Morning Commentary: Junk off ¼ point with equities, ETFs selling; Europcar brings €125 million tap

By Paul A. Harris

Portland, Ore., June 1 – High-yield bonds were down ¼ point on Wednesday morning against a backdrop of selling in the stock market, according to a New York-based trader.

High-yield ETFs were selling, the trader added.

ETF share prices were lower in the mid-morning. The iShares iBoxx $ High Yield Corporate Bd (HYG) was down 16 cents, or 0.2%, at $83.04 per share. SPDR Barclays High Yield Bond ETF (JNK), at $34.96 per share, was down 8 cents, or 0.24%.

Among recent issues, notes sold by Teck Resources Ltd. in the pre-Memorial Day week continue to trade above new issue price, the trader said.

The Teck 8% notes due June 1, 2021 (B1/BB-) were 101½ bid, 102 offered on Wednesday morning. The $650 million issue priced at par on May 26.

Teck’s 8½% notes due June 1, 2024 (B1/BB-) were trading on either side of 102, the source said.

Secured second priority notes sold last week in an upsized $1,235,000,000 two-part deal from Hertz Equipment Rental Corp. (Herc) were somewhat less robust in the post-holiday secondary market.

The Herc Spinoff Escrow Issuer, LLC/Herc Spinoff Escrow Issuer, Corp. 7½% notes due June 1, 2022 were par bid, par ½ offered. The $610 million issue priced at par on May 24.

The Herc 7¾% notes due June 1, 2024 were trading either side of par on Wednesday morning, the trader said. The $625 million tranche priced at par.

The amount of the combined Herc issuance was increased from $1.1 billion.

Europcar tapping 5¾% notes

In the primary market Europcar Groupe SA announced in a Wednesday press release that it intends to do a €125 million add-on to its 5¾% senior notes June 15, 2022.

Proceeds will be used primarily to fund the Paris-based car rental company’s acquisition program focused on bolt-ons, franchisees and new mobility services, as well as for general corporate purposes.

The original €475 million issue priced at 99.289 to yield 5 7/8% in May 2015.

Meanwhile all was quiet in the dollar-denominated primary market.

Two deals are on the road.

Yum! Brands, Inc. is marketing $2.3 billion of senior notes (B1/BB) in two tranches: eight-year notes, which are being guided at 4¾% to 5%, and 10-year notes guided 25 basis points behind the eight-year notes.

CVR Partners, LP is in the market with $625 million of seven-year senior secured notes (B1/B+) being whispered in the low to mid 8% context.

Both deals rolled out on Tuesday, with timelines that had them pricing on Thursday.

However CVR could be Friday's business, a trader said on Wednesday morning.

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