Morning Commentary: Merger talks lift Intelsat bonds; ETFs see big Tuesday outflows

By Paul A. Harris

Portland, Ore., March 29 – After opening ¼ point better on Wednesday, cash high-yield bonds were up ¼ to 3/8 of a point at mid-morning, according to a bond trader in New York.

With the S&P 500 stock index up 1.05% at mid-morning, the Shares iBoxx $ High Yield Corporate Bd (HYG) share price was up 0.7%, or 51 cents, at $73.89.

News that Virginia-based Intelsat SA is in merger talks with Luxembourg-based SES SA to form a giant satellite services combination, gave a big lift to Intelsat secured bonds on Wednesday morning, the trader said.

The Intelsat Jackson Holdings, SA 6½% first-lien secured notes due 2030 were 90 bid, 90¼ offered, up 6 points on the morning, according to the source, who noted that those bonds went out Tuesday at 84½ bid, 85 offered.

SES confirmed in a Wednesday press release that the talks are taking place.

Elsewhere, the first new dollar-denominated issue to clear the market since early March, the LABL, Inc. 9½% senior secured notes due Nov. 1, 2028 (B2/B-), were trading very tight, at par 7/8 bid, 101 1/8 offered at mid-morning on Wednesday, the trader said.

Those bonds, which priced late Tuesday at par, were off somewhat from higher levels seen earlier in the session, the source noted.

The $300 million issue priced at par, tight to talk, on accelerated timing, and heard to have played to $1.9 billion of orders.

Nevertheless, a big bid from the dealer appeared to be attracting flippers, which are typically scarce trailing a deal that is more than six-times oversubscribed, the trader remarked.

The deal from LABL, which does business as Multi-Color Corp., was the first to clear the dollar-denominated new issue market since Jones DesLauriers Insurance Management Inc./Navacord Inc. priced a $500 million issue of 8½% secured notes on March 2.

That's the longest dormant period in the dollar primary market since early 2020, which took place during the initial Covid scare, a market source said.

The dollar-denominated primary remained quiet on Wednesday, although a shadow calendar is coming together, pending market conditions, sources say.

In the European primary market, Nexans SA launched an upsized €400 million offering (from €325 million) of senior sustainability-linked five-year bullet notes (expected S&P: BB+) with a 5½% coupon at par, 12.5 basis points tighter than price talk.

Fund flows

High-yield ETFs sustained a whopping $1.83 billion of net daily cash outflows on Tuesday, according to a market source.

The HYG exchange traded fund saw $1.34 billion of outflows on the day, amounting to 10% of assets under management, the source said.

Actively managed high-yield funds sustained $85 million of outflows on Tuesday.

The combined funds are tracking $2.04 billion of net outflows for the week that will conclude with Wednesday’s close, according to the market source.

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