Morning Commentary: Junk opens flat; ETF cash flows remain positive; Sally Beauty on deck

By Paul A. Harris

Portland, Ore., Nov. 18 – Junk bonds opened flat on Wednesday, according to a bond trader based on the East Coast of the United States.

Some names were a spot stronger while others were a weaker, the source said, adding that no conspicuous headline-driven trading was seen in the early going.

High-yield ETFs were flat to slightly higher heading into the mid-morning, New York time.

The iShares Trust - iShares iBoxx $ High Yield Corporate Bond ETF (HYG) was up a nickle at $83.50 per share.

The SPDR Series Trust - SPDR Barclays High Yield Bond ETF (JNK), at $35.56 per share, was up 6 cents.

The ETFs saw $155 million of cash inflows on Tuesday, the trader said.

That number follows the more modest $27 million of inflows which the ETFs saw on Monday and is further evidence that retail investors are presently demonstrating a more vigorous appetite for junk, sources say.

Meanwhile asset managers saw outflows of $175 million on Tuesday, the trader said.

And dedicated bank loan funds saw $10 million of outflows on the day.

Sally Beauty plans drive-by

In a primary market that has lately been cruising slow-ahead, Sally Beauty Holdings, Inc. announced plans to price a $750 million offering of 10-year senior notes on Wednesday.

The offer is in the market with yield guidance in the high 5% range. Official price talk is pending.

BofA Merrill Lynch, J.P. Morgan Securities LLC, Wells Fargo Securities LLC, Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Goldman Sachs & Co. and RBC Capital Markets are the joint bookrunners for the debt refinancing deal.

And American Energy – Permian Basin, LLC is expected to price its downsized $530 million offering of five-year senior secured first-lien notes (B2/B) on Thursday.

The deal, which kicked off in mid-October and has spent much of the intervening time on the sidelines of the high-yield primary market, has “baseline price talk” of 12% minimum, a source said on Wednesday.

The deal has been subjected to covenant changes.

At least two revised offering documents were circulated subsequent to the deal’s October launch, sources say (see related stories in this issue).

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