Morning Commentary: Buyers converge on high yield, give Uber bonds a lift; outflows eyed

By Paul A. Harris

Portland, Ore., Oct. 19 – High-yield bond buyers had the wheel Friday morning, with the broad market unchanged to ¼ point higher at mid-morning, a hedge fund manager said.

Bonds of Uber Technologies Inc. that came in a $2 billion private placement on Thursday were 3/8 point to ½ point better on Friday morning, on considerable volume, the manager said.

The short-maturity tranche, the 7½% notes due November 2023, was 101½ bid, 102 offered Friday morning. The bonds came in a $500 million tranche and priced at par.

The longer-maturity 8% notes due November 2026 were 102 bid, 102½ offered. The $1.5 billion tranche, upsized from $1 billion, also priced at par on Thursday.

Uber undertook a novel private placement execution in order to limit the circulation of the San Francisco-based ride sharing company’s private financial information, sources say.

To a certain extent the deal appeared to be driven to market by means of reverse inquiry, with investors who participated in Uber's $1.5 billion bank loan earlier in the year believed to be seeking greater exposure to the credit.

Elsewhere, bonds priced Thursday by Nine Energy Service, Inc. were turning in a strong Friday morning performance in the secondary market, the manager said.

The Nine Energy 8¾% senior notes due November 2023 (B3/B) were 102 bid, 102½ offered at mid-morning.

The $400 million issue priced at par.

Oil was up a buck at mid-morning.

The barrel price of West Texas Intermediate crude for November 2018 delivery was 1.44% higher on the day, or 99 cents, at $69.64.

The California Resources Corp. 8% senior secured second-lien notes due December 2022, a big liquid issue said to closely track oil prices, were unchanged on the morning at 94½ bid, 95 offered.

Muted new issue market

There was no primary market activity taking place in front of the camera Friday morning and very little going on behind the camera sources said.

The active forward calendar is empty, and the new deal pipeline is by no means vast, syndicate bankers say.

United Rentals, Inc. is expected to bring $1.1 billion of senior notes (Ba3) in a deal that could launch before the end of October, sources say.

The Stamford, Conn.-based equipment rental company is seeking to raise cash to fund its acquisition of heavy equipment rental firm BlueLine Rental from Platinum Equity. The transaction is expected to close in the fourth quarter.

Thursday outflows

High-yield ETFs remain in the clenches of volatility heading into the weekend, a trader said.

The junk ETFs sustained $924 million of outflows on Thursday.

To correspond with that big number traders reported seeing hefty bids-wanted-in-competition (BWIC) lists on Thursday.

Of the $1.57 billion of BWICs seen during Thursday's sell-off, $1.08 billion came from the junk ETFs, a trader said.

High-yield ETF share prices were up heading into Friday mid-morning. The iShares iBoxx $ High Yield Corporate Bd (HYG) was up 0.17%, or 15 cents, at $85 per share.

Actively managed high-yield funds sustained $70 million of outflows on Thursday, the trader said.

News of Thursday’s outflows comes on the heels of a report that the combined funds saw $447 million of net inflows on the week to Wednesday’s close, according to information posted Thursday on the internet by Lipper US Fund Flows.

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