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Morning Commentary: High-yield opens slightly weaker, California Resources bonds slide
By Paul A. Harris
Portland, Ore., July 17 – Junk bonds were slightly weaker on Friday morning, according to a trader, who added that the sell-off seemed disproportionately light, given the damage being sustained by names in the energy sector.
The California Resources Corp. 6% senior note due Nov. 15, 2024, an energy sector benchmark, was down a few points at 78 bid, 79 offered, the trader said, noting that bonds in the coal sector also continue to be under pressure, as was the case on Thursday.
Among recent issues, Eldorado Resorts, Inc.’s new 7% senior notes due Aug. 1, 2023 (Caa1/B-) were par ½ bid, 101 offered on Friday morning. The $375 million issue priced at par on Thursday.
The Genesis Energy LP 6¾% senior notes due Aug. 1, 2022 (B1/B+), meanwhile, were trading below their new issue price at 98 bid, 98½ offered. The $750 million issue priced at 98.629 to yield 7% on Thursday.
Primary market eyed
There were two new deal announcements on Friday morning.
Builders FirstSource, Inc. plans to start a roadshow on Monday for its $750 million offering of eight-year senior notes (Caa2/B-)
And Kenan Advantage Group Inc. plans to start a roadshow on Monday for a $405 million offering of eight-year senior notes (see related stories in this issue).
Meanwhile WPX Energy, Inc. is on deck with a $1.2 billion two-part bullet deal (Ba1/BB), featuring five-year senior notes talked to yield 7¼% to 7½%, and eight-year senior notes talked to yield 8% to 8¼%.
Tranche sizes remain to be announced on the Barclays-led deal.
Look for WPX to downsize to $1 billion, an investor said on Friday morning.
Books might remain open beyond the scheduled 10 a.m. ET close, the source added.
Inflows to ETFs
High-yield ETFs continued to attract cash on Thursday, according to a buyside source, who added that the ETFs saw $324 million of inflows.
Actively managed funds, on the other hand, continued to see flat to slightly negative flows, sustaining $5 million of outflows on Thursday.
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