Morning Commentary: Early Thursday bid for junk fades into mid-morning; Solera talk heading north

By Paul A. Harris

Portland, Ore., Feb. 25 – An early Thursday bid for junk bonds was fading with the approach of mid-morning, according to a New York-based trader, who remarked that the market was stronger, then became sideways.

High-yield ETFs were posting modest declines. The iShares iBoxx $ High Yield Corporate Bd (HYG) was 7 cents lower, or 0.09%, at $78.21 per share heading into mid-morning. SPDR Barclays High Yield Bond ETF (JNK), at $32.65 per share, was down 6 cents, or 0.2%.

Portugal Telecom plunges

News that Russian billionaire Mikhail Fridman has withdrawn his offer to support the merger between Brazilian telecom Oi and Telecom Italia has caused the bonds of Oi subsidiary Portugal Telecom to fall 15 to 20 points, according to a London-based sellside source.

Last year Fridman’s investment firm, LetterOne, offered to invest up to $4 billion if the merger went forward, the source recounted.

Realogy tapping 5¼% notes

In the primary market Realogy Group LLC, an indirect, wholly owned subsidiary of Realogy Holdings Corp., plans to price a $250 million add-on to its 5¼% senior notes due Dec. 1, 2021 (expected ratings B2/B) on Thursday, according to a market source, who added that the deal is being driven by reverse inquiry.

JPMorgan and Barclays are joint bookrunners for the debt refinancing deal.

Solera talk heading north

Elsewhere in the primary, price talk on Solera LLC and Solera Finance, Inc.’s $2.03 billion equivalent offering of eight-year senior notes (Caa1/B-) is headed north, sources say.

Most recently the buzz in the market has the deal's dollar-denominated tranche coming at 11½% to 12%, versus official price talk of 10¾% to 11%.

The deal, via left bookrunner Goldman Sachs, is coming in tranches of dollar-denominated and euro-denominated notes, the sizes of which remain to be determined.

A euro-denominated tranche, talked to yield in the 25 basis points area inside of the yield of the dollar-denominated notes, has not been getting any traction, according to a London-based sellside source.

Solera’s concurrent bank loan is done, the sellsider said.

The loan was oversubscribed, but it was not a blowout, although the order book did contain some triple-digit orders.

Bond investors, however, want to be better compensated for a deal that is highly leveraged and coming amid difficult market conditions.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.