Morning Commentary: Junk notches higher heading into holiday weekend; funds see inflows

By Paul A. Harris

Portland, Ore., May 24 – Junk opened ¼ point higher on Friday heading into an extended holiday weekend, a New York-based trader said.

The junk move was in line with stocks, said the trader, noting that the improvement came in the face of much weaker-than expected April durable goods orders. Core orders were down 0.9%, or 0.6% lower than consensus. Also, March numbers saw a substantial 1.1% downward revision.

Recently priced Berry Global Group, Inc. 5 5/8% second priority notes due July 2027 (B2/BB) were up slightly less than 2 points in active Friday morning trading, the source said, noting that $15 million had changed hands.

The bonds came in a $500 million tranche, and were priced at par on May 17.

The more recent IHO/Schaeffler dollar-denominated PIK toggle bonds (Ba1/BB+/BB+), which were lagging issue prices on Thursday, were better on Friday morning.

The IHO Verwaltungs GmbH 6%/6¾% senior secured PIK toggle notes due May 2027 and the 6 3/8%/7 1/8% senior secured PIK toggle notes due May 2029 were both 99½ bid, par offered, up ¼ point.

Both tranches – sized $450 million and $400 million, respectively – priced at par on Wednesday.

The dollar-denominated primary market was quiet on Friday morning heading into the holiday weekend, sources said.

The market has been awaiting word on the Neiman Marcus Group Ltd. LLC $550 million offering of five-year second-lien notes.

Early guidance had the deal coming with a blended 14% coupon that would be comprised of an 8% cash payment, with the remaining 6% to be taken out by means of an in-kind PIK payment.

The deal had been scheduled to price before the end of the pre-Memorial Day week, although the likelihood of that happening ahead of Friday's recommended early close was slim, sources said.

Thursday inflows

The cash flows of the dedicated high-yield bond funds were positive on Thursday, according to a trader.

High-yield ETFs saw $112 million of inflows on the day.

Actively managed high-yield funds saw $120 million of inflows on Thursday, the trader said.

News of Thursday's daily cash flows follows a Thursday afternoon report that the combined funds saw a modest $4 million of inflows in the week to the Wednesday close, according to Lipper US Fund Flows.

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