Morning Commentary: Junk opens flat; Denbury 7½% notes trade higher with crude price

By Paul A. Harris

Portland, Ore., Aug. 20 – High-yield bonds opened flat amid low liquidity on Monday, sources said.

High-yield ETF share prices were better on the morning. The iShares iBoxx $ High Yield Corporate Bd (HYG) was up a nickel, or 0.06%, at $86.10 per share.

Against a backdrop of higher crude oil prices, recent energy deals were mixed in Monday trading.

The new Denbury Resources Inc. 7½% senior secured second-lien notes due February 2024 (B3/B+) were up ¼ point to ½ point on Monday, according to a New York-based trader.

The upsized $450 million issue (from $400 million) priced at par on Aug. 14 in what figures to be the final burst of dollar-denominated junk issuance of Summer 2018.

However, the Matador Resources Co. 5 7/8% senior notes due September 2026 (B2/BB-) were lagging new issue price on Monday, said the trader, who spotted them at 99 1/8 offered.

The $750 million issue priced at par on Aug. 7.

The barrel price of West Texas Intermediate crude oil for September 2018 delivery was up 42 cents, or 0.64%, at mid-morning on Monday, selling for $66.33.

Away from energy, the new Frontdoor, Inc. (ServiceMaster Global Holdings, Inc.) 6¾% senior notes due Aug. 15, 2026 (B2/B-) continued to turn in a strong performance in the secondary market at 101 7/8 bid, 102 3/8 offered Monday morning. Those bonds traded late last week at 101¾.

The $350 million issue priced at par on Tuesday, 12.5 basis points below the tight end of yield talk in the 7% area, also part of that Aug. 14 burst of issuance.

Two recent conspicuously leveraged new bonds were both trading above new issue prices on Monday.

The Verscend Holding Corp. 9¾% senior notes due August 2026 (Caa2) were 102¼ bid, 103¼ offered. They were seen at 102¼ bid late last week.

The downsized $1.1 billion issue (from $1.15 billion), backing Verscend's acquisition of Cotiviti Holdings, Inc., priced at par on Aug. 10.

And the BMC Software (Banff Merger Sub, Inc.) 9¾% senior notes due September 2026 (Caa2/CCC+) were par bid, par ¼ offered on Monday, improved from 99¾ bid, par ¼ offered last Friday.

The $1,475,000,000 issue priced at par on Aug. 9.

Teekay’s krone deal

Although there was no new issue news in the dollar-denominated market on Monday, Teekay LNG Partners LP announced that it mandated global coordinators DNB Markets and Nordea and joint bookrunners Danske Bank and Swedbank to arrange a conference call with fixed income investors on Tuesday ahead of a krone-denominated offering of five-year senior unsecured bonds.

Away from that Nordic deal there was no news on the major currencies new issue front and little likelihood that there will be until September, sources say.

Mixed Friday flows

The daily cash flows of the dedicated high-yield bond funds were mixed on Friday, a trader said.

High-yield ETFs sustained $153 million of outflows on the day.

However actively managed high yield funds saw $38 million of inflows on Friday, the trader said.

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