Morning Commentary: Junk flat to slightly weaker; CenturyLink, Boyd Gaming drive by with deals

By Paul A. Harris

Portland, Ore., March 22 – High-yield bonds opened unchanged to slightly weaker on Tuesday, sources said.

“Things don’t look too bad,” a portfolio manager remarked. “We’ve had a hell of a rally.

“People are still long cash. And triple C bonds are outperforming year to date.”

High-yield ETFs were slightly lower heading into the New York mid-morning. The iShares iBoxx $ High Yield Corporate Bd (HYG) was down 17 cents, or 0.21%, at $82.14 per share. SPDR Barclays High Yield Bond ETF (JNK), at $34.51 per share, was down 2 cents, or 0.07%.

Boyd, CenturyLink drive-bys

The primary market opened to news of a pair of drive-by deals, both announced at sizes of $500 million.

Boyd Gaming Corp. plans to price a $500 million private offering of 10-year senior notes (expected ratings B3/B-) on Tuesday.

Early whisper has the deal coming with a yield in the mid 6% range.

Deutsche Bank, BofA Merrill Lynch, J.P. Morgan Securities LLC, Wells Fargo Securities LLC, UBS Investment Bank, BNP Paribas Securities Corp., Credit Suisse Securities (USA) LLC and Nomura are the leads.

And CenturyLink, Inc. also plans to price a $500 million offering of non-callable eight-year senior notes (expected ratings Ba3/BB) on Tuesday.

Early guidance has the bonds coming in the mid-to-high 7% yield context.

JPMorgan, Barclays, Mizuho and SunTrust Robinson Humphrey Inc. are the joint bookrunners.

Looking past these two deals, Constellium NV has been marketing a $400 million offering of five-year senior secured notes (B2/B+). Guidance on the deal has shaped up at 7½% to 8%, according to a portfolio manager, who added that the book is done at 8%. Books are expected to close Tuesday, and the deal is expected to price Wednesday.

And Aleris International, Inc. began a brief roadshow for a $450 million offering of five-year senior secured notes on Monday.

The Aleris book is done, with 20 accounts taking down the offer, the portfolio manager said, adding that timing could be accelerated, with the deal possibly pricing before the end of the day on Tuesday.

Among recent deals, the new Intelsat Jackson Holdings SA 8% senior secured first-lien notes due Feb. 15, 2024 (B1/B-) are turning in a stellar performance in the secondary market, sources say.

The new Intelsat 8% notes were 102 3/8 bid, 102 5/8 offered on Tuesday morning.

The upsized $1.25 billion issue, which was increased from $1 billion, came at par on Monday.

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