Morning Commentary: Junk opens flat to slightly better; Hilton Grand Vacations on deck

By Paul A. Harris

Portland, Ore., Nov. 18 – The high-yield bond market opened flat to slightly better on Friday, according to a portfolio manager.

Treasuries were up a hair in price and synthetics were basically unchanged, the manager said.

High-yield ETFs were also flat at mid-morning.

The iShares iBoxx $ High Yield Corporate Bd (HYG) was up 0.06%, or 4 cents, at $84.67 per share. The SPDR Barclays High Yield Bond ETF (JNK), at $35.65 per share, was up a penny, or 0.03%.

In the secondary market, with the big post-election jump in Treasury yields, preferences have shifted toward short-dated paper with a decent coupon, a London-based syndicate banker said.

Of recent dollar-denominated deals Tenet Healthcare Corp.’s 7½% senior secured second-lien notes due Jan. 1, 2022 (Ba3/B) continue to turn in a spectacular performance in the secondary market.

The new Tenet 7½% paper was at 103¾ bid, 104¼ offered on Friday morning, the manager said.

It was 103 bid on Thursday.

Better-than-expected ratings and lower-than-expected leverage enabled Tenet to dramatically reel in price talk to 7½% from earlier guidance of 8% to 8¼%.

The Tenet 7.25-year paper, which came Wednesday in an upsized $750 million (from $500 million) issue, priced at par and played to whopping $5.6 billion of orders, sources said.

Meanwhile the new Bombardier, Inc. 8¾% non-callable five-year notes (B3/B-) were below new issue price at 98½ bid, 99 offered on Friday morning, the portfolio manager said.

The $1.4 billion issue came at 99.001 to yield 9% on Wednesday, at the wide end of the 8¾% to 9% yield talk and sized at the high end of the company’s contemplated issuance range of $750 million to $1.4 billion.

Hilton Grand eyed

In the primary market Hilton Grand Vacations Inc. plans to price its $300 million offering of eight-year senior notes (Ba3/BB) on Friday.

The Goldman Sachs deal was talked to yield 6¼% to 6½% on Thursday, tight to initial price guidance in the mid 6% area, sources said.

Away from that deal there are question marks regarding Friday new issue business, sources say.

Earlier in the week talk gapped higher on Conduent Inc.’s $750 million offering of eight-year notes (expected ratings B2/B+), the deal backing Xerox Corp.’s spinoff of its business process services division.

As the market awaits official talk, Conduent was being guided with a 9%-plus yield after coming with initial guidance of 7¾% to 8%.

And Genesys Telecommunications Laboratories’ $700 million offering of eight-year senior (Caa2/CCC) was also expected to clear before the weekend.

However there was no word on Friday morning, according to a fund manager, who expects to at least hear official price talk before Friday’s close.

Early guidance is 9% to 9¼%, sources say.

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