Morning Commentary: New Viking Cruises notes trade higher; Earthstone plans drive-by

By Paul A. Harris

Portland, Ore., June 27 – The high-yield bond market opened unchanged on Tuesday, according to traders.

With the Dow Jones industrial average up 0.35% at mid-morning, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was up 0.11%, or 8 cents, at $74.32.

At that time, the freshly minted Viking Cruises Ltd. 9 1/8% senior notes due July 2031 (Caa1/B-) were par ¼ bid, par ½ offered, a trader said.

The $720 million issue came at par in a Monday drive-by, playing to orders amounting to 2.5-times deal-size, sources said.

Among distressed paper, Michaels Stores’ bonds were in play, according to the trader, who added that a catalyst for the Tuesday morning action was not immediately apparent.

The Magic MergerCo, Inc. (Michaels Cos., Inc.) 5¼% senior secured notes due May 2028 were up in excess of 1 point, changing hands at 80¼, the trader said.

The same issuer’s 7 7/8% senior notes due May 2029 traded at 68½, up 2¼ points, according to the source.

In the primary market Earthstone Energy Holdings, LLC is driving by with a $500 million offering of senior notes due 2031 (B3/B+/B+). Initial talk has the deal coming to yield 10% to 10¼%.

Fund flows

High-yield ETFs sustained $127 million of daily cash outflows on Monday, according to a market source.

Actively managed high-yield funds saw positive flows on the day, posting $30 million of inflows on Monday, the source said.

The combined funds are tracking $676 million of net outflows for the week that will conclude with Wednesday’s close, according to the market source.

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