Morning Commentary: MoneyGram upsizes, sets talk, pricing Wednesday; Occidental higher

By Paul A. Harris

Portland, Ore., May 31 – A bond offering backing the buyout of MoneyGram International Inc. by Madison Dearborn Partners upsized to $450 million from $400 million on Wednesday.

Official talk on the Mobius Merger Sub, Inc. seven-year senior secured notes (B2/B/B+) specifies a 9% coupon at an original issue discount of 83 to yield 12.742%, nearly 175 basis points beyond the wide end of early guidance in the 10½% to 11% area.

In addition to the big rate concession came covenant changes.

The deal is set to price later on Wednesday.

Away from new issues, the broad high-yield bond market opened unchanged on Wednesday, sources said.

The Copeland (Emerald Debt Merger Sub LLC and Emerald Co-Issuer Inc.) 6 5/8% senior secured notes due December 2030 (Ba3/BB-/BB+) were 98¾ bid, 99½ offered at mid-morning, unchanged, a New York-based bond trader said.

The $2.275 billion tranche, backing Blackstone’s buyout of Emerson Electric Co.’s climate technologies business, priced at par on May 4.

The Solenis (Olympus Water US Holding Corp.) 9¾% senior secured notes due November 2028 (B3/B-) were 99¼ bid, par offered, also mostly unchanged, the trader said.

The $1.7 billion tranche priced at par on May 24.

Meanwhile, in defiance of weaker crude oil prices, the entire capital structure of Occidental Petroleum Corp. was up ¼ point trailing news that Berkshire Hathaway bought an additional 4.7 million shares of the company’s stock (NYSE: OXY), upping Berkshire’s stake in the company to 222 million shares, or $13 billion.

The improvement in Occidental Petroleum’s bonds took place as the barrel price of West Texas Intermediate crude for July delivery fell 1.19%, or 83 cents, by mid-morning to $68.63.

Fund flows

High-yield ETFs saw $127 million of daily cash inflows on Tuesday, according to a market source.

However, actively managed high-yield bond funds sustained $12 million of outflows on the day, the source said.

The combined funds are tracking $946 million of net outflows for the week that is set to conclude with Wednesday’s close, according to the market source.

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