Morning Commentary: New DISH bonds trade back above issue price; funds see inflows

By Paul A. Harris

Portland, Ore., Nov. 8 – After opening unchanged, junk bonds were generically ¼ point to ½ point better at mid-morning on Tuesday, according to a bond trader in New York.

With the S&P 500 stock index up 0.81% at mid-morning, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was up 10 cents, or 0.13%, at $72.99.

Bonds priced Monday by DISH Network Corp. recovered losses they sustained when they broke for trading late in the afternoon, sources said.

The DISH 11¾% senior secured notes due November 2027 (Ba3/B+) were 98 3/8 bid, 98 5/8 offered on Tuesday morning, according to the New York-based bond trader.

The notes priced on Monday at 98.171 to yield 12¼% in a $2 billion issue and broke lower, to 97½ bid, 97¾ offered, the trader recounted.

Accounts spoke of receiving full allocations, sources say.

Investors, possibly anticipating that the issue would be left more or less to fend for itself without much stabilizing support from the dealer, laid in wait and began jumping in when the price dropped to 97½, another trader said.

The market heard that DISH wanted to upsize the offering to as much as $3.5 billion in order to raise cash sufficient to complete the buildout of its 5G network, sources said.

“They obviously didn't have the book,” a trader remarked, adding that the company is expected to return sooner than later, looking to raise as much as another $2 billion.

Meantime the new Faurecia SLB 7¼% senior sustainability-linked notes due June 2026 (Ba2/BB/BB+), which priced on Monday at par in a €700 million issue, opened in London on Tuesday at par ¾ bid, 101¾ offered, a market source said.

The deal upsized from €550 million after upsizing earlier from €400 million and priced tight to talk.

There were no new issue announcements in the early going on Tuesday.

However, with the capital markets rallying, look for timing to be accelerated on the Neptune BidCo US Inc./Nielsen Holdings plc $1.96 billion offering of senior secured notes due April 15, 2029 (B2/B), market sources advise.

With official price talk pending at mid-morning on Tuesday, the deal has been guided to come at a discount in the low 90s, to yield in the high-10% to low-11% area.

Some investor friendly covenant changes kindled demand, heard to be around $3 billion, early Tuesday, a trader said, and added that the Tuesday rally would likely see demand for the Nielsen paper to intensify.

The offering has been in the market on a timeline which had pricing expected on Wednesday.

Timing could also be accelerated on the Spirit AeroSystems $800 million offering of senior secured notes due November 2029 (Ba2/BB-), a trader said.

The deal, which was announced on Monday, is in the market with initial guidance of 9½% to 9¾%, with pricing expected on Wednesday.

However, it could be moved up to Tuesday business, the trader said.

Monday inflows

The dedicated high-yield bond funds saw $457 million of daily net inflows of cash on Monday, according to a market source.

High-yield ETFs saw $384 million of inflows on the day.

Actively managed high-yield funds saw $73 million of inflows on Monday, according to the market source.

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