Morning Commentary: Possible Asian venture lifts Toys ‘R’ Us; Explornet brings $25 million tap

By Paul A. Harris

Portland, Ore., Oct. 17 – The bonds of bankrupt toy retailer Toys “R” Us, Inc. traded substantially higher Tuesday morning on news that the company is exploring a joint venture with the Chinese billionaire Fung brothers to sell high-end toys in Asia, a trader said.

Toys “R” Us secured paper, the TRU Taj LLC/TRU Taj Finance, Inc. 12% senior secured notes due August 2021, were up 3.5 points at 98 bid on Tuesday, the trader said.

The unsecured Toys “R” Us, Inc. (Toys HoldCo) 7 3/8% senior notes due October 2018 were up 6 to 7 points at 34 bid.

The market is hearing that an initial public offering could be in the works in a deal that could see the contemplated joint venture valued at $2 billion, the trader said.

Away from retail, bonds of Quebec-based aerospace and transportation company Bombardier Inc. were also substantially higher on Tuesday on news of a partnership with rival Airbus to make and market Bombardier's C series jet airplanes.

The entire Bombardier complex of bonds was up 5 to 7 points, the trader said.

Bombardier’s 6% senior notes due October 2022 were up 5.5 points at 102 bid at midmorning.

The Canadian company's securities had been under pressure because of import duties being recommended by the U.S. Commerce Department related to a complaint leveled by American aircraft maker Boeing.

Among recent issues, Pattonair’s 9% senior secured notes due Nov. 1, 2022 (Caa1/CCC+) were 101½ bid on Tuesday.

The $280 million deal priced at par on Monday.

High-yield ETFs were positive at midmorning. The SPDR Blmbg Barclays High Yield Bd ETF (JNK) was up 0.11%, or 4 cents, at $37.23 per share.

Xplornet tapping PIK notes

In the primary market, Xplornet Communications Inc. plans to price a $25 million add-on to its 9 5/8%/10 5/8% senior PIK notes due June 1, 2022 (expected ratings Caa2/CCC) on Tuesday.

SunTrust Robinson Humphrey Inc., BMO Securities and Jefferies LLC are the joint bookrunners.

The Woodstock, N.B.-based rural-focused broadband service provider plans to use the proceeds, in addition to a $25 million add-on to its term loan B, to finance the acquisition of internet business assets in Canada.

The original $230 million issue priced at par on May 19, 2017.

The add-on notes will immediately become fungible with the original notes.

CMA CGM upsizes

In the European primary market, Marseille, France-based container ship company CMA CGM SA launched an upsized €500 million offering of seven-year senior notes (B3/B-) at 5¼%.

Terms on the deal were expected near midday ET.

The deal was upsized from €300 million.

Price talk was in the 5½% area. Initial talk was 5½% to 5¾%.

Joint global coordinator BNP Paribas will bill and deliver for the Rule 144A and Regulation S deal. HSBC is also a joint global coordinator. Credit Agricole CIB, ING, SG CIB and UniCredit Bank are the joint bookrunners.

The company, which is based in Marseille, plans to use the proceeds to repay bank debt.

Monday outflows

Cash flows for dedicated high-yield bond funds were negative on Monday, the trader said.

High-yield ETFs sustained $53 million of outflows on the day.

Actively managed high-yield funds sustained $35 million of outflows on Monday.

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