Solid employment growth propels junk higher; Forestar accelerates timing

By Paul A. Harris

Portland, Ore., April 5 – A solid non-farm payrolls report propelled junk ¼ point to ½ point higher on Friday, as it lifted the markets in the United States, in general, high-yield sources said.

The U.S. economy added 196,000 jobs in March, versus an anemic 33,000 in February, a trader remarked.

A look at a few of the conspicuous issues that came in the first quarter of 2019 turns up some solid performers, a junk bond investor said, Friday morning.

Power Solutions is a case in question.

The Panther BF Aggregator 2 LP/Panther Finance Co. 6¼% senior secured notes due May 2026 (Ba3/B+/BB) were trading at 102½ bid, 103 offered, on Friday.

They priced at par in a $1 billion tranche on March 18.

The Panther 8½% unsecured notes due May 2027 (B3/B/B-) were par ½ bid, 101 offered on Friday. The unsecured notes also came March 18 at par in a $1.95 billion tranche.

Investors pushed Surgery Center Holdings, Inc. up 75 basis points from the tight end of initial guidance before taking down the Nashville-based health care services company's 10% senior notes due April 2027 (Caa2/CCC) at par on March 28.

Since then it has been a pretty nice ride, the investor said, spotting the Surgery Centers 10% bonds at 101¾ bid, 102½ offered.

More dramatic, still, is the move made by the Targa Resources Partners LP/Targa Resources Finance Corp. 6½% senior notes due July 2027 (Ba3/BB).

That bond, which came at par in a $750 million tranche on Jan. 10, sold Thursday at 108¼, the investor said.

Ensign talk 9% to 9¼%

Two deals are on deck to clear the primary market ahead of the weekend.

Ensign Drilling Inc. talked its $700 million offering of five-year senior notes (B2/BB-) to yield 9% to 9¼%.

Books close at 2:30 p.m. ET on Friday.

BMO Capital Markets Corp. is the left physical bookrunner for the debt refinancing.

Forestar for Friday

And Forestar Group Inc. talked its $300 million offering of five-year senior notes (B2/B) to yield 7¾% to 8%.

Official talk comes tight to initial guidance in the 8% area.

Deal timing accelerated. Books close at 1 p.m. ET on Friday, and the notes are expected to price thereafter. When launched, Forestar's deal was expected to remain in the market into the April 8 week.

J.P. Morgan Securities LLC is the lead.

The Ensign and Forestar deals both underwent covenant changes.

Mixed Thursday flows

The daily cash flows of the dedicated high-yield bond funds were mixed on Thursday, according to a trader.

High-yield ETFs sustained $30 million of outflows on the day.

However actively managed high-yield funds saw $30 million of inflows on Thursday, the trader said.

News of Thursday's daily flows trails a Thursday afternoon report that the combined high yield funds saw $2 billion of net inflows in the week to Wednesday's close, according to Lipper US Fund Flows.

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