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North American Bond Research – December 11, 2020

Posted on December 11, 2020
HIGH YIELD BOND RESEARCH
December 11, 2020
Bond Markets

GLOBAL MARKETS WERE MOSTLY LOWER AS THE US FIGHTS OVER HOW MUCH STIMULUS TO RAISE AND HOW MUCH HELP IS GOING TO BE GIVEN TO CASH STRAPPED STATES. COVID CASES ARE REALLY SOARING. 10 Year Treasury notes were UP 2.8 bps. S&P -0.13%, Dow +0.16%, NASDAQ -0.23%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 71.3 MILLION+ CASES AND 1.6 MILLION DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 16.2 MILLION+ CASES AND 302000+ 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
+   Latam Finance Limited 6.875% 4/11/2024 Reg S +1.5%
  T-Mobile USA Inc. 3.5% 4/15/2025 144A +0.1%
  Apache Corp. 4.375% 10/15/2028 +0.4%
  Western Gas Partners LP 4.5% 3/1/2028 +0.5%
  Devon Energy Corp. 5% 6/15/2045 +0.2%
–   Bank of Nova Scotia FLT% 9/15/2023 -0.1%
  Citigroup Inc. VAR% PERP (4) -0.1%
  United States STL Corp. New 6.25% 3/15/2026 -0.9%
  Vale Overseas LTD 3.75% 7/8/2030 -0.3%
  HCA Inc. 3.5% 9/1/2030 -0.2%
Latam Finance Limited   6.875% 4/11/2024 Reg S
Bank of Nova Scotia   FLT% 9/15/2023
T-Mobile USA Inc.   3.5% 4/15/2025 144A
Citigroup Inc.   VAR% PERP (4)
United States STL Corp. New   6.25% 3/15/2026
Vale Overseas LTD   3.75% 7/8/2030
Occidental Petroleum Corp.   2.9% 8/15/2024
Apache Corp.   4.375% 10/15/2028
Apache Corp.   4.75% 4/15/2043
HCA Inc.   3.5% 9/1/2030
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.05% 0.19% 1.12% 2.35% 8.50% 9.40%
Mining 0.09% 1.11% 6.87% 58.40% -1.57% 1.20%
Construction -0.11% -0.08% 0.95% 4.00% 8.62% 9.18%
Manufacturing -0.12% 0.20% 1.64% 5.04% 7.10% 8.17%
Transportion, Communication, Electric/Gas -0.05% 0.14% 1.36% 5.16% 6.71% 7.93%
Wholesale -0.03% 0.48% 1.39% 2.88% 5.15% 6.42%
Retail -0.10% 0.07% 1.99% 4.71% 6.65% 7.96%
Finance, Insurance, Real-Estate -0.10% 0.19% 1.61% 4.38% 6.14% 7.30%
Services -0.12% 0.29% 1.49% 3.68% 6.58% 7.69%
Public Administration 0.38% 0.58% 1.19% 2.93% 10.30% 11.58%
Energy 0.10% 1.25% 6.67% 50.50% -0.20% 2.92%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar
1. Genesis Energy LP (USD) 8% 1/15/2027 (12/10/2020): 750MM Senior Unsecured Notes, Price at Issuance 100, Yielding 8%.

2. Rayonier AM Products Inc. (USD) 7.625% 1/15/2026 144A (12/10/2020): 500MM Secured Notes, Price at Issuance 100, Yielding 7.63%.

3. Rayonier AM Products Inc. (USD) 7.625% 1/15/2026 Reg S (12/10/2020): 500MM Secured Notes, Price at Issuance 100, Yielding 7.63%.

4. Vedanta Resources PLC (USD) 13.875% 1/21/2024 144A (12/11/2020): 0MM Senior Unsecured Notes.

1. Adtalem: $1.4B credit facilities: $400MM revolver; $1B TLB

2. American Public Education Inc.: $195MM credit facilities: $20MM revolver; $175MM TLB

3. Unified Women’s Healthcare LP: $560MM TLs: $420MM TLB (B-); $140MM TL

4. Provation Software Group Inc.: $330MM TLs: $250MM TL; $80MM TL2

5. Pointclickcare: $450MM TLB (B1/B+)

6. Planview: $890MM TLs: $535MM TL (B2/B-); $125MM DD; $230MM TL (Caa2/CCC+)

7. Energizer Holdings Inc.: $1.2B TLB (BB+)

8. Centerfield: $500MM TL (B2/B): $400MM TLB; $100MM DD

9. Asurion LLC: $2.087B TLB8

10. Unified Women’s Healthcare LP: $560MM TLs: $420MM TLB (B-); $140MM TL

Additional Commentary

NEW ISSUANCE WATCH:  Austin Bidco Inc.  issued 500 MM in notes.
Top Widening Loans Top Narrowing Loans
ADB Safegate (USD) TL L+425 10/02/2024
Hema BV (EUR) RC E+300 01/31/2022
American Tire Distributors Inc. (USD) TL DIP PIK L+750 09/01/2024
Samsonite IP Holdings SARL (USD) TLA L+150 04/19/2023
Unifrax Corp. (USD) TL2 L+850 12/14/2026
Allsup’s (USD) TLB L+625 11/18/2024
Dental Corp. (USD) TL2 L+750 06/06/2026
Buzz Merger Sub LTD (USD) TLB L+275 01/29/2027
Flynn Restaurant Group LP (USD) TL2 L+700 06/29/2026
Learning Care Group Inc. (USD) TL L+750 03/13/2026

