Morning Commentary: Junk opens slightly weaker on low volume; Chemours bonds plummet

By Paul A. Harris

Portland, Ore., June 3 – High-yield bonds were off perhaps ¼ point on low volume as the stock market see-sawed early Friday morning, according to a bond trader on the East Coast of the United States.

The CDX HY 26 was down 23 cents in the mid-morning, the trader said.

The high-yield ETFs were essentially flat. The iShares Trust - iShares iBoxx $ High Yield Corporate Bond ETF (HYG) was down a nickel, or 0.06%, at $83.31 per share. SPDR Series Trust - SPDR Barclays High Yield Bond ETF (JNK), at $35.10 per share, was up 3 cents, or 0.09%.

Among actively trading bonds, the Chemours Co. 6 5/8% senior notes due May 15, 2023 were down 4 points on the day, at 84½ bid, trailing a report from short seller Citron Research alleging that Chemours has extensive exposure to hazardous chemical liabilities pre-dating its 2013 spinoff from DuPont and asserting that Chemours is “a zero.”

Citron Research reports have, in the past, had corrosive impacts on the bonds of Valeant Pharmaceuticals and Men's Wearhouse Inc., the trader recounted.

Meanwhile among recent issues, Albertsons Cos., LLC’s new 6 5/8% senior notes due June 15, 2024 (B3/B+) continue to turn in a stellar performance in the secondary market, the trader said, marking them at 103 3/8 bid on Friday morning.

The older Albertson’s Holdings LLC 7¾% second-lien senior secured notes due Oct. 15, 2022 were trading at 114¼ bid, 114.35 offered, levels near to where the market is anticipating they will be taken out by means of a make-whole call in three weeks, the trader said. The amount of the issue outstanding is $609,597.

The primary market

In the primary market one deal is on deck for Friday.

CVR Partners, LP is in the market with a $625 million offering of seven-year senior secured notes (B1/B+) talked to yield 9% to 9¼%.

Books close at noon ET, and the deal, via Credit Suisse and UBS, is set to price thereafter.

Official talk blew out well beyond initial guidance, which had the deal coming in the low-to-mid 8% yield context, market sources said.

There were also covenant changes.

Meanwhile Direct ChassisLink, Inc. began a roadshow on Friday in New York for a $325 million offering of seven-year senior secured second-lien notes.

Initial guidance has the deal coming with a yield in the high 8% to 9% range.

Goldman Sachs is the left bookrunner for the buyout deal. BNP Paribas is the joint bookrunner.

Mixed Thursday flows

The cash flows of the dedicated high-yield bond funds were mixed on Thursday.

High-yield ETFs sustained $16 million of outflows on the day.

However actively managed funds were positive on the day, seeing $65 million of inflows on Thursday.

The news trails the weekly report from Lipper-AMG that the dedicated high-yield bond funds saw $145 million of net inflows for the week to Wednesday’s close.

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