Morning Commentary: CSC Holdings driving with $750 million; junk opens to strong bid

By Paul A. Harris

Portland, Ore., July 1 – July got underway with a strong bid for high-yield bonds, market sources said on Monday.

With the S&P 500 stock index trading in record territory, the CDX HY32 index of high-yield credit default swaps was trading 107.805 bid, 107.895 offered, up 0.26 basis point, according to a hedge fund manager.

Among recent issues the Sirius Computer Solutions, Inc. 11% senior notes due July 2027 (Caa1/CCC+) were par 3/8 bid, par 7/8 offered, an investor said.

The $300 million issue priced at par last Thursday, with its yield printing 25 bps beyond the wide end of talk.

The deal, backing the leveraged buyout of Sirius Computer by Clayton, Dubilier and Rice, came with a covenant package that was hotly contested right up to the 11th hour, sources said.

Secured and unsecured bonds priced last Thursday by Allied Universal Holdco LLC traded at premiums to new issue prices on Monday, the investor added.

The Allied Universal secured 6 5/8% notes due July 2026 were 101¾ bid, 102¼ offered, up from 101 5/8 bid, 101 7/8 offered on Friday.

The $1 billion tranche, ultimately upsized by $500 million with proceeds shifted from the concurrent term loan, came at par and was heard to be oversubscribed since early in the roadshow.

The unsecured notes were also trading better on Monday morning.

The Allied Universal 9¾ senior unsecured notes due July 2027 (Caa2/CCC/CCC+) were par ¼ bid, par ¾ offered on Monday morning, up from 99¾ bid, par offered on Friday.

The $1.05 billion tranche came at 98.641 to yield 10%.

And with the barrel price of West Texas Intermediate Crude for August 2019 delivery up 1.04%, or 61 cents at mid-morning, at $59.08, the California Resources Corp. 8% senior secured second-lien notes due December 2022, a big liquid issue employed by high-yield bond investors for the purpose of tracking crude oil prices in the index, were up a point at 75½ bid, 76½ offered, the hedge fund manager said.

CSC drive-by on tap

Market watchers expect this week's new issue market activity to be generally muted relative to the torrid pace of last week's $11.5 billion, the biggest week of 2019 to date.

Thursday’s market close, in observation of Independence Day in the United States, will put a damper on the primary market action, sources say.

Many participants scheduled vacation days around July 4, so scaring up a crowd will be more challenging than usual, they add.

Nevertheless, CSC Holdings, LLC, a subsidiary of Altice USA, Inc., plans to price a $750 million offering of 10.5-year senior notes (expected ratings B3/B) in a Monday drive-by.

Price talk is 5¾% to 5 7/8%, tighter than initial talk in the 6% area.

Mixed Friday flows

The daily cash flows of the dedicated high-yield bond funds were mixed on Friday, an investor said.

High-yield ETFs sustained $168 million of outflows on the day.

Actively managed high yield funds saw $30 million of inflows on Friday, the investor said.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.