Morning Commentary: Junk retreats; Verisure, International Design Group notes on deck

By Paul A. Harris

Portland, Ore., Nov. 9 – With sellers holding the wheel in global equites, high-yield bonds were down 1/8 point on Friday morning, a trader said.

High-yield ETFs were lower on the morning. The iShares iBoxx $ High Yield Corporate Bd (HYG) was 0.47% lower at mid-morning, down 40 cents at $84.44 per share.

The rout in crude oil prices continued into the Friday session, with the barrel price of West Texas Intermediate crude (WTI) for December 2018 delivery down 21 cents, or 0.35%, at $60.46 at mid-morning, after opening the session below $60 per barrel.

Crude oil related bonds were getting crushed, traders said.

The California Resources Corp. 8% senior secured second-lien notes due December 2022 generally moves in approximate proportionality to crude prices, a trader remarked.

However, when the WTI priced dipped below $60, the bottom fell out, the source said, adding that the California Resources paper was generically trading in the mid-80s Friday morning, down around 3 points on the day.

Those bonds were seen at 88¾ bid, 89½ offered on Thursday morning.

Primary market

The European new issue market came into the Friday session with €1.99 billion of junk teed up to price ahead of the weekend.

On Friday morning International Design Group SpA set final price talk in its €720 million two-part offering of seven-year senior secured notes (B2/B/B+).

The deal features a tranche of fixed-rate notes with price talk in the 6½% area, toward the wide end of earlier guidance in the low-to-mid 6% area, and floating-rate notes talked at Euribor plus 600 basis points with a 0% Euribor floor, at par, in line with initial guidance which had the floater coming 50 bps inside of the fixed-rate notes.

Tranche sizes remain to be determined.

The deal is set to price later on Friday.

Also, Verisure Holding AB is expected to price its €1,012,000,000 secured loan and notes debt package ahead of the London close.

Earlier in the week a €300 million tranche of 4.5-year senior secured notes (B1/B) was talked in the 3¾% area.

A €712 million term loan B (B1/B) is talked at a 325 bps to 350 bps spread to Euribor, a 0% Euribor floor, at 99.75 to par.

The bonds and loan are set to price on Friday.

The dollar-denominated primary market awaits news on HC2 Holdings, Inc.’s $535 million offering of senior secured notes that have had an extended stay in the market.

The deal, via bookrunner Jefferies, was announced on Oct. 22 and originally set to price in the week of Oct. 29.

The HC2 Holdings notes were talked on Wednesday with an 11½% coupon at a reoffer price of 98.75 to yield 12%.

Meanwhile, word in the market is that the RegionalCare Hospital Partners Holdings, Inc. and LifePoint Health, Inc. $1,575,000,000 offering of eight-year senior notes (Caa1/CCC+) is moved back into the Nov. 12 week.

The notes were talked on Thursday to yield 9% to 9¼%, tight to earlier guidance in the 9¼% area, and the deal was set to price on Friday.

However, wider price talk and covenant changes are expected to be announced on Tuesday, according to a trader, who added that accounts were heard to have been canvassed at 9¾%.

The merger financing deal is being helmed by left lead bookrunner Barclays.

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