Morning Commentary: Ritchie Bros., IAA active as proxy advisers urge merger rejection

By Paul A. Harris

Portland, Ore., March 6 – Bonds priced last week by Ritchie Bros. Auctioneers Inc., in addition to the bonds of IAA Inc., were active on Monday morning on news that proxy advisory firms Institutional Shareholder Services and Glass Lewis recommended that IAA shareholders reject Ritchie Bros.’ $7 billion bid to acquire IAA, traders said.

The Ritchie Bros. 6¾% senior secured notes due 2028 (Ba2/BB+) and the 7¾% senior notes due 2031 (B1/BB-) had been trading early Monday at 101¾ bid, 101 7/8 offered but then traded down into a context of par ½ bid, 101 offered and appeared to be trading into a 101 special mandatory redemption, sources said.

The bonds priced last Wednesday – $550 million of the secured notes and $800 million of unsecured notes – at par in support of the acquisition and also to help refinance the Ritchie Bros. 5 3/8% senior notes due 2025 and help fund a $120 million special dividend.

Meanwhile the IAA SpinCo 5½% notes due 2027 were down around 1 point, changing hands on Monday at 99½, a trader said.

Those notes traded last week at 101 in round-lot trading, a source noted.

At mid-morning, IAA’s stock (NYSE: IAA) was down 7½%.

In a Monday press release, Ritchie Bros.’ board and management said they strongly disagree with the proxy advisers' recommendations and urged shareholders to follow the board's recommendation to vote for the merger.

The vote is set for March 14.

Away from that situation, the high-yield bond market was perhaps 1/8 of a point better and generally quiet on Monday morning, a trader said.

There was no activity in the dollar-denominated primary market.

With the J.P. Morgan Global High Yield & Leveraged Finance Conference underway in Miami, new issue business is expected later in the week, sources said.

As the March 6 week got underway, there was news in the euro-denominated primary market. Both Media and Games Invest SE and Azelis were beginning the market process for potential bond offerings, according to market sources.

Fund flows

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

High-yield ETFs saw $769 million of inflows on the day.

Actively managed high-yield funds sustained $540 million of outflows on Friday, the source said.

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