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North American Bond Research – April 3, 2020

Posted on April 3, 2020
HIGH YIELD BOND RESEARCH
April 3, 2020
Bond Markets

MARKETS ARE DOWN AS VIRUS CASE AND DEATH COUNTS CONTINUE TO RISE. JOB LOSES CONTINUE TO PILE ON AS THE US REPORTS 700k JOB PAYROLL DIVE.  10 Year Treasury notes were down 4 basis points. S&P -1.51%, Dow -1.69%, NASDAQ -1.53%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 1030000+ CASES AND 53000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 245000+ CASES AND 6000+ DEATHS.  Among high-grade bonds showing topmost price gains at appreciable volumes traded, Ford Motor Co (USD) 7.4% 11/1/2046 made analysts’ ‘Conviction Buy’ list. (See the chart below for Ford Motor Co bonds) Pierre Robert
Key Gainers and Losers Volume Leaders
+   Hilton Worldwide Finance LLC 4.875% 4/1/2027 +1.0%
  Expedia Inc. 5.95% 8/15/2020 +1.3%
  Ally Financial Inc. 4.125% 2/13/2022 +1.2%
  Western Gas Partners LP 5.3% 3/1/2048 +11.4%
  Intl Lease Finance Corp. 8.25% 12/15/2020 +1.2%
–   General Motors Co. 6.25% 10/2/2043 -2.8%
  HCA Inc. 3.5% 9/1/2030 -1.0%
  General Motors Co. 4.875% 10/2/2023 -2.0%
  SLM Corp. (USD) 5.5% 1/25/2023 -1.0%
  Charter Communications Operating LLC 4.8% 3/1/2050 -1.7%
General Motors Co.   6.25% 10/2/2043
Hilton Worldwide Finance LLC   4.875% 4/1/2027
Ally Financial Inc.   4.125% 2/13/2022
Expedia Inc.   5.95% 8/15/2020
HCA Inc.   3.5% 9/1/2030
Western Gas Partners LP   5.3% 3/1/2048
Intl Lease Finance Corp.   8.25% 12/15/2020
General Motors Co.   4.875% 10/2/2023
SLM Corp.   (USD) 5.5% 1/25/2023
Whiting Petroleum Corp.   6.625% 1/15/2026
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.16% 4.49% -12.16% -12.12% -11.94% -1.86%
Mining 0.42% 0.09% -35.82% -40.42% -40.01% -32.24%
Construction -0.08% 1.53% -11.31% -9.83% -9.68% 0.33%
Manufacturing -0.38% 3.55% -11.22% -10.65% -10.51% -1.47%
Transportion, Communication, Electric/Gas -0.22% 2.15% -11.61% -10.82% -10.69% -1.49%
Wholesale -0.23% 1.63% -14.09% -14.36% -14.20% -5.54%
Retail -0.49% 1.36% -15.61% -15.74% -15.64% -3.44%
Finance, Insurance, Real-Estate -0.16% 2.77% -11.17% -10.66% -10.52% -0.70%
Services -0.45% 3.24% -11.69% -11.66% -11.56% -2.21%
Public Administration -1.24% 6.20% -14.46% -13.52% -13.15% -5.00%
Energy 0.78% 1.42% -35.95% -39.79% -39.52% -32.63%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar
1. Tenet Healthcare Corp. (USD) 7.5% 4/1/2025 144A (04/02/2020): 700MM First Lien Notes, Price at Issuance 100, Yielding 7.5%.

2. Tenet Healthcare Corp. (USD) 7.5% 4/1/2025 Reg S (04/02/2020): 700MM First Lien Notes, Price at Issuance 100, Yielding 7.5%.

3. NEW Red Finance, Inc. (USD) 5.75% 4/15/2025 144A (04/02/2020): 500MM First Lien Notes, Price at Issuance 100, Yielding 5.75%.

4. NEW Red Finance, Inc. (USD) 5.75% 4/15/2025 Reg S (04/02/2020): 500MM First Lien Notes, Price at Issuance 100, Yielding 5.75%.

