Morning Commentary: WeWork bonds up as Softbank set to increase stake; Uber eyes market

By Paul A. Harris

Portland, Ore., Oct. 10 – The high-yield bond market in the United States awoke to the news that for the second time in three sessions high-yield ETFs saw record daily cash outflows, according to an investor.

The junk ETFs sustained $1.6 billion of outflows on Tuesday, a new record, eclipsing $1.43 billion of outflows seen last Friday, a record which stood for three days.

This set in motion a massive $1.55 billion amount of bids-wanted-in-competition (BWIC) lists, a bond trader said.

Amid a big sell-off in equities, high-yield ETFs were off sharply at mid-morning. The iShares iBoxx $ High Yield Corporate Bd (HYG) was down 0.41%, or 35 cents, at $84.89 per share.

WeWork improves

In the secondary market WeWork Cos. Inc.'s bonds were up 3 points, at 98½ bid, on news that Japan's Softbank, via its Saudi Arabia-backed Vision Fund, is set to invest another $10 billion in the Manhattan-based workspace technologies company.

Among recent issues, the W&T Offshore, Inc. 9¾% second-lien notes due November 2023 (B3/B) were par bid, par ½ offered on Wednesday, basically unchanged, the investor said.

The $625 million issue priced at par to yield 9¾% on Friday.

Meanwhile the big Refinitiv dollar-denominated issues were variously lagging or straddling new issue prices on Wednesday, the investor said.

The dollar-denominated 6¼% first-lien notes due May 2026 (B2/B/BB+) were 99¾ bid, par ¼ offered on Wednesday. The $1.25 billion tranche priced at par on Sept. 18.

The dollar-denominated unsecured notes, the 8¼% senior notes due November 2026 (Caa2/B-/B+), were 97½ bid, 98 offered. The $1,575,000,000 tranche priced at par, also on Sept. 18.

Primary market quiet

The new issue market remained generally mute on Wednesday, as issuers continue to gauge the cost of capital against recent massive moves in Treasury rates.

Most of the action is coming from the European high-yield primary market.

Luxembourg-based Millicom International Cellular SA, which operates in Latin America and Africa, was expected to wrap up an international roadshow for its $500 million offering of eight-year senior notes (expected ratings Ba2/BB+) on Wednesday in New York.

Although it is dollar-denominated junk, the deal, to help fund Millicom’s acquisition of an 80% stake in Panama-based Cable Onda, is unlikely to be traded on the U.S. high-yield desk, a trader said.

Early price talk is in the mid-6% area, the source added.

And Uber Technologies Inc. is premarketing $1.5 billion of high-yield bonds, the trader said.

The deal includes $500 million of five-year notes guided in the 7½% area and $1 billion of eight-year notes guided in the 8½% area.

Morgan Stanley & Co. LLC is leading the effort.

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