Morning Commentary: Junk opens flat; Equiniti on deck, undergoes covenant changes

By Paul A. Harris

Portland, Ore., Oct. 29 – High-yield bonds opened unchanged to slightly lower on Friday, traders said.

Bad news from the tech sector, where manufacturers are in the throes of supply chain strangulation, took the U.S. stock indexes lower into mid-morning, with the tech-heavy Nasdaq down half a percent, underperforming the lot.

This negative sentiment was reflected in the iShares iBoxx $ High Yield Corporate Bd (HYG) share price, which was down 0.2%, or 18 cents, at $86.99.

The new CA Magnum Holdings 5 3/8% senior secured notes due October 2026 (B1//BB-), the deal that generated the week's biggest buzz, were 102½ bid, 103 offered, unchanged on the morning, a trader said.

The $1.01 billion deal, backing the buyout of India-based Hexaware Technologies by Carlyle Group, priced on Wednesday at par, heard to be playing to $8 billion of demand.

The primary market was generally quiet on Friday.

Armor Holdco, Inc. is on deck with a $350 million offering of eight-year senior notes (Caa1/CCC+) backing the combination of Equiniti Group and AST by sponsor Siris Capital.

The deal was talked on Thursday at 8¼% to 8½%, backed up from earlier guidance in the high 7% area to 8%.

Subsequent to talk, the deal underwent covenant changes, which primarily bear upon how the company may disburse cash and incur additional debt.

Meanwhile, terms on the Petrofac Ltd. $500 million offering of five-year senior secured notes (BB-/BB-), an execution being undertaken on a London high-yield desk, could surface on Friday, sources say.

Pricing on that deal backed up to 10% to 10¼% from earlier guidance in the 10% area, they add.

Thursday inflows

The dedicated high-yield bond funds saw $79 million of net daily inflows on Thursday, according to a market source.

High-yield ETFs saw almost the entire amount, posting $78 million of inflows on the day.

Actively managed funds were almost totally flat on Thursday, posting $1 million of inflows on the day, the source said.

News of Thursday’s daily flows follows a Thursday report that the combined funds saw $1.19 billion of net inflows in the week to the Wednesday, Oct. 27 close, according to Refinitv Lipper.

In the past two weeks the funds have seen $3.5 billion of inflows, the source said, adding that year-to-date flows for the dedicated high-yield funds now stand at negative $11 billion.

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