Morning Commentary: Copeland 6 5/8% notes slip below par; Heartland Dental on deck

By Paul A. Harris

Portland, Ore., May 5 – Cinco de Mayo saw the high-yield bond market lagging equities, as it opened unchanged, according to a bond trader in New York.

With the S&P 500 stock index up 1.43% at mid-morning, the Shares iBoxx $ High Yield Corporate Bd (HYG) share price was up 0.4%, or 30 cents, at $74.66.

The freshly minted Copeland (Emerald Debt Merger Sub LLC/Emerald Co-Issuer Inc.) 6 5/8% senior secured notes due December 2030 (Ba3/BB-/BB-) were trading below par on Friday morning at 99½ bid, par offered, the trader said.

The bonds came Thursday at par in a $2.275 billion tranche (upsized from $2.25 billion).

Although throughout the week there was a buzz in the market that had the acquisition financing deal playing to massive demand, that’s not how the new Copeland/Emerald 6 5/8% notes have been trading in the secondary, sources say.

The Copeland deal, backing Blackstone’s acquisition of a majority stake in Emerson Electric’s climate technologies business, also included a €455 million tranche of 6 3/8% secured notes due 2030, which also priced at par on Thursday.

The Thursday primary market session also saw EquipmentShare.com Inc. price a $640 million issue of 9% second-lien senior secured notes due May 2028 (B3/B-) in a deal that suffered more slings and arrows than Hamlet.

The new notes were trading at 95 bid, 95½ offered on Friday morning after pricing Thursday at 94.26 to yield 10½%, more than $2.81 cheap to the cheap end of price talk, having widened out as much as 200 basis points from initial yield guidance.

The EquipmentShare.com issue was ultimately downsized from $750 million.

Among other recent issues, the Tenet Healthcare Corp. 6¾% senior secured first-lien notes due May 2031 (B1/BB-/BB-) were par ¼ bid, par ¾ offered on Friday morning, the trader said.

The $1.35 billion issue priced at par on Tuesday.

Away from recent issues, the QVC Inc. 4.85% senior secured notes due April 2024 were up 3 points to 4 points on Friday morning, 92¼ bid, 93¼ offered, trailing an upbeat earnings call from parent Qurate Retail, Inc., the trader said.

In an otherwise quiet new issue market, Heartland Dental, LLC and co-issuer Heartland Dental Finance Corp. launched an upsized $535 million offering of senior secured notes due April 30, 2028 (B2/B) with a 10½% coupon at par.

The deal, which is upsized from $500 million, is set to price on Friday.

The offering launched in the middle of talk in the 10½% area. Initial guidance was in the mid-10% area.

Fund flows

High-yield ETFs sustained $1.346 billion of daily cash outflows on Thursday, their third-largest daily outflow of the year, according to a trader.

Also on Thursday, fund-tracker Refinitiv Lipper reported that the dedicated high-yield bond funds sustained $1.58 billion of net outflows in the week to the Wednesday, May 3 close.

Those outflows followed four consecutive weekly net inflows that totaled $7.7 billion, according to a market source.

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