Morning Commentary: Coty bonds improve on news JAB will boost its stake; Ascend on deck

By Paul A. Harris

Portland, Ore., Feb. 12 – With equities plowing into the green, junk bonds were on firm footing Tuesday morning, according to a New York-based trader.

With the Nasdaq up over 1%, high-yield ETFs were turning in solid performances at mid-morning. The iShares iBoxx $ High Yield Corporate Bd (HYG) was up 0.44%, or 37 cents, at $85.20.

Bonds of Coty Inc. got a nice ride on news that JAB Holding Co. has undertaken a tender for shares with the goal of increasing its stake in the New York-based multinational beauty company to around 60% from the 40% JAB currently controls.

The Coty 6½% senior notes due April 2026 were 103¼ bid, 103½ offered, up 3/8 point in active trading.

JAB is tendering for 150 million of Coty class A common shares at $11.65 per share, a 38% premium to the 90-day volume-weighted average as of Monday, the source said.

Elsewhere, Bristow Group Inc.'s distressed 8¾% senior secured notes due March 2023 were up 2½ points in active trading, printing at 75, the trader said.

Bristow’s stock has been under pressure in the wake of news of its pending acquisition of Columbia Helicopters, the source recounted.

Last week Bristow undertook an effort to syndicate between $300 million and $400 million of bridge debt backing the acquisition.

The bridge is expected to be taken out with $360 million of secured high-yield notes.

Jefferies has the bridge commitment.

The loan is capped around 15%, a buyside source said.

Recent issues

Although the new issue market is off to a slow start in the Feb. 11 week, late in the previous week the primary put up its biggest daily issuance total since March 2017, as $6.24 billion priced on Thursday.

Among the deals that priced that day, the Clear Channel Outdoor Holdings, Inc. 9¼% senior subordinated notes due February 2024 (Caa1/CCC+/CCC+) were 103¼ bid, 103½ offered, up 3/8 of a point in active trading on Tuesday, the trader said.

The upsized $2,235,000,000 (from $2.2 billion) deal priced at par, playing to $7 billion of orders.

Meanwhile the CommScope Inc. unsecured notes due March 2027 (B1/B+), another deal that came on Thursday, were trading actively at 102¼ on Tuesday morning. The $1 billion deal came at par in a $3.75 billion three-part transaction – upsized by $750 million – which also featured $2.75 billion of secured paper (Ba1/BB) in two tranches.

Ascend Learning on deck

Ascend Learning, LLC upsized its offering of notes that mirror its existing senior notes due Aug. 1, 2025 (Caa2/CCC) to $350 million from $300 million and talked the deal in the 94.5 area, plus or minus ½ point, rich to initial talk of 93 to 94.

The indicative coupon is 6 7/8%, the same as the notes in the existing issue.

The dividend deal, via lead bookrunner Barclays, is set to price Tuesday afternoon.

Also in the market is Getty Images Inc. with a $400 million offering of eight-year senior notes (CCC+).

As the market awaits word on official talk and timing, initial price talk has the deal coming to yield in the 10½% area.

The new issue market is poised to become more active as potential issuers clear capital markets blackout periods related to reporting earnings for the last quarter of 2018.

Monday fund flows

The cash flows of the dedicated high-yield bond funds were flat to slightly positive on Monday, a trader said.

High-yield ETFs saw $36 million of inflows on the day.

Actively managed high-yield funds saw $15 million of inflows on Monday, the trader said.

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