Nordic primary active; Garrett on tap; First Quantum, DaVita trade down; funds add $97 million

By Paul A. Harris and Abigail W. Adams

Portland, Me., Aug. 30 – While the domestic primary market remained dormant on Thursday, there was signaling of the active weeks that lay ahead with one deal joining the forward calendar.

Garrett Motion Inc. plans to issue $510 million equivalent of senior notes (B2/B) in the return from the Labor Day holiday.

While the major currencies continued to take a breather, the Nordic market was busy. Ship Finance International Ltd. announced it placed NOK 600 million in five-year senior notes.

Netherland's-based Veritas Petroleum Services BV and Norway-based Odfjell Group plan to hold fixed-income investor meetings to be followed with possible offerings.

Meanwhile, the secondary space remained quiet with light trading volume ahead of the holiday weekend.

First Quantum Minerals Ltd.’s junk bonds continued to lose ground in active trading on Thursday due to the plummeting cost of copper.

DaVita Inc.’s junk bonds were also under pressure as California seeks to enact legislation limiting the amount the dialysis center operator can charge customers.

After a large drop on Wednesday, Digicel Group’s junk bonds rebounded Thursday with some notes up as much as 4 points.

Meanwhile, high-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall liquidity trends in the junk market – continued their streak of inflows for the week ended Aug. 29, adding $97 million, according to fund-flow statistics generated by AMG Data Services Inc.

The week marks the fifth consecutive week of inflows, making August the first month of the year where cash has continually entered the space.

Garrett on deck

With the major currencies market having put up the shutters more than a week ago, as the market takes its traditional pre-Labor Day breather, the lights flickered on Thursday.

Garrett Motion plans to issue $510 million equivalent of senior notes (B2/B), as part of the debt financing for the spinoff of the company from Honeywell International Inc.

The financing also includes $1.65 billion of credit facilities set to launch at bank meetings on Monday in London, and on Wednesday in New York. J.P. Morgan Securities LLC is the lead bank on the deal.

Nordic primary active as Ship Finance prices

Away from major currencies there was news from the Nordic bond market.

Ship Finance International announced that it placed NOK 600 million of NIBOR plus 475 basis points five-year senior unsecured bonds.

Danske Bank, DNB Markets, Nordea and SpareBank 1 Markets were the joint lead managers.

The Hamilton, Bermuda-based operator of tankers, bulkers, container vessels and offshore assets plans to use the proceeds for refinancing of existing debt and general corporate purposes.

Elsewhere, Netherlands-based Veritas Petroleum Services announced that it has engaged Arctic Securities AS and ABG Sundal Collier ASA to arrange investor meetings beginning on Monday.

A possible fixed income transaction may follow, subject to market conditions.

And Norway-based Odfjell Group announced it plans to hold a number of fixed income investor meetings in the coming days ahead of a planned NOK-denominated senior unsecured bond.

Clarksons Platou Securities AS, Pareto Securities AS and Swedbank Norge are arranging the meetings.

First Quantum in focus

First Quantum’s junk bonds were again down in active trading on Thursday, a move sources attributed to the plunging price of copper.

The Vancouver-based mining company’s 6 7/8% senior notes due 2026 were down another point to trade at 94.

The notes were the most active in the secondary space with $14 million of the bonds on the tape.

The notes were also down 1¼ point on Wednesday.

The company’s 7½% senior notes due 2025 were also down 1 point to 97 3/8. About $12.5 million of the bonds were on the tape.

The notes were trading down based on the technicals in copper, a market source said.

The price of copper was down 20% from its 52-week high on Thursday, settling around $2.6975.

DaVita drops

DaVita’s 5% senior notes due 2025 were also dropping in active trading on Thursday.

The notes were down about 1¼ point to trade between 95¼ and 95½, according to a market source.

The 5% notes were also volume leaders on Thursday with more than $11 million of the bonds on the tape.

The dialysis center operator’s 5 1/8% senior notes due 2024 dropped about 1½ points to trade at 97. However, the 5¾% senior notes were largely unchanged at 101½.

Davita’s bonds were down alongside the company’s equity after California initiated legislation to limit the price Dialysis centers can charge patients.

The bill passed the state assembly on Wednesday but must still be approved by the state senate and the governor before becoming law, 247wallst.com reported.

Digicel rebounds

After a large drop on Wednesday, some of Digicel’s junk bonds were rebounding on Thursday.

Digicel’s 8¼% senior notes due 2020 climbed 4 1/8 point on Thursday to trade up to 71, according to a market source.

More than $13 million of the bonds were on the tape by the late afternoon.

The notes dropped 3 5/8 points Wednesday but surpassed their previous level prior to Wednesday’s slide.

Digicel’s 6% senior notes due 2021 rose about ¾ point to 91¾ with about $11 million of the bonds on the tape.

While the 6% notes pared some of their losses from Wednesday, they are still below their previous levels.

The notes dropped 3¼ points on Wednesday.

Digicel’s junk bonds were under pressure Wednesday after the company’s chief financial officer resigned after one year on the job.

Digicel also announced disappointing earnings on Wednesday with the company’s leverage increasing slightly despite its goal to deleverage.

Wednesday’s inflows

The daily cash flows of the dedicated high-yield bond funds were positive on Wednesday, the most recent session for which data was available at press time, an investor said.

High-yield ETFs saw $38 million of inflows on the day.

Actively managed funds saw $20 million of inflows on Wednesday, the investor added.

Indexes down

Three benchmarks for the high-yield secondary market posted losses on Thursday after a mixed week.

The KDP High Yield Daily index dropped 7 basis points to close Thursday at 70.47 with the yield now 5.80%.

The index was flat at 70.54 with the yield 5.78% on both Wednesday and Tuesday. The index was up 6 basis points on Monday and gained 9 bps last week.

The Merrill Lynch High Yield index broke a long stretch of gains on Thursday.

The index dropped 4 bps with the year-to-date return now 1.953%. The loss marks the index’s first in several session.

The index was up 1.8 bps on Wednesday, 1.9 bps on Tuesday and 9.8 bps on Monday.

The index has seen solid upward momentum since it crossed into the black on July 6 after a long stretch in the red. While down on Thursday, the index remains within sight of a 2% year-to-date return.

The CDX High Yield 30 index saw a significant drop on Thursday. The index was down 29 bps to close Thursday at 106.79.

The index was down 7 bps on Wednesday and 2 bps on Tuesday after rising 18 bps on Monday. The index saw a 27 bps gain last week but is poised to close the current week with losses.

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