Morning Commentary: Univision, KB Home bring deals; junk rallies in line with stocks

By Paul A. Harris

Portland, Ore., June 7 – After opening ¼ point lower on Tuesday, the high-yield bond market rallied back in line with improving equities and was unchanged at mid-morning, sources said.

With the S&P 500 stock index up 0.4% at mid-morning, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was unchanged at $78.05.

There was news in the primary market.

KB Home plans to price a $350 million public offering of eight-year senior notes (Ba2/BB) in a Tuesday drive-by.

Initial guidance is in the high-6% area, including an original issue discount.

And Univision Communications Inc. plans to shop a $500 million offering of eight-year senior secured notes (B1/B+) on an investor conference call scheduled to get underway at 2 p.m. ET on Tuesday.

Initial guidance has the notes coming to yield in the high-7% area to 8%.

Univision is set to run a roadshow through the remainder of the week, with books closing on Friday.

Turing to the calendar Cogent Communications Group, Inc. talked its $450 million offering of five-year senior notes (B3/B) to yield 7% to 7¼%, tight to initial guidance in the low-to-mid 7% area.

That deal was announced at the beginning of the week.

The order book was heard to be two-times oversubscribed at mid-morning, a sellside source said.

Books close at 1:15 p.m. ET on Tuesday.

Among existing issues, the Advanced Drainage Systems Inc. 6 3/8% senior notes due June 2030 (Ba2/B+) were down ½ point on the morning at 101¼ offered, the sellsider said, adding that they closed on Monday at 101½.

The most recent issue to clear the market, Advanced Drainage priced the $500 million deal at par last Thursday.

Elsewhere the Builders FirstSource, Inc. 6 3/8% senior notes due June 2032 (Ba2/BB-) were ¾ of a point lower early Tuesday at 99.313 bid, in fairly active trading, the sellsider said.

The notes went out at 100.05 bid on Monday.

The $700 million issue priced at par last Wednesday.

Monday fund flows

High-yield ETFs sustained $525 million of daily cash outflows on Monday, according to a market source.

Actively managed high-yield funds were positive on the day, posting $150 million of inflows on Monday, the source said.

The combined funds are tracking $1.06 billion of net inflows for the week that will conclude with Wednesday's close, according to the market source.

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