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Morning Commentary: HEMA bonds inch higher despite downgrade; junk opens week unchanged
By Paul A. Harris
Portland, Ore., Dec. 23 – Amid low liquidity in the pre-holiday high-yield bond market, the euro-denominated notes of Amsterdam-based retailer HEMA Stores were slightly better on Monday in spite of the recent downgrades from S&P Global Ratings, according to a market source.
The HEMA BondCo I BV Euribor plus 625 basis points senior secured floating-rate notes due July 2022 were 81½ bid, 83 offered, up 1/8 on the day, the source said.
Late last week S&P cited increasing refinancing risk and the possibility of a distressed restructuring due to still-weak cash generation under the current capital structure and bond trading as it downgraded HEMA and its senior secured notes to CCC from B-.
Meanwhile, with the major U.S. stock indexes in the green at mid-morning, high-yield ETF share prices were unchanged to slightly better.
The iShares iBoxx $ High Yield Corporate Bd (HYG) was up 4 cents, or 0.05%, at $87.76 per share.
The high-yield new issue market was quiet as the Christmas week got underway.
Following a highly active post-Thanksgiving primary market, $19 billion in 32 junk-rated, dollar-denominated bond tranches compressed into 14 market sessions, participants appeared to be looking toward holiday plans on Monday as telephone calls went unanswered and voicemail picked up.
Given late 2019 market conditions, January should be an active month, as prospective issuers attempt to access the market ahead of a big February earnings blackout, sources say.
However the active forward calendar was empty on Monday, and is quite likely to remain that way until early January, they add.
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