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North American Bond Research – August 7, 2020

Posted on August 7, 2020
HIGH YIELD BOND RESEARCH
August 7, 2020
Bond Markets

MARKETS WERE MIXED AS DUALING NEWS BUFFETED THE MARKETS. UNEMPLOYMENT RATE FELL TO 10.2% AS 1.8 MILLION JOBS WERE ADDED IN JULY, BUT COLLATERAL DAMAGE FROM THE COVID19 VIRUS CONTINUES TO BUILD UP IN THE MARKET. TENSIONS WITH CHINA IS ALSO A NEGATIVE. 10 Year Treasury notes were down 2.6 bps. S&P +0.06%, Dow +0.17%, NASDAQ -0.87%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 19.5 MILLION+ CASES AND 721000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 5.1 MILLION+ CASES AND 164000+ DEATHS.  Among high-grade bonds showing topmost price gains at appreciable volumes traded, Hertz Corp (The) (USD) 7% 1/15/2028 made analysts’ ‘Conviction Buy’ list. (See the chart below for Hertz Corp  bonds) Pierre Robert
Key Gainers and Losers Volume Leaders
+   T-Mobile USA Inc. 3.875% 4/15/2030 144A +0.5%
  T-Mobile USA Inc. 3.75% 4/15/2027 144A +0.4%
  Extraction Oil & Gas LLC 5.625% 2/1/2026 Reg S +156.9%
  ADT Corp. 6.25% 10/15/2021 +0.6%
  United Rentals North AM 3.875% 2/15/2031 +0.4%
–   Pacific Gas & Electric Co. 4.55% 7/1/2030 -0.3%
  Pacific Gas & Electric Co. 4.95% 7/1/2050 -0.2%
  Ford Motor Co. 8.5% 4/21/2023 -0.2%
  Transocean Sedco Forex Inc. 7.5% 4/15/2031 -11.3%
  American Axle & Manufacturing Inc. 6.5% 4/1/2027 -0.5%
Pacific Gas & Electric Co.   4.55% 7/1/2030
Pacific Gas & Electric Co.   4.95% 7/1/2050
T-Mobile USA Inc.   3.875% 4/15/2030 144A
Ford Motor Co.   8.5% 4/21/2023
T-Mobile USA Inc.   3.75% 4/15/2027 144A
Extraction Oil & Gas LLC   5.625% 2/1/2026 Reg S
ADT Corp.   6.25% 10/15/2021
Transocean Sedco Forex Inc.   7.5% 4/15/2031
United Rentals North AM   3.875% 2/15/2031
American Axle & Manufacturing Inc.   6.5% 4/1/2027
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.07% 0.17% 3.82% 7.22% 4.71% 8.93%
Mining 0.39% 1.24% 6.97% 29.92% -10.88% -5.99%
Construction 0.12% 0.81% 4.04% 11.28% 3.51% 8.36%
Manufacturing 0.11% 0.67% 4.17% 11.67% 1.78% 7.40%
Transportion, Communication, Electric/Gas 0.06% 0.58% 3.20% 8.51% 4.11% 8.20%
Wholesale -0.00% 0.74% 3.66% 11.04% 2.74% 7.12%
Retail 0.07% 0.81% 4.41% 12.51% -0.32% 4.12%
Finance, Insurance, Real-Estate 0.09% 0.63% 3.33% 10.36% 0.91% 5.31%
Services 0.06% 0.66% 4.29% 10.27% 1.91% 7.13%
Public Administration 0.41% 1.61% 3.56% 11.32% 5.07% 9.12%
Energy 0.37% 1.27% 6.84% 26.02% -8.85% -3.92%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar
1. Triumph Group Inc. (USD) 8.875% 6/1/2024 144A (08/05/2020): 700MM First Lien Notes, Price at Issuance 100, Yielding 8.88%.

2. Triumph Group Inc. (USD) 8.875% 6/1/2024 (08/05/2020): 700MM First Lien Notes, Price at Issuance 100, Yielding 8.88%.

3. Triumph Group Inc. (USD) 8.875% 6/1/2024 Reg S (08/05/2020): 700MM First Lien Notes, Price at Issuance 100, Yielding 8.88%.

4. Harvest Midstream I LP (USD) 7.5% 9/1/2028 144A (08/05/2020): 600MM Senior Unsecured Notes, Price at Issuance 100, Yielding 7.5%.

