Morning Commentary: SPX Flow/Redwood Star on roadshow; junk secondary opens lower

By Abigail W. Adams

Portland, Me., March 7 – The domestic high-yield bond primary market saw some activity on Monday despite the continued volatility in markets.

Redwood Star Merger Sub. Inc. (SPX Flow Inc.) started a roadshow for a $570 million offering of eight-year non-call three-year senior notes (Caa2/CCC) that will run through March 17.

Early guidance for the leveraged buyout deal is for a yield in the high 8% to 9% area, according to a market sources.

Proceeds, together with cash on hand, borrowings under the senior secured credit facility and proceeds from equity will be used to support Lone Star Funds’ acquisition of SPX Flow.

The deal is the sole offering on a calendar that has been sidelined by the volatility in the markets, sources said.

However, the primary market is expected to be active in the coming week with estimates of $5 billion to $7 billion in issuance.

Meanwhile, the secondary space opened lower on Monday with the cash bond market down ¼ point early in the session with the conflict in the Ukraine continuing to weigh down the market, a source said.

Exchange-traded funds were a main driver of the selling pressure in the market as retail funds continued to leave the space.

ETFs saw $496 million of outflows on Friday, according to the most recent data available. However, actively managed funds saw inflows of $27 million.

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