Morning Commentary: Lights go on in junk primary as Ally and PBF plan drive-bys; ETFs seen buying

By Paul A. Harris

Portland, Ore., Nov. 17 – The high-yield market felt pretty strong to a trader heading into mid-morning New York time.

High-yield ETFs were better buyers, the trader added.

ETFs were higher on the morning.

The iShares Trust - iShares iBoxx $ High Yield Corporate Bond ETF (HYG) was up 32 cents at $83.71 per share heading into mid-morning.

SPDR Series Trust - SPDR Barclays High Yield Bond ETF (JNK) was 9 cents better at $35.64 per share.

High-yield ETFs saw $27 million of inflows on Monday, the trader said, relating information reported by Lipper-AMG.

However the daily flows of the actively managed funds were negative on Monday: $25 million of outflows.

Primary rekindles

The primary market came to life Tuesday morning with the announcement of a pair of deals expected to price before the end of the session.

Ally Financial Inc. plans to place a benchmark-sized issue of non-callable subordinated notes due Nov. 20, 2025 (/BB-/BB-) on Tuesday.

The target size of the deal is $750 million, and the notes are in the market with initial guidance of 6¼%, a trader said.

Joint bookrunner Deutsche Bank Securities Inc. will bill and deliver for the public offering, which is being priced on the investment-grade desk. Barclays, BofA Merrill Lynch, Citigroup Global Markets Inc. and J.P. Morgan Securities LLC are also joint bookrunners for the debt refinancing deal.

And PBF Holding Co., LLC and PBF Finance Corp. scheduled one-on-one meetings with investors as well as an investor conference call on Tuesday morning for the purpose of marketing a proposed $500 million offering of eight-year senior secured notes.

The deal comes with initial yield guidance of 7¼% and is expected to price Tuesday, a trader said.

Credit ratings remain to be determined; however, the deal is expected to garner a BBB- rating from Standard & Poor's, while the rating from Moody's Investors Service is expected to be speculative grade, the trader added.

Joint global bookrunner UBS is lead left bookrunner on the offering. Deutsche Bank is also a joint global bookrunner.

Barclays, Citigroup, Credit Agricole and Credit Suisse are joint bookrunners.

The Parsippany, N.J.-based independent petroleum refiner plans to use the proceeds for general corporate purposes, including a portion of the purchase price for Exxon Mobil Corp.’s refinery in Torrance, Calif (see related stories in this issue).

Elsewhere there was a buzz in the market about American Energy – Permian Basin, LLC's sidelined $530 million offering of five-year senior secured first-lien notes (B2/B).

The deal could come on Wednesday, a trader said, adding that word has circulated that the deal has a sizable order at a yield of 12%.

The deal, which was downsized from $560 million, ran a roadshow in mid-October before undergoing covenant changes.

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