Morning Commentary: Junk opens unchanged; Vermilion Energy brings $400 million notes

By Paul A. Harris

Portland, Ore., April 19 – The high-yield bond market opened unchanged on Tuesday as equities whipsawed, according to a sellside source in New York.

With the S&P 500 index up 1¼%, at mid-morning and Treasury yields remaining on the march, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was essentially flat at $80.05 per share, down 6 cents, or 0.07%.

News that private equity firm Apollo Global Management is considering providing debt financing for a potential buyout of Twitter, Inc. was generating a modicum of activity in the company's junk bonds on Tuesday morning, the sellsider said.

The Twitter 3 7/8% senior notes due December 2027, the nearer maturity of Twitter's two outstanding issues, changed hands at 97 1/8, up half a point. They were 96¼ bid, 97¼ offered on Monday.

The longer maturity Twitter 5% senior notes due May 2030 traded at 98 5/8 on Tuesday, unchanged on the day.

Elon Musk, the CEO of Tesla and SpaceX, has offered to buy Twitter for $43 billion.

Although the U.S. stock indexes were better, commodities were floundering in a sea of red ink on Tuesday morning.

The barrel price of West Texas Intermediate crude oil for May 2022 delivery was down $4.91 on the morning at $103.30, off 4.54%.

At that time, the Holly Energy Partners, LP and Holly Energy Finance Corp. 6 3/8% senior notes due April 2027 (Ba3/BB+/BB+) were unchanged at 101¾ bid, the sellsider said.

The $400 million issue priced at par on April 6.

Meantime the most recent deal to clear the market, the Oldcastle BuildingEnvelope (Oscar AcquisitionCo LLC) 9½% senior notes due April 2030 (Caa1/CCC+), changed hands on Tuesday morning at 93 7/8, down 1/8 point, in round lot trading.

Those bonds, which came last Thursday in a deal that had been battered by market turbulence, were 93¾ bid, 94½ offered on Monday, the sellsider said.

The post-Easter primary market flickered to life on Tuesday morning as Vermilion Energy Inc. announced a $400 million offering of eight-year senior notes (B3//BB-), with proceeds to refinance bank debt.

The deal is in the market with initial guidance in the low 7% area and is expected to price on Wednesday.

The high-yield new deal machine, which began sputtering in earnest around the time that Russia invaded the Ukraine in late February, is expected to continue to generate at least some business in the days ahead, sources say.

Fund flows

The daily cash flows of the dedicated high-yield bond funds were flat to slightly negative on Monday, according to a market source.

High-yield ETFs saw $201 million of inflows on the day.

Actively managed high-yield funds, however, sustained $244 million of outflows on Monday, the source said.

The combined funds are tracking $62 million of net outflows for the week that will conclude with Wednesday's close, according to the market source.

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