Morning Commentary: Junk rallies into new week; Bausch Health bonds trading at premiums

By Paul A. Harris

Portland, Ore., Feb. 25 – Junk rallied into the new week, with the index up ¼ point or better in Monday morning trading, a New York-based trader said.

High-yield ETFs were better on the morning. The iShares iBoxx $ High Yield Corporate Bd (HYG) was up 0.22%, or 19 cents, at $85.78 per share.

Bonds priced Friday in a well oversubscribed deal from Bausch Health were trading at premiums on Monday morning.

The Bausch Health Cos., Inc. new 5¾% secured notes due August 2027 (Ba2/BB-) were 101 3/8 bid, 101 7/8 offered on Monday.

The $500 million tranche priced at par.

The Bausch Health Americas Inc. (formerly Valeant Pharmaceuticals International) add-on to the 8½% unsecured notes due January 2027 (B3/B-) were 104 bid, 104½ offered on Monday.

The upsized $1 billion tap (from $750 million) priced at 103¼ on Friday.

The recently priced USA Compression Partners, LP 6 7/8% senior notes due September 2027 (B3/B+/BB-) were trading at 101 7/8 bid, 102 3/8 offered on Monday morning.

The upsized $750 million issue (from $500 million) priced at par on Thursday.

Away from recent issues the McDermott International, Inc. 10 5/8% notes due May 2024 were up 1¼ points on Monday at 79 1/8 bid.

However, that paper was trading in the low-to-mid 90s in early February before McDermott reported a $168 million adverse charge due to unfavorable labor productivity and increases in subcontract, commissioning and construction management costs related to the Cameron LNG project.

And the Beazer Homes USA, Inc. 5 7/8% senior notes due October 2027 were up 7/8 of a point at 87 1/8 on Monday, the New York-based trader said.

The primary market was quiet on Monday morning.

However, the new issue market is expected to be active during the February-March crossover week, sources say.

In particular the JPMorgan Global High Yield & Leveraged Finance Conference, taking place Monday through Wednesday in Miami, is expected to generate some primary market business, they add.

Mixed Friday flows

The daily cash flows of the dedicated high-yield bonds funds were mixed on Friday, according to a trader.

High-yield ETFs saw $238 million of inflows on the day.

However actively managed high-yield funds sustained $36 million of outflows on Friday, the source added.

The combined funds posted a robust $4.1 billion of net inflows in February to Friday’s close, the trader said.

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