Morning Commentary: Junk opens unchanged; ams-Osram bonds trade at handsome premiums

By Paul A. Harris

Portland, Ore., Nov. 21 – The junk bond market opened unchanged on Tuesday, with the market in pre-holiday mode amid reduced trading activity as the Thanksgiving holiday approaches, according to a bond trader in New York.

At mid-morning, with the Dow Jones industrial average off 0.22%, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was flat to slightly lower, down 0.03%, or 3 cents, at $74.82.

Recent issues have been turning in varied secondary market performances, the trader said.

The ams-Osram AG dollar-denominated 12¼% senior notes due March 2029 (B2/BB-/BB-) were wrapped around 101 on Tuesday morning, having appreciated almost 2 points in price since the bonds allocated last Thursday, according to the source.

The $400 million tranche came at 99.087, part of a dollar and euro deal that also featured €625 million of similarly structured 10½% notes due March 2029.

Those euro-denominated bonds were trading on Tuesday at a whopping 102 3/8 (priced at 99.034), according to a debt capital markets banker in London, who wonders whether the Munich-based electric light manufacturer might have left some money on the table.

Meanwhile, the recently priced Verde Purchaser, LLC 10½% senior secured notes due November 2030 (B2/B+) changed hands on Tuesday at 99¼, unchanged on the day, the trader said.

The $700 million issue, which came last Friday in support of the CD&R’s buyout of Veritiv Corp., priced at par.

Elsewhere, the Nabors Industries, Inc. 9 1/8% senior priority guaranteed notes due January 2030 (Ba3/B-/B+) were trading below issue price at 99 5/8 bid, 99 7/8 offered, according to the trader.

The upsized $650 million issue (from $550 million) priced at par in a drive-by last Wednesday.

And the Avis Budget Car Rental, LLC/Avis Budget Finance, Inc. 8% senior notes due Feb. 15, 2031 (B1/BB-) were 98½ bid, 99 offered on Tuesday, the trader said.

The $500 million issue priced at 99.341 in a drive-by, also last Wednesday, the trader noted, adding that the book, which was slow to build, might have gotten stronger had the deal remained in the market a little longer.

In the run-up to Thanksgiving – which numerous market participants will turn into a four-day holiday weekend – the activity level of the high-yield ETFs has fallen appreciably, as measured by the comparatively low volumes of bids-wanted-in-competition (BWICs) and offers-wanted-in competition (OWICs), the trader said.

The fortunes of the above-mentioned sub-par bonds could improve in the week ahead as the ETFs, when they are buyers, frequently shop the recent issues, the source added.

The primary market, itself, remained quiet on Tuesday.

A pre-holiday reactivation of the new deal machine, while extremely unlikely, is not impossible, sources say.

The active forward calendar stood empty on Tuesday and is apt to remain that way until the week ahead, they add.

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