5. Howard Hughes Corp. (USD) 5.375% 8/1/2028 144A (08/05/2020): 750MM Senior Unsecured Notes, Price at Issuance 100, Yielding 5.38%.

6. Harvest Midstream I LP (USD) 7.5% 9/1/2028 Reg S (08/05/2020): 600MM Senior Unsecured Notes, Price at Issuance 100, Yielding 7.5%.

7. Howard Hughes Corp. (USD) 5.375% 8/1/2028 Reg S (08/05/2020): 750MM Senior Unsecured Notes, Price at Issuance 100, Yielding 5.38%.

8. STL Holding Company LLC (USD) 7.5% 2/15/2026 Reg S (08/05/2020): 225MM Senior Unsecured Notes.

9. STL Holding Company LLC (USD) 7.5% 2/15/2026 144A (08/05/2020): 225MM Senior Unsecured Notes.

10. WMG Acquisition Corp. (USD) 3% 2/15/2031 144A (08/06/2020): 550MM Secured Notes, Price at Issuance 100, Yielding 3%.

1. CJ Foods Inc.: $285MM TLB

2. Logmein Inc.: $2.45B credit facilities: $1.95B first lien TL; $500MM second-lien TL

3. MAG Aerospace: $290.7MM TL (B3/B)

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

5. Smart Start Inc.: $350MM TLB

6. Tutor Perini: $375MM TLB (Ba3/BB-/BB+)

7. Concord : $1.05B credit facilities (B1/B+): $450MM revolver; $600MM TLB

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

9. MAG Aerospace: $290.7MM TL (B3/B)

10. Logmein Inc.: $3.55B credit facilities: $250MM Revolver; $2.7B first lien TL; $600MM second-lien TL

Additional Commentary

NEW ISSUANCE WATCH: Triumph Group Inc. issued 600 MM in notes.
Top Widening Loans Top Narrowing Loans
Packaging Coordinators Inc. (USD) TL L+400 08/22/2023
Arvos Holding (EUR) TLB2 E+450 08/29/2021
Openlink Intl. Inc. (EUR) TLB E+450 03/02/2025
American Tire Distributors Inc. (USD) TL DIP PIK L+600 09/01/2023
CPV Shore LLC (USD) TLB L+375 12/27/2025
MMM Holdings Inc. (USD) RC 11/01/2024
Samsonite IP Holdings SARL (USD) TLA L+150 04/19/2023
Jazz Securities LTD (USD) TLA 06/07/2023
Nets Hldgs AS (NOK) TLB1N L+400 02/06/2025
Carrols Restaurant Group (USD) TLB1 L+625 04/30/2026

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 16 bp (basis points), as of 08/07/2020
  • Net negative capital flows into high-yield ETFs & mutual funds
INVESTMENT GRADE BOND RESEARCH
August 7, 2020
Bond Markets