1. AVI-SPL: $370MM covenant lite TLB (B2/B)

2. Service Logic: $140MM bank debt: $40MM TL; $100MM DD TL

3. CJ Foods Inc.: $285MM TLB

4. Cornerstone Ondemand Inc.: $1.135MM senior secured credit facilities: $150MM revolver; $985MM TLB

5. Eldorado Resorts Inc./Caesars Entertainment Corp.: $6.4B credit facilities:$1B revolver at Eldorados; $3B seven-year cove-lite TLB due 2027 at Eldorado; $2.4B seven-year cove-lite TLB due 2027 at Caesars Resorts Collection

6. Innovate Xcessories & Services LLC: $695MM credit facilities: $75MM revolver; $620MM TL(B2/B)

7. Instructure: $825MM senior secured credit facilities: $50MM revolver; $775MM TL

8. RSA: $1.425B credit facilities: $75MM revolver; $1B TL; $350MM TL

9. Snapav: $390MM term loans: $290MM TL (B2); $100MM TL

10. Tata Chemicals North America Inc. : $380MM TL (Ba3)

Additional Commentary

NEW ISSUANCE WATCH: Tenet Healthcare Corp put out $1400 MM issues on 4/3/2020.  The most recent data showed money flowed in of ETF/mutual funds for the week ended 01/10/2020, with a net inflow of $9.8 billion.
Top Widening Loans Top Narrowing Loans
J Crew Group Inc. (USD) TLB L+322 03/06/2021
Arvos Holding (EUR) TLB2 E+450 08/29/2021
Advantage Sales & Marketing Inc. (USD) TL2 L+650 07/25/2022
Tipico Co. LTD (EUR) TLB E+350 08/08/2022
Quest Software US Holdings Inc (USD) TL L+425 05/17/2025
Booz Allen Hamilton Inc. (USD) TL L+175 11/22/2026
Concordia International (EUR) TL E+525 09/06/2024
Hamilton Holdco LLC (USD) TLB L+200 01/02/2027
Prosol Gestion (EUR) TLB E+400 04/21/2024
ATI Holdings (USD) TLB L+350 05/10/2023

Loans and Credit Market Overview

SYNDICATED LOANS HIGHLIGHTS:

Deals recently freed for secondary trading, notable secondary activity:

  • Symantec Corp., Broadcom LTD, Toll Brothers Inc., Cole-Parmer Instrument Co.

OVERALL CREDIT MARKET:

Long-term bond yields are expected to hit a cyclical peak in 2019 given tight fiscal policy and lagging global economies. Europe remains checked by stubbornly low inflationary forces.  Positive effects remained in force:

  • TED spread held below  130 bp (basis points), as of 04/3/2020
  • Net negative capital flows into high-yield ETFs & mutual funds

 

INVESTMENT GRADE BOND RESEARCH
April 3, 2020
Bond Markets

MARKETS ARE DOWN AS VIRUS CASE AND DEATH COUNTS CONTINUE TO RISE. JOB LOSES CONTINUE TO PILE ON AS THE US REPORTS 700k JOB PAYROLL DIVE. 10 Year Treasury notes were down 4 basis points. S&P -1.51%, Dow -1.69%, NASDAQ -1.53%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 1030000+ CASES AND 53000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 245000+ CASES AND 6000+ DEATHS.   Among high-grade bonds showing topmost price gains at appreciable volumes traded, Baker Hughes Inc. (USD) 4.08% 12/15/2047 made analysts’ ‘Conviction Buy’ list. (See the chart below for Baker Hughes Inc. bonds) Pierre Robert
Key Gainers and Losers Volume Leaders
+   Citibank NA 3.05% 5/1/2020 +0.3%
  General Dynamics Corp. 4.25% 4/1/2050 +0.2%
  Oracle Corp. 2.95% 4/1/2030 +0.1%
  Dollar General Corp. 4.125% 4/3/2050 +0.2%
  Nike Inc. 3.375% 3/27/2050 +0.2%
–   Coca-Cola Co. 4.2% 3/25/2050 -2.9%
  Anheuser-Busch Inbev Worldwide Inc. 3.5% 6/1/2030 -1.4%
  Oracle Corp. 3.6% 4/1/2050 -0.1%
  Nvidia Corp. 2.85% 4/1/2030 -1.1%
  Lowe’s Companies Inc. 5.125% 4/15/2050 -0.3%
Coca-Cola Co.   4.2% 3/25/2050
Anheuser-Busch Inbev Worldwide Inc.   3.5% 6/1/2030
Oracle Corp.   3.6% 4/1/2050
Nvidia Corp.   2.85% 4/1/2030
Lowe’s Companies Inc.   5.125% 4/15/2050
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.11% 1.57% -6.78% -3.41% -3.33% 4.19%
Mining 0.43% 1.67% -16.43% -14.74% -14.62% -3.23%
Construction 0.11% 2.38% -9.89% -7.14% -7.07% 0.44%
Manufacturing -0.07% 2.34% -5.00% -1.77% -1.65% 7.15%
Transportion, Communication, Electric/Gas -0.00% 3.31% -7.01% -3.07% -2.92% 7.35%
Wholesale 0.10% 1.35% -7.00% -4.58% -4.51% 4.35%
Retail -0.01% 2.45% -5.40% -2.07% -1.95% 7.30%
Finance, Insurance, Real-Estate -0.05% 1.86% -4.57% -1.89% -1.79% 5.51%
Services 0.00% 2.01% -5.02% -1.57% -1.43% 7.45%
Public Administration 0.01% 0.37% 1.21% 3.41% 3.37% 6.28%
Energy 0.36% 2.35% -15.80% -14.09% -13.97% -4.00%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. Hyundai Capital America (USD) 5.75% 4/6/2023 144A (04/02/2020): 550MM Senior Unsecured Notes, Price at Issuance 99.886, Yielding 5.79%.

