Morning Commentary: Junk rebounds; recent deals rocket higher; Stonegate Pub brings add-on

By Paul A. Harris

Portland, Ore., Sept. 30 – Junk bonds rebounded as the final day of September got underway, according to a trader in New York.

ETFs were better heading into mid-morning on the East Coast of the United States.

iShares iBoxx $ High Yield Corporate Bd (HYG) was up 39 cents at $83.16 per share.

SPDR Barclays High Yield Bond ETF (JNK) was 11 cents better at $35.67 per share.

Recent issues were retracing lost ground.

Bonds of Frontier Communications Corp. were trading higher, with the most activity focused on the Frontier 11% senior notes due Sept. 15, 2025, which were up a solid point to a point-and-a-half heading into mid-morning at 97 bid, 97½ offered.

The most active paper was the Cablevision Systems Corp. 10 7/8% senior notes due 2025, trading at 101¼ bid, 101¾ offered.

There was also a lot of trading in the Cablevision 10 1/8% 7.25-year senior notes, which were 101 bid, 101½ offered, the trader said.

Alcoa recovers

Bonds of aluminum producer Alcoa were retracing ground they lost when bond investors feared that Alcoa’s plans to split into two publicly traded companies would negatively impact the company’s debt.

Alcoa's 5 1/8% notes due 2024 got as high as 97½ bid early Wednesday and were settling around 96 bid after having sunk into the mid-to-low 80s last week, the trader said.

The bonds improved after Alcoa said that its debt would be put in the value-add entity for which it is targeting an investment-grade rating.

Stonegate tapping 5¾% notes

Stonegate Pub Co. Financing plc plans to participate in an investor conference call on Thursday to discuss a proposed £80 million add-on to its 5¾% senior secured notes due April 15, 2019 (existing ratings B2/B+).

Barclays is the bookrunner.

The Luton, England-based pub operator plans to use the proceeds to finance the acquisition of freehold properties in the Tattershall Castle Group portfolio.

On Tuesday Stonegate Pub Co. announced that it has reached agreement to acquire 53 pubs from Swindon, Wiltshire, England-based TCG for an undisclosed sum.

The original £260 million issue of 5¾% notes due 2019 priced at par in April 2014.

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