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 15 bps (basis points), as of 12/11/2020
  • Net negative capital flows into high-yield ETFs & mutual funds
INVESTMENT GRADE BOND RESEARCH
December 11, 2020
Bond Markets

GLOBAL MARKETS WERE MOSTLY LOWER AS THE US FIGHTS OVER HOW MUCH STIMULUS TO RAISE AND HOW MUCH HELP IS GOING TO BE GIVEN TO CASH STRAPPED STATES. COVID CASES ARE REALLY SOARING. 10 Year Treasury notes were UP 2.8 bps. S&P -0.13%, Dow +0.16%, NASDAQ -0.23%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 71.3 MILLION+ CASES AND 1.6 MILLION DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 16.2 MILLION+ CASES AND 302000+ 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
+   Boeing Co. 4.508% 5/1/2023 +0.3%
  Anheuser-Busch Inbev Worldwide Inc. 4.5% 6/1/2050 +0.4%
  Duke Energy Florida Inc. 1.731% 9/22/2022 +3.3%
  GE Capital Intl. Funding Co. 4.418% 11/15/2035 +0.4%
  Commonwealth Edison (USD) 2.95% 8/15/2027 +0.6%
–   Cigna Corp. 2.789% 9/17/2021 -0.0%
  Verizon Communications Inc. 3% 11/20/2060 -0.7%
  Verizon Communications Inc. 2.65% 11/20/2040 -0.1%
  NextEra Energy Capital Holding Inc. 2.25% 6/1/2030 -0.3%
  American Intl Group Inc. 4.375% 6/30/2050 -0.1%
Boeing Co.   4.508% 5/1/2023
Anheuser-Busch Inbev Worldwide Inc.   4.5% 6/1/2050
Cigna Corp.   2.789% 9/17/2021
Verizon Communications Inc.   3% 11/20/2060
Verizon Communications Inc.   2.65% 11/20/2040
Duke Energy Florida Inc.   1.731% 9/22/2022
GE Capital Intl. Funding Co.   4.418% 11/15/2035
NextEra Energy Capital Holding Inc.   2.25% 6/1/2030
Commonwealth Edison   (USD) 2.95% 8/15/2027
American Intl Group Inc.   4.375% 6/30/2050
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Mining -0.03% 0.05% 2.29% 2.67% 8.61% 9.41%
Construction -0.00% -0.00% 1.33% 4.63% 9.12% 9.31%
Manufacturing -0.07% -0.23% 1.12% 1.73% 9.24% 9.54%
Transportion, Communication, Electric/Gas -0.07% -0.12% 1.85% 2.05% 10.80% 11.05%
Wholesale -0.07% -0.03% 1.44% 2.91% 10.10% 10.71%
Retail -0.04% -0.41% 1.27% 2.07% 10.51% 10.72%
Finance, Insurance, Real-Estate -0.07% -0.12% 0.93% 1.56% 8.08% 8.45%
Services -0.08% -0.24% 1.28% 1.58% 8.59% 8.84%
Public Administration 0.01% 0.07% 0.25% 0.10% 5.25% 5.36%
Energy -0.07% 0.00% 2.56% 2.72% 7.64% 8.66%
 
Total returns (non-annualized) by rating, market weighted.
New Issues New Issues [Continued]
1. HSBC Holdings PLC (USD) VAR% PERP (12/10/2020): 1500MM Junior Subordinated Notes, Price at Issuance 100.

2. Chip Mortgage Trust (CAD) 1.738% 12/15/2025 (12/10/2020): 250MM Secured Notes, Price at Issuance 100, Yielding 1.74%.

3. CI Financial Corp. (USD) 3.2% 12/17/2030 (12/10/2020): 700MM Senior Unsecured Notes, Price at Issuance 99.873, Yielding 3.21%.

4. OWL Rock Technology Finance Corp. (USD) 3.75% 6/17/2026 (12/10/2020): 375MM Senior Unsecured Notes, Price at Issuance 99.332, Yielding 3.89%.

5. CT REIT (CAD) 2.371% 1/6/2031 (12/10/2020): 150MM Senior Unsecured Notes, Price at Issuance 100, Yielding 2.37%.

6. Vedanta Resources PLC (USD) 13.875% 1/21/2024 144A (12/11/2020): 0MM Senior Unsecured Notes.

Additional Commentary

NEW ISSUANCE WATCH:  Charles Schwab Corp issued 2500 MM in notes.
Top Widening Loans Top Narrowing Loans
ADB Safegate (USD) TL L+425 10/02/2024
Hema BV (EUR) RC E+300 01/31/2022
American Tire Distributors Inc. (USD) TL DIP PIK L+750 09/01/2024
Samsonite IP Holdings SARL (USD) TLA L+150 04/19/2023
Unifrax Corp. (USD) TL2 L+850 12/14/2026
Allsup’s (USD) TLB L+625 11/18/2024
Dental Corp. (USD) TL2 L+750 06/06/2026
Buzz Merger Sub LTD (USD) TLB L+275 01/29/2027
Flynn Restaurant Group LP (USD) TL2 L+700 06/29/2026
Learning Care Group Inc. (USD) TL L+750 03/13/2026

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 15 bps (basis points), as of 12/11/2020
  • Net positive capital flows into high-yield ETFs & mutual funds

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