Morning Commentary: CDX down ¼ point; California Resources bonds continue slide

By Paul A. Harris

Portland, Ore., Dec. 12 – High-yield bonds remained under pressure on Friday.

The CDX North American High Yield index Series 23 opened half a point lower before staging a modest recovery, sources said.

In the middle of the New York morning the index was at 104.81 bid, 104.91 offered, down a quarter of a point.

Energy names continue slide

Crude oil prices continued to drop as the Friday session got underway, with a high-yield investor marking the West Texas Intermediate barrel price at $58.69, down $1.35.

The phenomenal fall in oil prices continues to take a dramatic toll on bonds issued by energy companies with exposure to it.

The California Resources Corp. 6% senior notes due Nov. 15, 2024 were 81¼ bid, 82¼ offered on Friday, down 2¼ points on the day, according to a portfolio manager.

The deal priced at par in a whopping $5 billion transaction that came in three bullet tranches on Sept. 11 of this year.

In the wake of that transaction the 6% notes due 2024 traded as high as 104½ bid.

Outflows continue

Dedicated high-yield funds continue to see negative cash flows, according to an asset manager.

Trailing news that Lipper-AMG tracked $1.89 billion of aggregate outflows for the week to Wednesday’s close, daily numbers from the first day of the present reporting period, Thursday, continued negative, with high-yield ETFs sustaining $47 million of outflows while actively managed funds saw $205 million of outflows, the manager said.

Market on hold

Two deals remain on the active forward calendar, although neither one is expected to price on Friday, sources say.

Global Cash Access Holdings Inc. began a roadshow for a $700 million two-part offering of high-yield notes a week ago, aiming to price the deal late this week.

The offering features a $350 million tranche of senior secured notes due March 15, 2021 (B1/B+) and a $350 million tranche of senior unsecured notes due Jan. 15, 2022 (Caa1/CCC+).

BofA Merrill Lynch and Deutsche Bank are the joint bookrunners.

No formal price talk has been circulated, sources said.

And the Real Alloy Holding Inc./Signature Group Holdings, Inc. $300 million five-year senior secured notes deal is overdue, according to the timeline set forth when the deal was announced during the Dec. 1 week, sources say.

Again, no formal price talk has circulated.

“People are losing money, and stuff is backing up every day,” an investor said on Friday.

“Right now the market is on hold.”

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