Junk opens slightly weaker; New TI Automotive bonds trade off lows; Funds see Thursday outflows

By Paul A. Harris

Portland, Ore., June 26 – High-yield bonds were slightly weaker on Friday morning, according to a junk bond trader.

Investor Carl Icahn’s comments earlier in the week, asserting that the high-yield market is over-heated, continue to weigh, the trader conceded.

However investors who are doing deal-by-deal credit work before buying high-yield bonds should be okay, the source added.

TI Automotive off lows

TI Group Automotive Systems, LLC’s new 8¾% senior notes due July 15, 2023 (Caa1/B) traded off their lows and were wrapped around the new issue price on Friday morning, the trader said.

The notes, which came at par in a downsized $450 million issue on Thursday, fell to 99¾ bid, par offered in late Thursday trading, the source added.

The company downsized the bond deal from $550 million as it shifted $100 million of proceeds to its term loan.

Elsewhere Endo International plc’s 6% senior notes due July 15, 2023 (B1/B) were holding at 102 1/8 bid on Friday, the trader said, adding that the deal had earlier traded as high as 102¼ bid, 102 3/8 offered.

The $1,635,000,000 deal, which priced at par on Wednesday, was a blowout, upsized by $200 million and multiple-times oversubscribed market sources said.

Douglas prices downsized deal

In an otherwise quiet primary market on Friday morning, Douglas AG priced a downsized €635 million two-part high-yield notes transaction.

Douglas cut the deal’s size twice before setting terms, reducing it from €855 million and the original €1,055,000,000. The company shifted the €420 million of proceeds to its bank loan.

The deal came in tranches of secured and unsecured notes.

Kirk Beauty Zero GmbH priced €300 million of seven-year senior secured notes (B1/B) at par to yield 6¼%. The secured notes tranche was reduced from €435 million after previously having been downsized from €635 million. The yield printed at the tight end of the 6¼% to 6½% yield talk.

Kirk Beauty One GmbH priced €335 million of eight-year senior unsecured notes (Caa1/CCC+) at par to yield 8¾%. The secured notes tranche was cut from €420 million. The yield printed at the wide end of the 8½% to 8¾% yield talk.

Elsewhere the active forward features deals ranging in size from $125 million to $500 million, some of them coming from off-the-run issuers.

Although some of those had been expected to clear by the end of the present week there has been no price talk or timing updates, sources say.

Outflows on Thursday

The daily cash flows of the dedicated high yield funds turned negative on Thursday, the trader said.

High yield ETFs saw $83 million of outflows on the day.

Asset managers underwent $30 million of redemptions on Thursday.

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