Morning Commentary: Wednesday deals trade up; funds eye first weekly inflows in 11 weeks

By Paul A. Harris

Portland, Ore., March 31 – The high-yield bond market opened unchanged on the final day of March, according to a trader in New York.

With the major stock indexes in the United States all off half a percent or less at mid-morning on Thursday, the iBoxx $ High Yield Corporate Bd (HYG) share price was essentially flat at $82.54, down 4 cents, or 0.05%.

Sustainability-linked bonds sold Wednesday in support of Apollo Global Management's buyout of Novolex Holdings LLC were trading at premiums to their new issue prices in reasonably active trading on Thursday morning, the trader said.

The Clydesdale Acquisition Holdings, Inc. (Novolex) 6 5/8% senior secured notes due April 2029 (B1/B) were wrapped around 101, up 1 point to 1¼ points.

The downsized $500 million issue (from $750 million) priced at par and saw $3.5 billion of demand, sources said.

The Clydesdale Acquisition Holdings 8¾% senior notes due April 2030 (Caa2/CCC+) were ¼ point better, wrapped around 94.

The downsized $1.11 billion issue (from $1.23 billion) priced at 93.87 to yield 9 7/8%.

Altogether, Novolex downsized the bond portion of its financing by $370 million, shifting that amount to its bank loan, which ended up at a size of $3 billion and was heard to be a blowout.

Meantime the Churchill Downs Inc./CDI Escrow Issuer Inc. 5¾% senior notes due April 2030 (B1/B) were par ¾ bid, 101¼ offered on Thursday morning, also in reasonably active trading.

The upsized $1.2 billion issue (from $900 million) supporting the acquisition of Peninsula Pacific Entertainment LLC priced at par on Wednesday afternoon, playing to $3 billion of demand.

The primary market lapsed back into dormancy on Thursday morning, with the forward calendar finishing March devoid of active new issue business.

Fund flows

The dedicated high-yield bond funds saw $982 million of daily net inflows on Wednesday, according to a market source.

High-yield ETFs saw $848 million of inflows on the day.

Actively managed high-yield funds saw $134 million of inflows on Wednesday, the source said.

The combined funds are tracking $1.05 billion of net inflows for the week to Wednesday's close ahead of a weekly report on the fund flows of the various asset classes expected later Thursday from Refinitiv Lipper.

Should positive weekly cash flow numbers for the junk funds indeed materialize, as expected, they would represent the first weekly inflows to those funds in 11 weeks, according to the market source.

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