Morning Commentary: Macy's bonds improve post-earnings; Sylvamo senior notes on deck

By Paul A. Harris

Portland, Ore., Aug. 20 – Junk opened weaker on Friday but was retaking lost ground at mid-morning, sources said.

At that time, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was up 15 cents, or 0.17%, at $87.23.

Shorter dated bonds of Macy's improved on news that its second-quarter profits beat analysts' estimates, that it reinstated its dividend and that it intends to deleverage its balance sheet with an eye to regaining its high-grade credit ratings, a trader said.

The Macy's Retail Holdings Inc. 4 3/8% senior notes due September 2023 were up a point at 104 bid.

The department store company’s longer dated paper was unchanged to slightly lower, the trader added.

The Macy's 5 1/8% senior notes due January 2042 were 94¼ bid, 95¼ offered on Friday morning. The 4.3% senior notes due February 2043 were 86 bid, 87 offered.

Macy's relinquished its investment-grade credit ratings in April 2020 as the economic impact of the global pandemic quickly took hold of the bricks and mortar retail sector.

Elsewhere, news that car makers continue to labor against a shortage of essential microchips failed to push recent automotive-related issues one way or the other, the trader said.

Bonds recently sold by Carvana Co., a seller of used cars, which, amid the chip shortage, are commanding a premium, continued to lag issue price.

The Carvana 4 7/8% notes due September 2029 were 98¾ bid, 99¼ offered, with no prints on Friday, the trader said.

The $750 million issue priced at par on Aug. 12.

American Axle & Manufacturing, Inc.’s 5% senior notes due October 2029 (B2/B+) were also lagging their issue price on Friday, at 98 1/8 bid, 99¼ offered, unchanged.

The $600 million issue priced at par last Monday.

Ford Motor Credit Co. LLC’s 2.7% senior bullet notes due August 2026 (Ba2/BB+/BB+) were slightly above their new issue price on Friday at par bid, par ½ offered.

The $1.5 billion issue priced at par on Aug. 5.

Away from automotive-related paper, the most recent deal to clear the market was turning in a solid performance on Friday morning.

Pilgrim's Pride Corp.’s 3½% senior notes due March 2032 (B1/BB+/BBB-) were 101 3/8 bid, 101 7/8 offered where they popped on the break Thursday.

Trading in that paper was fairly active on Friday morning, the trader added.

The upsized $900 million issue (from $750 million) priced at par in a deal heard to be two-times oversubscribed at the close of books.

Sylvamo on tap

In the new issue bourse, the market is focused on Sylvamo Corp.'s downsized $450 million offering (from $500 million) of eight-year senior notes (B1/BB).

The sole deal left on the active forward calendar, books were set to close at mid-morning Friday.

The deal was talked Thursday at 6¾% to 7%, well wide of early guidance in the high 5% area.

Along with price talk came covenant changes.

The order book was heard to be around deal-size on Friday morning, the trader said.

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