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North American Bond Research – April 8, 2020

Posted on April 8, 2020
HIGH YIELD BOND RESEARCH
April 8, 2020
Bond Markets
IMPROVING CORONAVIRUS CASE AND DEATH NUMBERS PUSHES MARKETS HIGHER. SENTIMENT THAT DAMAGE TO THE ECONOMY MIGHT BE NEGATED IF IMPROVEMENTS CONTINUES. 10 Year Treasury notes were up 2.8 basis points. S&P +3.41%, Dow +3.44%, NASDAQ +2.58%.

CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 1500000+ CASES AND 88000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 448000+ CASES AND 14500+ 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
+   Intelsat Jackson Hldg SA 5.5% 8/1/2023 (1) +3.1%
  Frontier Communications Corp. 11% 9/15/2025 +1.9%
  Sprint Corp. 7.125% 6/15/2024 +0.3%
  Citigroup Inc. 6.125% PERP +1.0%
  Macy’s Retail Hldg Inc. 3.625% 6/1/2024 +0.6%
–   General Motors Co. 4.875% 10/2/2023 -2.1%
  Continental Res Inc. 5% 9/15/2022 -0.6%
  Oasis Petroleum Inc. 6.875% 3/15/2022 (1) -10.1%
  Latam Finance Limited 6.875% 4/11/2024 Reg S -2.1%
  Freeport-McMoRan Inc. 5% 9/1/2027 -0.8%
Intelsat Jackson Hldg SA   5.5% 8/1/2023 (1)
Frontier Communications Corp.   11% 9/15/2025
Sprint Corp.   7.125% 6/15/2024
Citigroup Inc.   6.125% PERP
Macy’s Retail Hldg Inc.   3.625% 6/1/2024
Ford Motor Co.   4.346% 12/8/2026
Tenet Healthcare Corp.   8.125% 4/1/2022
Continental Res Inc.   4.5% 4/15/2023
General Motors Co.   4.875% 10/2/2023
Western Gas Partners LP   5.5% 8/15/2048
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.26% 1.08% -11.25% -11.68% -11.10% -0.19%
Mining 2.14% 0.51% -34.43% -39.39% -38.59% -31.41%
Construction 0.34% -0.53% -11.60% -9.80% -9.49% -0.05%
Manufacturing 0.56% -1.01% -11.83% -11.20% -10.77% -2.07%
Transportion, Communication, Electric/Gas 0.91% 0.16% -11.04% -9.87% -9.67% -0.92%
Wholesale 0.66% -0.45% -14.95% -15.34% -14.94% -6.97%
Retail 0.46% -1.23% -15.82% -15.84% -15.56% -3.62%
Finance, Insurance, Real-Estate 0.35% -0.78% -11.72% -11.06% -10.75% -1.58%
Services 0.61% -1.52% -12.41% -12.37% -12.10% -2.75%
Public Administration 0.36% -1.23% -14.75% -12.56% -12.28% -3.93%
Energy 2.23% 1.14% -33.95% -38.41% -37.75% -31.55%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar
1. LifePoint Health Inc (USD) 6.75% 4/15/2025 144A (04/07/2020): 600MM First Lien Notes, Price at Issuance 100, Yielding 6.75%.

2. NCR Corp. (USD) 8.125% 4/15/2025 Reg S (04/07/2020): 400MM Senior Unsecured Notes, Price at Issuance 100, Yielding 8.13%.

3. NCR Corp. (USD) 8.125% 4/15/2025 144A (04/07/2020): 400MM Senior Unsecured Notes, Price at Issuance 100, Yielding 8.13%.

4. LifePoint Health Inc (USD) 6.75% 4/15/2025 Reg S (04/07/2020): 600MM First Lien Notes, Price at Issuance 100, Yielding 6.75%.

5. Wynn Resorts LTD. (USD) 7.75% 4/15/2025 Reg S (04/07/2020): 600MM Senior Unsecured Notes, Price at Issuance 100, Yielding 7.75%.

6. Wynn Resorts LTD. (USD) 7.75% 4/15/2025 144A (04/07/2020): 600MM Senior Unsecured Notes, Price at Issuance 100, Yielding 7.75%.

 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: LifePoint Health issued $600MM debt on 4/8/2020.
Top Widening Loans Top Narrowing Loans
Ascent Resources Marcellus LLC (USD) TL EXT L+650 12/31/2049
Wittur (EUR) TLB E+450 09/23/2026
Arvos Holding (EUR) TLB2 E+450 08/29/2021
Averys SA (EUR) TLB E+375 09/25/2025
Everi Payments Inc. (USD) TL L+300 05/09/2024		 Prosol Gestion (EUR) TLB E+400 04/21/2024
Cerba HealthCare (EUR) TLB E+350 04/19/2024
Automatic Data Processing Inc. (USD) RC L+30 06/13/2023
Shearer’s Foods Inc. (USD) TL2 L+675 06/30/2022
Sebia SA (EUR) TLB E+300 10/24/2024

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  118 bp (basis points), as of 04/8/2020
  • Net negative capital flows into high-yield ETFs & mutual funds

 

INVESTMENT GRADE BOND RESEARCH
April 8, 2020
Bond Markets
IMPROVING CORONAVIRUS CASE AND DEATH NUMBERS PUSHES MARKETS HIGHER. SENTIMENT THAT DAMAGE TO THE ECONOMY MIGHT BE NEGATED IF IMPROVEMENTS CONTINUES. 10 Year Treasury notes were up 2.8 basis points. S&P +3.41%, Dow +3.44%, NASDAQ +2.58%.

CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 1450000+ CASES AND 81000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 365000+ CASES AND 13000+ 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
+   Oracle Corp. 2.5% 4/1/2025 +0.8%
  Oracle Corp. 3.6% 4/1/2050 +2.2%
  Caterpillar Inc. 3.25% 4/9/2050 +1.0%
  Oracle Corp. 3.85% 4/1/2060 +4.8%
  Oracle Corp. 3.6% 4/1/2040 +2.7%
–   Oracle Corp. 2.95% 4/1/2030 -0.8%
  Shell Intl Finance BV 3.25% 4/6/2050 -1.2%
  Ross Stores Inc. 4.6% 4/15/2025 -0.6%
  BP Capital Markets PLC 3.633% 4/6/2030 -0.5%
  Procter & Gamble Co. 3.6% 3/25/2050 -0.9%
Oracle Corp.   2.5% 4/1/2025
Oracle Corp.   3.6% 4/1/2050
Caterpillar Inc.   3.25% 4/9/2050
Oracle Corp.   3.85% 4/1/2060
Oracle Corp.   3.6% 4/1/2040
Caterpillar Inc.   2.6% 4/9/2030
VMWARE Inc.   4.5% 5/15/2025
Oracle Corp.   2.95% 4/1/2030
Walt Disney Co.   4.7% 3/23/2050
Oracle Corp.   2.8% 4/1/2027
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.24% 0.99% -6.61% -2.81% -2.61% 4.40%
Mining 0.87% 1.93% -15.02% -12.46% -12.05% -2.21%
Construction 0.12% 0.47% -11.28% -7.28% -6.70% 2.17%
Manufacturing 0.20% -0.05% -6.14% -1.88% -1.54% 7.13%
Transportion, Communication, Electric/Gas 0.20% 0.64% -8.35% -3.11% -2.61% 7.57%
Wholesale 0.18% -0.26% -7.94% -4.52% -4.27% 4.64%
Retail 0.17% 0.21% -6.42% -1.86% -1.60% 7.85%
Finance, Insurance, Real-Estate 0.15% -0.07% -5.38% -2.05% -1.75% 5.47%
Services 0.10% -0.18% -6.41% -1.95% -1.68% 7.29%
Public Administration -0.06% -0.05% 0.14% 3.03% 3.25% 6.06%
Energy 0.78% 1.88% -14.64% -12.19% -11.81% -3.03%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. Suncor Energy Inc. (CAD) 5% 4/9/2030 (04/07/2020): 1250MM Senior Unsecured Notes, Price at Issuance 99.697, Yielding 5.04%.

2. Bruce Power LP (CAD) 4% 6/21/2030 (04/07/2020): 600MM Senior Unsecured Notes, Price at Issuance 99.93, Yielding 4.01%.

3. Estee Lauder Cos Inc. (USD) 2.6% 4/15/2030 (04/07/2020): 700MM Senior Unsecured Notes, Price at Issuance 99.816, Yielding 2.62%.

4. Avangrid Inc. (USD) 3.2% 4/15/2025 (04/07/2020): 750MM Senior Unsecured Notes, Price at Issuance 99.871, Yielding 3.23%.

5. Mondelez International Inc. (USD) 2.125% 4/13/2023 (04/07/2020): 500MM Senior Unsecured Notes, Price at Issuance 99.769, Yielding 2.2%.

6. Mondelez International Inc. (USD) 2.75% 4/13/2030 (04/07/2020): 500MM Senior Unsecured Notes, Price at Issuance 99.032, Yielding 2.86%.

7. NiSource Inc. (USD) 3.6% 5/1/2030 (04/07/2020): 1000MM Senior Unsecured Notes, Price at Issuance 99.631, Yielding 3.64%.

8. Narragansett Electric Co. (USD) 3.395% 4/9/2030 144A (04/07/2020): 600MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.4%.

9. Narragansett Electric Co. (USD) 3.395% 4/9/2030 Reg S (04/07/2020): 600MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.4%.

10. Keurig Dr Pepper Inc. (USD) 3.2% 5/1/2030 (04/07/2020): 750MM Senior Unsecured Notes, Price at Issuance 99.743, Yielding 3.23%.
Additional Commentary
NEW ISSUANCE WATCH: on 04/03/2020 participants welcome a $1000MM new corporate-bond offering by NiSource Inc.
Top Widening Loans Top Narrowing Loans
Ascent Resources Marcellus LLC (USD) TL EXT L+650 12/31/2049
Wittur (EUR) TLB E+450 09/23/2026
Arvos Holding (EUR) TLB2 E+450 08/29/2021
Averys SA (EUR) TLB E+375 09/25/2025
Everi Payments Inc. (USD) TL L+300 05/09/2024		 Prosol Gestion (EUR) TLB E+400 04/21/2024
Cerba HealthCare (EUR) TLB E+350 04/19/2024
Automatic Data Processing Inc. (USD) RC L+30 06/13/2023
Shearer’s Foods Inc. (USD) TL2 L+675 06/30/2022
Sebia SA (EUR) TLB E+300 10/24/2024

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 118 bp (basis points), as of 04/8/2020
  • Net positive capital flows into high-yield ETFs & mutual funds

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