Morning Commentary: United Rentals to price $1.1 billion drive-by; Endeavor Energy jumps

By Paul A. Harris

Portland, Ore., Oct. 24 – The dollar-denominated high-yield bond primary market continued to generate news on Wednesday morning.

United Rentals (North America) Inc. disclosed plans to price $1.1 billion of eight-year senior notes (Ba3/BB) in a drive-by.

Price talk is in the 6½% area, on top of initial guidance, a trader said.

Wells Fargo Securities LLC is the left bookrunner for the deal backing the company's acquisition of heavy equipment rental firm BlueLine Rentals from Platinum Equity for about $2.1 billion in cash.

Elsewhere Vector Group Ltd. started a roadshow for a $325 million offering of eight-year senior notes.

The debt refinancing and general corporate purposes deal, via bookrunner Jefferies LLC, is set to price early in the Oct. 29 week.

Endeavor up 4 points

The junk market opened “flattish” on Wednesday morning, pretty much in line with equities that were flat to slightly lower, a New York-based trader said.

High-yield ETFs were flat at mid-morning. The iShares iBoxx $ High Yield Corporate Bd (HYG) was up 2 cents, or 0.02%, at $84.88 per share.

The bonds of Texas fracker Endeavor Energy Resources LP traded sharply higher on news in the Wall Street Journal that the company is exploring a sale that could value the privately held company at more than $10 billion.

The Endeavor Energy Resources, LP/EER Finance, Inc. 5¾% senior notes due January 2028 were up nearly 4 points at 102 bid, the trader said.

Recently battered crude oil prices staged a modest recovery Wednesday morning.

The barrel price of West Texas Intermediate crude for December 2018 delivery was 39 cents better at $66.82, up 0.59% at mid-morning.

The bonds of California Resources Corp., used by some high-yield investors to track the price of crude oil, improved in line with the modest recovery, according to the trader, who spotted the California Resources 8% second-lien notes due December 2022 up half a point at 93¾ bid, 94½ offered.

Among recent issues, the new Netflix, Inc. senior bullet notes due May 2029 (Ba3/BB-) were hanging above new issue prices one day after the Los Gatos, Calif.-based media services provider placed $2.06 equivalent of the paper in a drive-by.

The Netflix dollar-denominated 6 3/8% notes were par ½ bid, par 7/8 offered. The $800 million tranche priced at par.

The Netflix euro-denominated 4 5/8% notes lagged their dollar-denominated counterparts at par 1/8 bid, par ¼ offered.

Accounts from the United States comprised a healthy portion of the audience for the Netflix euro-denominated 4 5/8% bonds, an investor said.

Mixed Tuesday flows

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

The outflows of the high-yield ETFs moderated somewhat. The ETFs sustained $105 million of outflows on Tuesday. That follows $308 million of outflows on Monday, $549 million of outflows last Friday and $994 million of outflows last Thursday.

Actively managed high-yield funds were flat to slightly positive on Tuesday, as they saw $5 million of inflows on the day, the trader said.

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