Morning Commentary: DaVita bonds slip on Fresenius growth forecast; UGI talk 3¼%-3½%

By Paul A. Harris

Portland Ore., Oct. 17 – Although equities and oil prices were lower, high-yield bonds opened unchanged on Wednesday, a trader said.

High-yield ETF share prices were lower.

The iShares iBoxx $ High Yield Corporate Bd (HYG) was down 0.2%, or 17 cents, at $85.21 per share at mid-morning.

The DaVita HealthCare Partners Inc. 5% senior notes due May 2025 were down a point at 93¾ bid, after Fresenius Medical Care AG & Co. KGaA warned in an earnings report that growth in demand for dialysis services in North America is expected to slow.

Among recent issues, the Refinitiv US Holdings Inc. 8¼% senior notes due November 2026 (Caa2/B-/B+) were 1/8 point lower on Wednesday at 98 7/8 bid.

The $1,575,000,000 tranche priced at par in mid-September as part of a $4.25 billion equivalent four-tranche deal.

UGI talk 3¼% to 3½%

News flow in the new issue market was low on Wednesday morning, with most of the news coming from Europe.

UGI International, a subsidiary of UGI Corp., set initial price talk for its €300 million offering of seven-year senior notes (Ba1//BB+) at 3¼% to 3½%.

The deal is set to price on Thursday.

Joint global coordinator and physical bookrunner BNP Paribas will bill and deliver. Joint bookrunner HSBC is also a joint global coordinator. Credit Agricole, ING, Mediobanca, Natixis and SG are also joint bookrunners.

Tesco plc (Ba1/BB+/BBB-) priced a split-rated €750 million issue of 1 3/8% five-year guaranteed senior notes at a 110 basis points spread to mid-swaps.

The spread came on top of spread talk, which had been revised from earlier guidance in the 115 bps area.

The deal, which came in an investment-grade execution, played to €4.4 billion of orders.

The only dollar-denominated deal in the public market is Nine Energy Service, Inc.'s $400 million offering of five-year senior notes (B3/B).

Initial talk is in the 9% area, and the deal is on track to price on Friday, a trader said.

Mixed Tuesday flows

The daily cash flows of the dedicated high-yield bond funds were mixed on Tuesday, a trader said.

High-yield ETFs saw $269 million of inflows on the day.

However, actively managed high-yield funds sustained $165 million of outflows on Tuesday, the source said.

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