼ offered.

The $500 million tranche priced at par.

The Bausch Health Americas Inc. (formerly Valeant Pharmaceuticals International) add-on to the 8½% unsecured notes due January 2027 (B3/B-) were 103½ bid, 104 offered.

The upsized $1 billion tap (from $750 million) priced at 103¼ on Friday.

Elsewhere, the Getty Images Inc. 9¾% senior notes due March 2027 (Caa2/CCC+) were par ¾ bid, 101 offered on Wednesday.

The $300 million issue priced at par on Feb. 13.

Junk felt firm early Wednesday, according to the New York trader.

By mid-morning, with the major U.S. stock indexes in the red, high-yield ETFs were flat to slightly lower. The iShares iBoxx $ High Yield Corporate Bd (HYG) was down 2 cents, or 0.02%, at $85.75 per share.

The primary market was quiet and the forward calendar extremely thin heading toward the end of February.

Just one deal is formally on the road.

Isle of Man gambling software supplier Playtech plc is conducting a roadshow for a €350 million offering of seven-year senior secured notes (expected Ba2/confirmed BB) with plans to use the proceeds to refinance its existing €297 million convertible bond and for general corporate purposes.

Tuesday inflows

The daily cash flows of the dedicated high-yield bond funds were positive on Tuesday, a trader said.

High-yield ETFs saw $39 million of inflows on the day.

Actively managed high-yield funds saw $50 million of inflows on Tuesday, the trader said.

With only Wednesday’s total pending in the tally of the most recent week's flows, the combined funds are tracking $601 million of inflows, the source added.

© 2015 Prospect News.
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