Morning Commentary: Cequel brings $1.05 billion drive-by; First Quantum bounces off lows

By Paul A. Harris

Portland, Ore., March 22 – The dollar-denominated high-yield primary market, which slumbered in the early part of the March 19 week, then reactivated on Wednesday, continued to generate news on Thursday morning.

Cequel Communications Holdings I, LLC and subsidiary Cequel Capital Corp. plan to price a $1.05 billion offering of 10-year senior notes (existing ratings Caa1/B) in a quick-to-market Thursday trade following a late-morning conference call with investors.

Initial price talk is 7 1/8% to 7 3/8%, a trader said.

Goldman Sachs is the left bookrunner for the debt refinancing deal.

The European primary market, meanwhile, has generated a steady stream of news throughout the week.

On Thursday, Italy-based TeamSystem Holding SpA set price talk in its €750 million offering of senior secured floating-rate notes (B3//B+).

The deal includes €550 million of five-year notes and €200 million of seven-year notes.

Both tranches are talked at spread to Euribor of 400 basis points to 425 bps.

Books closed earlier on Thursday.

Elsewhere Chicago-based LKQ Corp. firmed price talk on top of guidance in its €1 billion two-part offering of senior notes (Ba2/BB).

The offering is coming in tranches of eight-year notes talked to yield 3½% to 3¾% and 10-year notes talked to yield 4% to 4¼%.

The deal is set to price on Thursday.

First Quantum off lows

Amid a backdrop of volatility in the capital markets in Europe and the United States, high yield ETFs were lower at mid-morning on Thursday.

The SPDR Blmbg Barclays High Yield Bd ETF (JNK) was 0.26% lower at $35.84 per share, down 9 cents.

Oil prices were substantially lower at mid-morning.

The barrel price of West Texas Intermediate crude for May 2018 delivery was down 1.26%, or 82 cents, at $64.35.

Bonds of First Quantum Minerals Ltd. bounced off their lows on Thursday and were trading at 94¼ bid, 95 offered, a trader said.

They came under pressure earlier in the week when the government of Zambia asserted that the company owed $7.9 billion in unpaid import duties.

Mixed Wednesday flows

The daily cash flows of the dedicated high-yield bond funds were mixed on Wednesday, a trader said.

High-yield ETFs saw $114 million of inflows on the day.

However actively managed funds sustained $45 million of outflows on Wednesday.

The news surfaced as the market awaited a report on weekly fund flows from Lipper US Fund Flows, due Thursday afternoon.

Most recently the news on weekly flows was positive, with the market stemming a tide of eight consecutive weekly outflows with $11 million of net inflows for the week to the Wednesday, March 14, close.

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