Morning Commentary: Junk opens flat; Evergreen/Savers bonds above issue price

By Paul A. Harris

Portland, Ore., Jan. 27 – After opening 1/8 of a point lower on Friday, the high-yield bond market was unchanged – or perhaps a little better – at mid-morning, sources said.

With the major U.S. stock indexes mixed, at that point the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was down 0.4%, or 31 cents, at $76.08.

Bonds priced Thursday by Savers Value Village, Inc. maintained a premium to their new issue price in Friday morning trading.

The Evergreen AcqCo 1 LP/TVI, Inc. (Savers Value Village) 9¾% senior secured notes due April 26, 2027 were 99 5/8 bid, 99 7/8 offered at mid-morning, a trader said.

The upsized $550 million issue (from $500 million) priced at 97.986 to yield 10¼% in an oversubscribed Thursday execution.

The Caesars Entertainment Inc. 7% senior secured notes due February 2030 (Ba3/B) were trading on either side of 102 on Friday morning.

The $2 billion issue priced at par on Monday.

And from the “timing-could-have-been-better” department, the Spirit AeroSystems Inc. 9 3/8% senior secured first-lien notes due November 2029 (Ba2/BB-) were skipping across the stratosphere at 108 1/8 bid on Friday morning.

The $900 million issue priced at par on Nov. 8, the trader recounted, noting that had Spirit AeroSystems shown up in early January instead of early November they almost certainly could have realized a substantially lower cost of capital.

The primary market remained quiet on Friday morning and is apt to remain generally quiet until the conclusion of the Federal Open Market Committee meeting, set to run Jan. 31 through Feb. 1, sources say.

The Jan. 23 week saw $3.74 billion of junk-rated, dollar-denominated issuance in five tranches, a little more than half the previous week's dollar amount, $6.72 billion in 13 tranches.

There was news Friday morning that Mauser Packaging Solutions Holding Co. accelerated the timing of its $2.75 billion offering of senior first-lien notes due Aug. 15, 2026 (B2/B), with the roadshow now set to run through Monday instead of Wednesday.

And NRG Energy continues to be expected to appear sooner than later in the primary market, the trader said.

Fund flows

The daily cash flows of the dedicated high-yield bond funds were mixed and nearly flat on Thursday, with the two cohorts approximately canceling one another out, according to a market source.

The high-yield ETFs saw $30 million of inflows on the day, while the actively managed high-yield funds sustained $37 million of outflows on Thursday, the source said.

News of Thursday’s daily flows follows a Thursday afternoon report that the combined funds sustained $1.279 billion of net outflows in the week to the Wednesday, Jan. 25 close, according to Refinitiv Lipper.

That left the year-to-date cash flows of the dedicated junk bond funds at negative $771 million, the market source said.

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