Market Commentary: Secondaries well bid, junk primary quiet ahead of July 4 holiday

By Paul A. Harris

Portland, Ore., July 3 – With the high-yield market in the throes of pre-holiday illiquidity, and a lot of market participants stretching the Thursday Independence Day holiday into an extended weekend, junk was unchanged to slightly better on Wednesday morning, market sources said.

The CDX HY32 index of credit default swaps was 0.09 points higher on the morning at 107.78 bid, 107.9 offered, according to a hedge fund manager

High-yield ETF share prices were better on the morning. The iShares iBoxx $ High Yield Corporate Bd (HYG) was up 0.23%, or 20 cents, at $87.21 per share.

Recent issues tended to be well bid.

The Hannon Armstrong Sustainable Infrastructure Capital Inc. (HAT Holdings I LLC and HAT Holdings II LLC) 5¼% senior “green” notes due July 2024 (BB+/BB+) were 102 3/8 bid, 102 7/8 offered on Wednesday, the hedge fund manager said.

The upsized $350 million issue (from $300 million) came at par on June 26, pricing 12.5 basis points through the price talk.

The William Lyon Homes Inc. 6 5/8% senior notes due July 2027 (B2/B+), which lagged new issue price upon breaking into the secondary market on June 24 and continued lagging into the latter part of the June 24 week, were straddling that price on Wednesday at 99¼ bid, par ¼ offered

The $300 million deal came at par.

Away from recent issues, there was improvement in the oil patch on Wednesday, after oil prices took a serious beating Tuesday, on perceptions that a weakening global economy would slow demand for oil.

The barrel price of West Texas Intermediate crude, which traded above $59 on Monday, fell as low as $56.25 on Tuesday.

That price was staging a modest recovery on Wednesday, up 13 cents, or 0.23%, at $56.38.

The California Resources Corp. 8% senior secured second-lien notes due December 2022, a big liquid issue employed by high-yield bond investors for the purpose of tracking crude oil prices in the junk index, were unchanged at 74½ bid, 75 offered Wednesday morning, the hedge fund manager said.

Primary quiet

As expected, the new issue market remained quiet on Wednesday and is apt to remain shuttered into the early-to-mid part of the July 8 week, sources say.

One deal, a holdover from mid-June, is believed to remain in the market, sources say.

Although it has been radio silence for over a week, Canada's Alpha Auto Group is a work in progress, according to an investor, who believes that the Toronto-based automotive group is still intent on raising cash by selling high-yield bonds.

The company marketed $225 million of five-year notes during the June 17 week. Initial talk had that offering coming at 8% to 8¼%.

Late in the June 24 week a trader reported hearing word of a revived Alpha Auto deal at 11%.

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