Morning Commentary: Dynegy bonds flat to slightly lower; funds see big outflows on Monday

By Paul A. Harris

Portland, Ore., Oct. 14 – Bonds issued last Friday by Dynegy Inc. in a massive $5.1 billion three-part senior notes transaction (B3/B+) were flat to slightly lower on Tuesday in a quiet high-yield market, as players took up their positions following the three-day Columbus Day holiday weekend in the United States, sources said.

Dynegy’s new 6¾% notes due Nov. 1, 2019 were 99½ bid, par ½ offered. The 7 5/8% notes due Nov. 1, 2022 were 99 7/8 bid, par 3/8 offered. The long-dated 7 5/8% notes due Nov. 1, 2024 were par 1/8 bid, par 5/8 offered on Tuesday, according to a portfolio manager.

All three issues came at par.

Meanwhile Dynegy’s long-dated securities, the 7 5/8% notes due 2024, were seen at par 1/8 bid, par ¾ offered by a trader, who recounted that the bonds came out strong in last Friday’s secondary market, reaching as high as 101 bid.

Elsewhere the Metaldyne Performance Group Inc. 7 3/8% senior notes due Oct. 15, 2022 (B3/B+), which priced Friday at par in a $600 million issue, were faring slightly better at par ½ bid, 101 offered on Tuesday morning, a portfolio manager said.

Last Friday’s two Lundin Mining Corp. tranches of notes were both trading above issue price on Tuesday morning, according to a trader, who remarked that, given their sizes, $550 million 7½% notes due 2020 and $450 million 7 7/8% notes due 2022, volumes seem extremely light.

The 7½ notes were par ¾ bid, 101 offered, on Tuesday morning, while the 7 7/8% notes were par 3/8 bid, par ½ offered, the trader said.

Fund flows

The most recent news on the fund flows front is negative, according to a portfolio manager, who said that high yield exchange traded funds (ETFs) saw $98 million of outflows on Monday, while actively managed high-yield funds, that same day, saw a whopping $455 million daily outflow.

Last Friday’s flows were also negative, said the manager, who was citing information contained in a report from JPMorgan. On Friday ETFs saw $81 million of outflows while actively managed funds saw $5 million of outflows.

Flows were positive the previous day, Thursday, Oct. 9, with ETFs seeing $334 million of inflows and actively managed funds seeing $295 million of inflows.

Quiet primary

All was quiet in the primary market, with the most recent news being that DryShips Inc. pulled its planned $700 million offering of three-year senior secured notes due to market conditions and has instead agreed on a $350 million bridge facility to help fund the upcoming maturity of its 5% convertible senior notes.

Two other deals are still believed to be in the market, sources said.

Providence Service Corp. plans to price a $200 million offering of seven-year senior notes (B3/B-) via BofA Merrill Lynch, RBC and SunTrust Robinson Humphrey Inc.

And BPZ Resources, Inc. is in the market with a $150 million offering of five-year senior secured notes via Seaport Global.

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