Uber pre-markets bonds; WeWork rises as SoftBank ups stake; CalRes mixed; Wind Tre down

By Paul A. Harris and James McCandless

San Antonio, Oct. 10 – The only activity in the U.S. high-yield primary was the news that Uber Technologies Inc. is premarketing $1.5 billion of high yield bonds in two tranches via Morgan Stanley is leading the effort.

Otherwise there is little expectation of a busy close to the year, according to sources.

The secondary space saw lower levels with activity continuing in energy names.

Among the movers in oil and gas, California Resources Corp.’s paper was mixed on a weaker day in oil futures.

Also in the secondary’ WeWork Cos. Inc.’s bonds gained after news broke that Japan’s SoftBank would invest another $10 billion in the company.

Wind Tre SpA’s notes declined in spite of a ratings upgrade.

Uber premarketing $1.5 billion

The new issue market in the United States remained generally mute on Wednesday, as issuers continue to gauge the cost of capital against recent massive moves in Treasury rates.

In fact the U.S. primary market generated a single news nugget on Wednesday.

Uber Technologies is premarketing $1.5 billion of high-yield bonds, a trader said.

The deal includes $500 million of five-year notes guided in the 7½% area and $1 billion of eight-year notes guided in the 8½% area.

Morgan Stanley is leading the effort.

Elsewhere the dollar-denominated deal pipeline is by no means vast, sources say.

Potential issuers continue to migrate to the bank loan market, according to an investor involved with both junk bonds and loans.

There will be deals here and there in the run-up to 2019 but people are not looking for a big finish to this year, the source added.

Millicom, Recordati roadshows

With the U.S. quiet, most of the high-yield primary news was from Europe.

Luxembourg-based Millicom International Cellular SA, which operates in Latin America and Africa, was expected to wrap up an international roadshow for its $500 million offering of eight-year senior notes (expected ratings Ba2/BB+) on Wednesday in New York.

Although it is dollar-denominated junk, the deal, to help fund Millicom’s acquisition of an 80% stake in Panama-based Cable Onda, is unlikely to be traded on U.S. high-yield desks, a trader said.

Early price talk is in the mid-6% area, the source added.

Meanwhile Recordati SpA is scheduled to wrap up a roadshow for its €1.28 billion two-part offering of seven-year senior secured notes (expected ratings B2/B) on Thursday.

The deal is coming in tranches of fixed-rate notes and floating-rate notes, with tranche sizes to be determined.

The proceeds are being used to help fund CVC Capital Partners’ acquisition of a 51.8% stake in the Milan-based pharmaceutical company.

Record ETF outflows

Junk ETFs sustained $1.6 billion of outflows on Tuesday, a new record, eclipsing the $1.43 billion of outflows seen last Friday, itself a record although one that stood for only three days, a trader said.

The cash loss set in train a massive $1.55 billion of bids-wanted-in-competition (BWIC) lists on Wednesday, a bond trader said.

Fund flow watchers are being cautioned to fasten their seatbelts for Thursday’s report from Lipper US Fund Flows because the stage is set for a report that will show a weekly outflow of historic proportions.

The funds are tracking $5.36 billion of outflows for the week that was set to wrap up at Wednesday’s close, the trader said.

Should it materialize it will be the largest weekly outflow since the week ending Feb. 14, 2018, which saw a $6.3 billion outflow, which was the second biggest weekly outflow on record.

WeWork sees more funding

WeWork’s bonds improved with about $39 million of the notes trading, market sources said.

The 7 7/8% notes due 2025 added about 1¼ points to close at 97 bid after rising as high as 99 bid in intraday trading.

News broke Wednesday morning that Japan’s SoftBank would invest another $10 billion in the Manhattan-based workspace technologies company through its Saudi Arabia-backed Vision Fund.

The deal would give SoftBank a majority stake in the company.

The firm invested $4.4 billion last year.

CalRes mixed

In a weaker day for energy names, California Resources closed the session mixed.

Its 6% notes due 2024, while moving as high as 88½ bid during the day, traded back to Tuesday’s level of 88 bid. The 8% notes due 2022 picked up 1½ points to close at around 98 bid.

The Los Angeles-based producer’s weaker day was tied to oil futures, which continued to move lower on supply worries, market sources said. West Texas Intermediate crude futures lost $1.79 during the session to end at $73.17 per barrel. North Sea Brent crude traded down $1.90, settling at $83.10 per barrel.

Wind Tre off

Wind Tre’s notes moved lower, market sources said.

The 5% paper due 2026 lost ¼ point to close at 85½ bid.

Toward the close, the Milan-based fixed and mobile telecom services provider received a ratings upgrade. Fitch Ratings lifted the company’s long-term issuer default rating to BB- from B+ and affirmed a stable outlook.

The upgrade was triggered by CK Hutchinson Holdings Ltd. purchasing an additional 50% stake in the company in June, making it the sole owner.

Indexes lower

Three high-yield benchmarks extended a run of losses on Wednesday.

The KDP High Yield Daily index lost 18 basis points to close at 69.99 at Wednesday’s close with the yield at 5.97%.

The drop came after three previous days of decline, 21 bps on Tuesday, 16 bps on Friday and 12 bps on Thursday. The last rise was a 1 bps gain last Wednesday.

The ICE BofAML US High Yield index extended a run of large declines. The index lost 36 bps with the year-to-date return now at 1.405%.

The index lost 30.9 bps on Tuesday and 17.7 bps on Friday.

The CDX High Yield 30 index lost 28.2 bps to close Wednesday at 106.395.

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