Junk opens weaker; Rite-Aid lower in early trading; CMA CGM upsizes

By Paul A. Harris

Portland, Ore., July 6 – High-yield bonds were a touch weaker at midmorning amid thin post-holiday trading volume, as negative sentiment in the energy space – 14% of the junk index – continued to take its toll, a trader said.

An outlook seems to have taken hold that energy is headed lower in the intermediate term and hedge funds are shorting names such as Chesapeake Energy Corp., Halcon Resources Corp. and EP Energy Corp., the source added.

Oil prices were firmer at midmorning, however.

The per-barrel price of West Texas Intermediate crude for August 2017 delivery was 70 cents higher on the day at $45.83, 1.55% higher.

Elsewhere the bonds of Rite Aid Corp. were a little weaker on the morning, down with the company’s share price, continuing a selloff that appears overdone to this trader.

The most active bonds have been the Rite Aid 6 1/8% senior notes due April 1, 2023 and the 6¾% senior notes due June 15, 2021, both of which have fallen about 2 points since the June 29 news that a merger with Walgreens had been abandoned in favor of a scaled-down transaction in which Rite Aid will sell stores to its bigger rival.

The Rite Aid 6 1/8% notes due 2023 were at 98¼ bid, 98½ offered at midmorning.

Among recent issues, Kinross Gold Corp.’s split-rated 4½% senior bullet notes due 2027 (Ba1/BB+/BBB-), which spent late June trading above their new issue price, were at 99¾ bid, par offered on Thursday morning.

The $500 million issue priced at par on June 28 and traded to par ¼ bid, par ½ offered right out of the chute, the trader recounted.

The primary

The dollar-denominated primary market remained becalmed on Thursday morning as market participants continue to resume their desks following an extended July 4 Independence Day holiday which saw numerous players wrap up Monday, July 3 (when the market was technically open) into a four-or-more day holiday weekend.

Some buyside players have scratched off the entire week, an investment banker said on Thursday morning.

The European primary is a different story, as it has been generating steady-to-heavy news volume for the past 10 days.

Among the latest headlines, France-based containership company CMA CGM SA upsized its offering of five-year senior notes (B3/CCC+) to €600 million from €500 million and set yield talk in the 6 ½% area.

The issuer is also considering a carve-out tranche of seven-year notes with yield talk 50 basis points wide of the five-year notes.

The roadshow was scheduled to conclude on Thursday.

At midmorning the market also awaited terms on Kloeckner Pentaplast’s €395 million offering of six-year PIK toggle notes, talked on Wednesday with a cash yield in the 8½% area.

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