Morning Commentary: Tesla on deck with $1.5 billion notes, could upsize; Hexion trades down

By Paul A. Harris

Portland, Ore., Aug. 11 – Amid low liquidity on a summer Friday, Tesla, Inc. has the high-yield spotlight to itself as it attempts to place $1.5 billion of eight-year senior notes (B3/B-) talked to yield 5¼%.

That talk still remains, although the size of the deal could grow to $2 billion as it is believed to be playing to $4 billion of orders, a trader said.

In addition to straight high-yield accounts, the Tesla bond offering has sparked interest among investment-grade, convertibles and equity investors, sources say.

Hexion eases post-earnings

Junk caught a bid early Friday but had faded just a bit at mid-morning, the trader said.

The SPDR Blmbg Barclays High Yield Bd ETF (JNK) was up a dime, or 0.27%, at $36.78 per share.

Bonds of Hexion Inc. traded 2 to 3 points lower following the second-quarter earnings report from the Columbus, Ohio-based thermoset resins producer.

The Hexion U.S. Finance Corp./Hexion Nova Scotia Finance, ULC (Momentive Performance Materials Holdings) 9% second-priority senior secured notes due Nov. 15, 2020 were at 67 bid, 68 offered Friday morning. Prior to earnings they were trading around 69, the trader said.

The company reported net sales of $912 million, a year-over-year decrease of 4%, and a net loss of $34 million.

Among recent deals, the new Parexel International Corp. 6 3/8% senior notes due 2025 (Caa1/CCC+) were trading par bid, par ½ offered on Friday morning, down from post-break highs of par ½ bid, 101 offered.

The upsized $770 million issue (from $720 million) priced at par on Thursday.

Bonds priced earlier in the week by Dynegy Inc., the 8 1/8% senior notes due Jan. 30, 2026 (B3/B+), continued the lackluster secondary market performance seen throughout the latter half of the Aug. 7 week.

They were at 98¼ bid, 98¾ offered Friday morning. The notes were spotted at 98½ bid on Thursday.

The $850 million deal, which priced at 99.259 to yield 8¼% on Wednesday, got going pretty well out of the gates, trading ¼ point to 3/8 point higher initially, sources say.

News that a significant Dynegy shareholder had registered shares ahead of a possible sale appears to have been the catalyst for the decline of the bond price.

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