Morning Commentary: Junk eases with oil price; new Calfrac 8½% notes trade to smart premium

By Paul A. Harris

Portland, Ore., May 16 – Junk opened flat to slightly lower on Wednesday as the price of crude oil eased, according to a bond trader.

The barrel price of West Texas Intermediate crude for June 2018 delivery was off 0.5%, or 36 cents, at $70.95 at mid-morning.

High-yield ETFs were flat to slightly higher. The SPDR Blmbg Barclays High Yield Bd ETF (JNK) was up 3 cents, or 0.07%, at $35.67 per share.

Among recent issues, the new Calfrac Holdings LP 8½% senior notes due June 2026 (B3/B-) were trading well at 101 bid, 101¼ offered, said the trader, who was seeing a decent amount of smaller prints at 101.

The $650 million issue price at par on Tuesday, at the wide end of the 8¼% to 8½% yield talk.

Calfrac appeared to have a good following, according to the trader, who added that the orders were said to be approaching deal size at the tight end of that talk, and exceeded deal size at the wide end, 8½%.

Meanwhile the new MSCI Inc. 5 3/8% senior notes due May 2027, a nine-year deal, were par bid, par ¼ offered and not really going anywhere on Wednesday morning, the trader said.

The $500 million deal came Tuesday amid structural changes that saw the maturity extended to nine years from 8.5 years and call protection increased to four years from 3.5 years. It remained in the market a day longer than anticipated.

The MSCI 5 3/8% yield printed at the wide end of yield talk in the 5¼% area. Pricing on the deal crept wider from the time it was announced as an expected drive-by on Monday. Early guidance was in the low 5% area.

TMX roadshow

Activity in the new issue market was muted on Wednesday morning.

TMX Finance LLC plans to start a roadshow on Thursday for a $450 million offering of five-year senior secured notes via Jefferies LLC.

The Savannah, Ga.-based consumer finance company plans to use the proceeds to refinance its 8½% senior secured notes due Sept. 15, 2018.

The May 14 week should see a big finish in the primary market, with at least eight offerings – deals coming in dollars, euros and pounds sterling – poised to clear before the weekend.

Much of the European business is scheduled to price on Friday, according to a London-based debt capital markets banker.

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