Morning Commentary: Travelport up on acquisition; investors shift to secured paper

By Paul A. Harris

Portland, Ore., Dec. 10 – Travelport Worldwide Ltd.’s bonds improved on Monday trailing news that the company will be acquired by Siris Capital Group LLC and Elliott Management Corp. in an all-cash deal valued at approximately $2 billion, according to a junk bond trader in New York.

The Travelport Corporate Finance plc 6% senior secured notes due March 2026 were 1½ points better on Monday at 101 1/8 bid, the trader said.

Travelport, which is based in the United Kingdom, operates a platform for the distribution of air, hotel and other travel content.

The acquisition is set to close in the second quarter of 2019.

Preference for secured

The broad high-yield market was down at least 1/8 point in the early going on Monday, the trader said.

With the major stock indexes again deep in the red at mid-morning, high-yield ETFs were lower. The iShares iBoxx $ High Yield Corporate Bd (HYG) was down 0.23%, or 19 cents, at $82.64 per share.

As volatility continues to rock the global financial markets investors appear to be migrating to secured bonds, the trader remarked.

That would explain the dichotomy between secured and unsecured paper priced in a massive September deal by Refinitiv, the source added.

The secured, dollar-denominated Refinitiv tranche, the 6¼% first-lien notes due May 2026 (B2/B/BB+), was up ¼ point on Monday at 98¾ bid.

However, the unsecured paper, the 8¼% senior notes due November 2026 (Caa2/B-/B+), was down 5/8 of a point at 95¼ bid.

Investors are also demonstrating a preference for junk bonds with conspicuously tight covenant packages, sources say.

In that category, bonds backing the merger of RegionalCare Hospital Partners Holdings, Inc. and LifePoint Health, Inc. were trading at a handsome premium to the new issue price as the new week got underway.

The RegionalCare 9¾% senior notes due December 2026 were 105 bid on Monday, better on the day, according to the trader.

Those bonds came at par on Nov. 14 in a deal that found investors – some playing both the term loan and the bonds – pushing for and getting concessions on covenants which bear upon how the company may disburse cash, manage assets and incur additional debt.

Energy declines

As the price of crude oil fell on Monday, the volatile energy indexes resumed positions in the red.

The barrel price of West Texas Intermediate crude for January 2018 delivery was off 2.2%, or $1.16, at $51.45 at mid-morning.

Among junk issues, the bonds of offshore driller Transocean Inc. (RIG), the 9% senior notes due 2023, were down a point on the morning, the trader said.

EP Energy’s bonds were down 1¼ points across the curve, the source added.

The lights remained out in the primary market, which is expected to remain closed until the new year, positioning December 2018 to possibly be the first December in at least a decade to pass without a single new issue clearing the market.

Average December issuance, going back to and including 2010, is $15.44 billion, according to Prospect News data.

Big Friday outflows

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

High-yield ETFs sustained $314 million of outflows on the day.

Actively managed high-yield funds saw $475 million of outflows on Friday, the trader said.

© 2015 Prospect News.
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