Morning Commentary: Vivint bonds jump on acquisition news; outflows top $1 billion

By Paul A. Harris

Portland, Ore., Dec. 6 – The junk bond market opened unchanged on Tuesday, sources said.

With the S&P 500 stock index off 1.07% at mid-morning, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was down 0.18%, or 13 cents, at $74.71.

Bonds of Vivint Smart Home Inc. jumped 6 to 7 points on news that the company is being acquired by NRG Energy Inc. for $2.8 billion, according to a trader in New York.

The APX Group, Inc. (Vivint) 5¾% senior notes due July 2029 changed hands Tuesday morning at 91, up 6 points on the day, the source said.

NRG, a Houston-based electricity generator, will pay $12 per share for Vivint, a Utah-based supplier of smart thermostats, locks, lights and other household devices.

The deal, with an enterprise value of $5.2 billion including $2.4 billion of debt, is set to close in the first quarter of 2023.

Elsewhere, the most recent issue to clear the high-yield market, the Iliad SA 5 3/8% senior notes due June 2027 (Ba2/BB/BB), was trading at par bid, par ¼ offered, a slight premium to its new issue price, according to a London-based debt capital markets banker, who added that the notes had really not done much on Tuesday.

The Iliad 5 3/8% notes, which came at par in an upsized €750 million issue (from €500 million) on Monday, played to €2 billion of demand, done in an execution that saw pricing descend from initial guidance in the 7¾% area.

The dollar-denominated new issue market, which remained inactive through the entire post-Thanksgiving week, reanimated on Monday.

Two deals are presently on the road.

Chart Industries, Inc. is marketing $2.06 billion in two tranches: $1.31 billion of seven-year senior secured notes with initial guidance of 8¼% to 8½% and a $750 million of eight-year senior unsecured notes with initial guidance that has them coming 250 basis points behind the secured notes.

The deal came into the market pursued by $2.3 billion of reverse inquiry skewed toward the secured tranche, according to a sellside source, who added that there is chatter in the market that pricing on both tranches is expected to tighten significantly.

The secured tranche could come with a seven-handle yield, the source said.

Pricing is scheduled for Friday, however, that timing could be accelerated, the sellsider said.

Elsewhere, Jones DesLauriers Insurance Management Inc., a broker partner of Ontario-based Navacord Inc., plans to sell $300 million of eight-year senior notes (expected ratings Caa2/CCC/CCC+).

The deal was set to kick off on a Tuesday morning investor conference call and is scheduled to be marketed on a roadshow through Thursday.

Initial guidance has the notes coming to yield in the high-10% to low-11% area, a trader said.

Monday outflows

The dedicated high-yield bond funds sustained $1.135 billion of net daily cash outflows on Monday, according to a market source.

High-yield ETFs saw a whopping $1.05 billion of outflows on the day.

Actively managed high-yield funds sustained $85 million of outflows on Monday, the source said.

The combined funds are tracking $702 million of net inflows for the week that will conclude with Wednesday's close, according to the market source.

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