MARKETS WERE MIXED AS DUALING NEWS BUFFETED THE MARKETS. UNEMPLOYMENT RATE FELL TO 10.2% AS 1.8 MILLION JOBS WERE ADDED IN JULY, BUT COLLATERAL DAMAGE FROM THE COVID19 VIRUS CONTINUES TO BUILD UP IN THE MARKET. TENSIONS WITH CHINA IS ALSO A NEGATIVE.   10 Year Treasury notes were down 2.6 bps. S&P +0.06%, Dow +0.17%, NASDAQ -0.87%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 19.5 MILLION+ CASES AND 721000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 5.1 MILLION+ CASES AND 164000+ DEATHS. Among high-grade bonds showing topmost price gains at appreciable volumes traded, Halliburton Co. (USD) 5% 11/15/2045 made analysts’ ‘Conviction Buy’ list. (See the chart below for Halliburton Co.  bonds) Pierre Robert
Key Gainers and Losers Volume Leaders
+   Block Financial LLC 3.875% 8/15/2030 +0.7%
  Qualcomm Inc. 2.9% 5/20/2024 +0.1%
  Boeing Co. 5.15% 5/1/2030 +0.8%
  Boeing Co. 5.04% 5/1/2027 +1.3%
  Boeing Co. 5.93% 5/1/2060 +0.8%
–   Oracle Corp. 3.85% 4/1/2060 -1.1%
  Qualcomm Inc. 3.45% 5/20/2025 -0.2%
  Banco Santander SA 3.49% 5/28/2030 -0.5%
  Toyota Motor Credit Corp. 3% 4/1/2025 -0.1%
  Activision Blizzard Inc. 2.5% 9/15/2050 -1.2%
Oracle Corp.   3.85% 4/1/2060
Block Financial LLC   3.875% 8/15/2030
Qualcomm Inc.   2.9% 5/20/2024
Boeing Co.   5.15% 5/1/2030
Boeing Co.   5.04% 5/1/2027
Boeing Co.   5.93% 5/1/2060
Qualcomm Inc.   3.45% 5/20/2025
Takeda Pharmaceutical Co. LTD   2.05% 3/31/2030
Banco Santander SA   3.49% 5/28/2030
Pacific Gas & Electric Co.   3.15% 1/1/2026
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Mining 0.13% 0.57% 3.83% 12.54% 7.13% 9.24%
Construction -0.01% 0.27% 2.30% 6.05% 6.06% 6.65%
Manufacturing 0.10% 0.43% 2.64% 7.36% 8.55% 10.73%
Transportion, Communication, Electric/Gas 0.16% 0.44% 3.56% 8.53% 10.57% 12.70%
Wholesale 0.04% 0.47% 2.56% 8.12% 7.19% 10.96%
Retail 0.11% 0.39% 2.55% 7.51% 10.01% 13.05%
Finance, Insurance, Real-Estate 0.05% 0.30% 1.70% 5.52% 6.41% 8.35%
Services 0.09% 0.36% 2.33% 6.73% 7.76% 9.84%
Public Administration -0.01% 0.03% 0.30% 0.84% 4.83% 4.76%
Energy 0.15% 0.61% 3.33% 12.44% 5.96% 8.39%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. Wildlife Conservation Society (USD) 3.414% 8/1/2050 (08/06/2020): 165MM Unsecured Notes, Price at Issuance 100, Yielding 3.41%.

2. Pioneer Natural Resources Co. (USD) 1.9% 8/15/2030 (08/06/2020): 1100MM Senior Unsecured Notes, Price at Issuance 99.205, Yielding 1.99%.

3. ServiceNow Inc. (USD) 1.4% 9/1/2030 (08/06/2020): 1500MM Senior Unsecured Notes, Price at Issuance 99.626, Yielding 1.44%.

4. Prologis LP (USD) 1.25% 10/15/2030 (08/06/2020): 750MM Senior Unsecured Notes, Price at Issuance 99.62, Yielding 1.29%.

5. Prologis LP (USD) 2.125% 10/15/2050 (08/06/2020): 500MM Senior Unsecured Notes, Price at Issuance 98.438, Yielding 2.2%.

6. Baycom Corp. (USD) VAR% 9/15/2030 (08/06/2020): 65MM Subordinated Notes, Price at Issuance 100.

7. Regeneron Pharmaceuticals Inc. (USD) 1.75% 9/15/2030 (08/07/2020): 1250MM Senior Unsecured Notes, Price at Issuance 99.898, Yielding 1.76%.

8. Regeneron Pharmaceuticals Inc. (USD) 2.8% 9/15/2050 (08/07/2020): 750MM Senior Unsecured Notes, Price at Issuance 99.715, Yielding 2.81%.

9. Standard Industries Inc. (USD) 3.375% 1/15/2031 144A (08/07/2020): 1100MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.38%.

10. Standard Industries Inc. (USD) 3.375% 1/15/2031 Reg S (08/07/2020): 1100MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.38%.

Additional Commentary

NEW ISSUANCE WATCH: Activision Blizzard Inc. issued 2000 MM in notes.
Top Widening Loans Top Narrowing Loans
Whiting Oil and Gas Corp. (USD) RC L+200 04/12/2023
Global Ship Lease Inc. (USD) TL 09/19/2024
NCL Corp. LTD (USD) TLA L+150 01/02/2024
Buzz Merger Sub LTD (USD) TLB L+275 01/29/2027
Eagle 4 Limited (USD) TL L+775 06/14/2027
Conserve Merger Sub Inc. (USD) TL2 L+725 08/08/2026
Grosvenor Capital Mgmt Hldg LLP (USD) TLB L+275 03/29/2025
Carrols Restaurant Group (USD) TLB1 L+625 04/30/2026
Hyland Software Inc. (USD) TL2 L+700 07/10/2025
Apcoa Standard Parking Inc. (EUR) TLB E+325 03/20/2024

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 16 bp (basis points), as of 08/07/2020
  • Net positive capital flows into high-yield ETFs & mutual funds

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