Morning Commentary: Junk lower on profit-taking and a little indigestion; new deals on tap

By Paul A. Harris

Portland, Ore., June 10 – High-yield bonds were off ½ point to 1 point on Friday morning against of backdrop of weaker equity prices and weaker commodity prices, according to traders.

The price of crude oil slipped back below $50 a barrel, a New York-based trader remarked. The barrel price of West Texas Intermediate crude oil for July 2016 deliver was down 84 cents, or 1.66%, at $49.72 in the mid-morning.

Profit-taking was also taking its toll on prices, as was a bit of deal indigestion, a trader said, noting that $11.5 billion of new junk was priced over the past week.

Among recent issues, Dell Inc.’s unsecured bonds (Ba2/BB/BB+) were a little weaker with the market on Friday morning, with the 5 7/8% notes due June 15, 2021 at par ¼ bid, par ½ offered and the 7 1/8% notes due June 15, 2024 trading either size of 101.

The $3.25 billion deal came in a pair of equal sized tranches, both of which priced at par on Wednesday.

New deals on deck

In the primary market, a pair of dollar-denominated deals were on deck to price before the weekend.

Weatherford International Ltd. cut short the roadshow for its new two-part offering of senior notes (expected ratings B2/BB-) and upsized the deal to $1.25 billion from $1 billion.

The deal features five-year notes talked to yield in the 7¾% area and seven-year notes talked to yield in the 8¼% area.

Tranche sizes remain to be determined.

And Direct ChassisLink, Inc. talked its $325 million offering of seven-year senior secured second-lien notes (B3/BB-) to yield in the 9% area.

Official talk comes at the wide end of earlier guidance in the high 8% to 9% range, sources say.

Meanwhile in Europe, ContourGlobal Power Holdings SA is expected to price €550 million of five-year senior secured notes (expected ratings /BB/BB-) on Friday. The deal is talked in the 5¼% area.

And Titan Cement Co. SA priced an upsized €300 million issue of non-callable five-year senior notes (BB) at par to yield 3½% earlier Friday.

The issue size was increased from €250 million.

The yield printed on top of yield talk.

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