Morning Commentary: Transocean brings $500 million drive-by; big Tuesday outflows eyed

By Paul A. Harris

Portland, Ore., May 15 – Junk bonds opened weaker on Wednesday, according to a trader in New York, who remarked that a bunch of speculative-grade names were lower.

The bonds and stocks of Irving, Tex.-based enterprise software company Exela Technologies, Inc. were conspicuously lower, according to the source.

The Exela Intermediate LLC/Exela Finance Inc. 10% first priority senior secured notes due July 2023 were down a little over 3 points at 92 5/8 bid, the trader said, adding that the stock was trading at a one-year low.

Late last week, on its earnings call, the company reported that it missed quarterly earnings.

Cleveland-based aerospace parts supplier TransDigm, Inc.'s bonds weakened as a report circulated that the company might be gouging the Pentagon, the trader said.

The TransDigm 6¼% senior secured notes due March 2026 were ½ point lower at 102 7/8 bid on Tuesday.

A review from the inspector general asserts that TransDigm is charging the Defense Logistics Agency $4,361.00 for a drive pin that should cost $46.00, the New York trader recounted.

The bonds of Envision Healthcare Corp. also continued to drift lower on Wednesday morning, the source said.

The Envision (Enterprise Merger Sub Inc.) 8¾% senior notes due October 2026, which came in a $1,225,000,000 issue last September, in a deal supporting the KKR-led buyout, were 87¼ bid on Wednesday.

Those bonds were trading in the 90s a month ago, the trader remarked, adding that junk was generally down ¼ to ½ point on Wednesday morning.

RIG brings $500 million

The new issue news stream slowed to a trickle as the midweek session got underway.

Transocean Ltd., better known by its stock ticker RIG, plans to price a $500 million offering of four-year senior secured notes (expected ratings B1/B+) in a Wednesday drive-by.

Initial guidance has the deal coming at an issue price of 99.5 to yield 5¾%, a trader said.

Wells Fargo Securities is the left bookrunner.

Proceeds are to fund cash on the balance sheet, to fund the debt service reserve account and for general corporate purposes.

Meanwhile, Ausdrill Finance Pty Ltd. might price its $500 million offering of seven-year senior notes (Ba2/BB) before Wednesday's close, a market source said.

The Australia-based provider of natural resource exploration services marketed the deal on a roadshow last week.

With official price talk pending, the guidance is in the high 6% area, the source said.

Big outflows eyed

Actively managed high-yield bond funds sustained a massive $1.65 billion of daily outflows on Tuesday, according to a bond trader.

That number was getting considerable attention roundabout the market on Wednesday morning as the news circulated, sources said.

Meanwhile high-yield ETFs were flat to slightly positive on Tuesday, as they saw $4 million of inflows on the session.

With only Wednesday's daily flows remaining to be tabulated, the combined high-yield funds were tracking $2.25 billion of outflows on the week, the bond trader said.

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