Morning Commentary: Bombardier, Videotron bonds better in active trading; primary quiet

By Paul A. Harris

Portland, Ore., June 4 – High yield opened Friday unchanged ahead of the U.S. Bureau of Labor Statistics' non-farm payrolls report in which payrolls lagged economists' expectations but unemployment fell.

Against a backdrop of stronger stock prices, the iShares iBoxx $ High Yield Corporate Bd (HYG) was up 0.16%, or 14 cents, at $87.22 per share at mid-morning.

Conspicuous new Thursday issues were better in Friday morning trading.

The new Bombardier Inc. 7 1/8% senior notes due June 2026 (Caa2/CCC) were “super active,” changing hands at 101¼, a trader said.

The upsized $1.2 billion bond debt refinancing deal (from $1 billion) came at par.

The market had anticipated a bigger upsize – $2 billion seemed to be the expectation, roundabout – however the Montreal-based aerospace company drove a hard bargain in pricing its new notes at 7 1/8%, inside of the 7¼% to 7½% talk, and deep inside of early guidance in the mid-to-high 7% area.

Bombardier might have elected to double its deal size to $2 billion in spite of that tight pricing, the trader said.

However, the company, knowing it was going to have to return to the primary market sooner than later, elected not to “stuff” investors with the tightly priced paper, instead printing a bond that would trade well, as it has done, the source remarked.

Elsewhere trading in the new U.S. dollar-denominated Videotron 3 5/8% senior notes due 2029 (S&P: BB+) was also active on Friday morning.

The bonds were trading well at par 7/8 bid, the trader said.

The $500 million issue came Thursday at par, in conjunction with an upsized C$750 million issue (from C$400 million) of 3 5/8% senior notes due 2028, which also priced at par.

Away from new issues, with its shares up over 8% at mid-morning, AMC Entertainment’s bond prices were higher on the morning.

The AMC Entertainment Holdings Inc. 12% second-lien bonds were 101¼ bid, 101¾ offered at mid-morning, having closed Thursday at 101.

That bond traded in the single digits last fall, the trader recounted.

Meanwhile, on the heels of a moderately active, abbreviated post-Memorial Day week the new issue market went quiet on Friday morning.

In Europe, David Lloyd Leisure priced two tranches of six-year senior secured notes (B3//B+): £645 million of 5½% fixed-rate notes and €300 million Euribor plus 475 basis points floating-rate notes during the Friday London afternoon.

Both came at par, tight to talk.

Thursday fund flows

The daily cash flows of the dedicated high-yield bond funds were moderate and mixed on Thursday, according to a market source.

For the second consecutive daily session, actively managed high-yield funds were positive, posting $55 million of inflows on the day. Prior to Wednesday, the actively managed funds had sustained 13 back-to-back outflows in their worst run of outflows since March 2020.

High-yield ETFs were in the red on Thursday, sustaining $13 million of outflows on the day.

News of Thursday’s daily flows trails a Thursday report that the combined funds saw $385 million of net outflows in the week to the Wednesday, June 2 close, according to the Refinitiv Lipper Fund Flow Report Newsline.

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