2. Hyundai Capital America (USD) 6.375% 4/8/2030 Reg S (04/02/2020): 650MM Senior Unsecured Notes, Price at Issuance 99.941, Yielding 6.38%.

3. T-Mobile USA Inc. (USD) 4.5% 4/15/2050 Reg S (04/02/2020): 3000MM Secured Notes, Price at Issuance 99.575, Yielding 4.53%.

4. T-Mobile USA Inc. (USD) 3.75% 4/15/2027 Reg S (04/02/2020): 4000MM Secured Notes, Price at Issuance 99.957, Yielding 3.76%.

5. TransDigm Group Inc. (USD) 8% 12/15/2025 144A (04/02/2020): 1100MM Secured Notes, Price at Issuance 100, Yielding 8%.

6. TransDigm Group Inc. (USD) 8% 12/15/2025 Reg S (04/02/2020): 1100MM Secured Notes, Price at Issuance 100, Yielding 8%.

7. Ontario Power Generation Inc. (CAD) 2.893% 4/8/2025 (04/02/2020): 400MM Senior Unsecured Notes, Price at Issuance 100, Yielding 2.89%.

8. Ontario Power Generation Inc. (CAD) 3.215% 4/8/2030 (04/02/2020): 800MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.22%.

9. Hyundai Capital America (USD) 5.875% 4/7/2025 144A (04/02/2020): 600MM Senior Unsecured Notes, Price at Issuance 99.919, Yielding 5.89%.

10. Carnival Corp. (USD) 11.5% 4/1/2023 144A (04/02/2020): 4000MM First Lien Notes, Price at Issuance 99, Yielding 11.901%.

Additional Commentary

NEW ISSUANCE WATCH: on 04/03/2020 participants welcome a $2200MM new corporate-bond offering by TransDigm Group IncThe most recent data showed money flowed in of ETF/mutual funds for the week ended 01/10/2020, with a net inflow of $9.8 billion.
Top Widening Loans Top Narrowing Loans
J Crew Group Inc. (USD) TLB L+322 03/06/2021
Arvos Holding (EUR) TLB2 E+450 08/29/2021
Advantage Sales & Marketing Inc. (USD) TL2 L+650 07/25/2022
Tipico Co. LTD (EUR) TLB E+350 08/08/2022
Quest Software US Holdings Inc (USD) TL L+425 05/17/2025
Booz Allen Hamilton Inc. (USD) TL L+175 11/22/2026
Concordia International (EUR) TL E+525 09/06/2024
Hamilton Holdco LLC (USD) TLB L+200 01/02/2027
Prosol Gestion (EUR) TLB E+400 04/21/2024
ATI Holdings (USD) TLB L+350 05/10/2023

Loans and Credit Market Overview

SYNDICATED LOANS HIGHLIGHTS:

Deals recently freed for secondary trading, notable secondary activity:

  • Symantec Corp., Broadcom LTD, Toll Brothers Inc., Cole-Parmer Instrument Co.

OVERALL CREDIT MARKET:

Long-term bond yields are expected to hit a cyclical peak in 2019 given tight fiscal policy and lagging global economies. Europe remains checked by stubbornly low inflationary forces.  Positive effects remained in force:

  • TED spread held below 130 bp (basis points), as of 04/3/2020
  • Net positive capital flows into high-yield ETFs & mutual funds

Copyright 2020 Advantage Data Inc. All Rights Reserved. http://www.advantagedata.com

Information in this document should not be regarded as an offer to sell or solicitation of an offer to buy bonds or any financial instruments referred to herein. All information provided in this document is believed to be accurate. However, Advantage Data and its sources make no warranties, either express or implied, as to any matter whatsoever, including but not limited to warranties of merchantability or fitness for a particular purpose. Opinions in this document are subject to change without notice. Electronic redistribution, photocopying and any other electronic or mechanical reproduction is strictly prohibited without prior written permission from Advantage Data Inc.

 


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