Morning Commentary: Junk opens firm; new LeasePlan notes push higher; Extended Stay brings tap

By Paul A. Harris

Portland, Ore., March 11 – Junk opened firm on Friday, carrying over momentum from late Thursday, sources said.

The market’s propulsion seems to unmistakably derive from the ranging, decisive economic stimulus unveiled on Thursday by the European Central Bank, they add.

“The European banks are going to be able to borrow at zero interest for the next four years,” a hedge fund manager remarked on Friday morning.

“This addresses the refinancing concerns that had taken hold of the high-yield market.

“People are finally getting the message that this is set up so that banks and institutions will be motivated to put money to work. And money will be available to people who will lend it.”

High-yield ETFs were sharply higher, at mid-morning, New York time. The iShares iBoxx $ High Yield Corporate Bd (HYG) was up 84 cents, or 1.04%, at $82 per share. The SPDR Barclays High Yield Bond ETF (JNK), at $34.30 per share, was up 37 cents, or 1.09%.

Bonds priced on Thursday by LeasePlan Corp. NV continued to perform notably in the Friday morning secondary market, sources said.

The LeasePlan euro-denominated 6 7/8% senior secured notes due April 15, 2021 (B1/BB+/BB-) were at 102 5/8 bid, 103¾ offered, according to a hedge fund manager.

The €1.25 billion priced at par.

LeasePlan’s dollar-denominated 7 3/8% senior secured notes due April 15, 2021 (B1/BB+/BB-) were at 102 5/8 bid, 103 1/8 offered.

The $400 million issue also priced at par on Thursday.

Extended Stay guidance 98.5

Extended Stay America, Inc. came Friday morning with a drive-by $500 million add-on to its 5¼% senior notes due May 1, 2025.

Initial guidance has the deal pricing at 98.5, according to a trader.

Joint bookrunner J.P. Morgan Securities LLC will bill and deliver for the debt refinancing deal.

Elsewhere TRAC Intermodal LLC has been marketing $485 million of second-lien notes due 2021.

The deal, announced earlier in the week, was on a schedule that had it clearing the market before the weekend.

However there has been no formal price talk or any other news since the roadshow announcement.

Early guidance was 10%, but it could come wider, as interested investors are looking for more coupon and covenant concessions, a portfolio manager said.

Mixed flows on Thursday

The cash flows of the dedicated high-yield bond funds were mixed on Thursday, a trader said.

High-yield ETFs were essentially flat, sustaining $12 million of outflows on the day.

However actively managed funds saw $140 million of inflows on Thursday.

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