Morning Commentary: Junk opens slightly heavy; Boyd Gaming 6% notes above issue price

By Paul A. Harris

Portland, Ore., June 12 – Junk opened slightly heavy on Tuesday amid news of cash outflows and a couple of bids-wanted-in-competition (BWIC) lists from high-yield ETFs, a trader said at mid-morning.

Boyd Gaming Corp.’s new 6% senior notes due August 2026 (existing B3/confirmed B/confirmed B+) were holding in at a premium to their issue price. They were at par 1/8 bid, par ¼ offered after having traded as high as par ½, the trader said.

The 8.2-year paper priced at par in a Monday drive-by. The issue was upsized to $700 million from $500 million.

Elsewhere among recent issues, the Aleris International, Inc. 10¾% senior secured junior priority notes due July 2023 (Caa2/CCC+) continue to trade well, according to the trader, who marked them at 102 1/8 bid on Tuesday.

The $400 million deal, which priced at par on June 8, generated a big buzz in the market with early talk in the 11¼% area, sources said.

Demand fueled a book that was two times the deal size. That demand, along with some concessions from the company on its covenant package, allowed Aleris to cleave off some of that rate in the execution, they added.

Tailwind for Intelsat

Bonds of Intelsat were better on Tuesday on the heels of an oversubscribed convertibles issue, which priced Monday, the trader said.

Intelsat Jackson Holdings SA’s 7½% senior notes due April 2021 were up ¼ to ½ point on Tuesday at 99½ bid, 99¾ offered.

Bond investors appear to be reacting favorably to the company's sale of $350 million of seven-year convertible notes on Monday – a deal that came at par with a 4½% coupon, rich to talk of 4¾% to 5¼% and traded as high as 111¼ bid on Tuesday morning, then settled in a 110½ bid, 110¾ offered context, the trader said.

Intelsat's successful placement of convertibles comes atop an equity cushion provided by its $200 million offering of common stock, creating a favorable backdrop for the bondholders, the trader remarked.

The primary market was quiet Tuesday morning, although there is a pipeline of deals that will begin to appear when issuers gain more confidence that market volatility won't interfere with an efficient placement of new junk bonds.

The most recent deal to swim in front of the high-yield headlights comes from Danish telecom TDC A/S, which is selling €1.4 billion equivalent of five-year senior notes in dollars and euros.

The U.S. roadshow was scheduled to start on Tuesday.

The deal should go well, according to a London-based senior sellside source, who noted that TDC's euro-denominated term loan was upsized last week.

Among recent conspicuous euro-denominated issues, the new InterXion Holding NV 4¾% senior notes due 2025 (B1/BB-) were holding in above new issue price at 101 bid, the sellsider said.

The deal came at par on June 8.

As a comparable to InterXion, investors were looking at Equinix, Inc.’s bonds with maturities on either side of the new 2025 paper and asking for a concession of around 100 basis points, sources say.

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