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North American Bond Research – December 4, 2020

Posted on December 4, 2020
HIGH YIELD BOND RESEARCH
December 4, 2020
Bond Markets

GLOBAL MARKETS WERE UP AS PAYROLL NUMBERS WERE LOWER THAN EXPECTED. TIMETABLE FOR VACCINE DISTRIBUTION IS BECOMING CLEAR THAT BY JUNE 2021 THE PANDEMIC WILL BE OVER. 10 Year Treasury notes were UP 4.9 bps. S&P +0.88%, Dow +0.83%, NASDAQ +0.70%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 66.1 MILLION+ CASES AND 1.52 MILLION DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 14.7 MILLION+ CASES AND 285000+ 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
+   Ford Motor Credit Co. 3.336% 3/18/2021 +0.3%
  Cheniere Corpus Christi Hldgs LLC 5.125% 6/30/2027 +0.1%
  PulteGroup Inc. 5% 1/15/2027 +0.1%
  Kraft Heinz Co. 4.375% 6/1/2046 (2) +0.0%
  Dish DBS Corp. 7.75% 7/1/2026 +1.1%
–   Pacific Gas & Electric Co. 4% 12/1/2046 -1.3%
  Cinemark Inc. 4.875% 6/1/2023 -0.5%
  Lennar Corp. 4.75% 11/29/2027 -0.3%
  Intelsat Luxembourg SA 8.125% 6/1/2023 -0.5%
  Broadcom LTD 4.3% 11/15/2032 -0.3%
Pacific Gas & Electric Co.   4% 12/1/2046
Cinemark Inc.   4.875% 6/1/2023
Ford Motor Credit Co.   3.336% 3/18/2021
Cheniere Corpus Christi Hldgs LLC   5.125% 6/30/2027
Lennar Corp.   4.75% 11/29/2027
Intelsat Luxembourg SA   8.125% 6/1/2023
Broadcom LTD   4.3% 11/15/2032
General Motors Co.   6.25% 10/2/2043
PulteGroup Inc.   5% 1/15/2027
Pacific Gas & Electric Co.   4.3% 3/15/2045
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.17% 0.32% 2.06% 1.57% 8.29% 9.87%
Mining 0.26% 1.22% 9.65% 48.40% -4.26% -0.62%
Construction 0.01% 0.23% 2.42% 3.73% 9.16% 10.23%
Manufacturing 0.07% 0.47% 3.33% 3.94% 6.97% 8.45%
Transportion, Communication, Electric/Gas 0.06% 0.38% 2.89% 3.63% 6.48% 7.99%
Wholesale -0.06% 0.18% 2.76% 2.10% 4.58% 6.52%
Retail 0.18% 0.73% 4.30% 4.44% 6.58% 8.35%
Finance, Insurance, Real-Estate 0.03% 0.41% 3.32% 3.86% 5.90% 7.29%
Services 0.05% 0.29% 3.10% 2.83% 6.89% 8.74%
Public Administration 0.29% 0.40% 2.02% 2.79% 9.67% 11.50%
Energy 0.30% 1.28% 9.73% 42.30% -2.29% 1.76%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar
1. AssuredPartners Inc. (USD) 5.625% 1/15/2029 144A (12/03/2020): 550MM Senior Unsecured Notes, Price at Issuance 100, Yielding 5.63%.

2. IPL Plastics PLC (USD) 9% 1/15/2026 Reg S (12/03/2020): 125MM Senior Unsecured Notes, Price at Issuance 99, Yielding 9.25%.

3. FS Luxembourg SA R.L (USD) 10% 12/15/2025 Reg S (12/03/2020): 550MM Secured Notes, Price at Issuance 100, Yielding 10%.

4. AssuredPartners Inc. (USD) 5.625% 1/15/2029 Reg S (12/03/2020): 550MM Senior Unsecured Notes, Price at Issuance 100, Yielding 5.63%.

5. Seagate HDD Cayman (USD) 3.375% 7/15/2031 Reg S (12/03/2020): 500MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.38%.

6. Seagate HDD Cayman (USD) 3.125% 7/15/2029 Reg S (12/03/2020): 500MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.13%.

7. IPL Plastics PLC (USD) 9% 1/15/2026 144A (12/03/2020): 125MM Senior Unsecured Notes, Price at Issuance 99, Yielding 9.25%.

8. FS Luxembourg SA R.L (USD) 10% 12/15/2025 144A (12/03/2020): 550MM Secured Notes, Price at Issuance 100, Yielding 10%.

9. Citigroup Inc. (USD) VAR% PERP (12/03/2020): 1500MM Junior Subordinated Notes, Price at Issuance 100.

10. Seagate HDD Cayman (USD) 3.375% 7/15/2031 144A (12/03/2020): 500MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.38%.

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

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

3. Zaxby’s Operating Co LP: $975MM credit facilities: $100MM revolver; $625MM TLB; $250MM TL

4. Railworks: $280MM credit facilities: $230MM TLB; $50MM revolver

5. Service King Collision Repair Centers: $700MM TLB

6. Cano Health LLC: $685MM credit facilities: $30MM revolver; $480MM TL; $175MM DD

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

8. American Bath Group LLC: $1.2B TL (B2/B)

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

10. Astoria Energy LLC: $800MM TLB (Ba3)

Additional Commentary

NEW ISSUANCE WATCH: AssuredPartners Inc. ISSUED 550MM in notes.
Top Widening Loans Top Narrowing Loans
Casper Bidco (EUR) TL E+850 07/30/2027
Robertshaw Holdings Corp (USD) TL L+350 02/28/2025
HarbourVest Partners LLC (USD) TLB L+225 03/01/2025
ADB Safegate (EUR) TLB E+350 10/02/2024
CPV Shore LLC (USD) TLB L+375 12/27/2025
AVSC Holding Corp. (USD) TLB L+450 10/15/2026
Travel Leaders Group (USD) TLB L+400 01/25/2024
Cirque Du Soleil (USD) TL 11/24/2027
Quorum Health Corp. (USD) TL EXIT L+825 04/29/2025
Transplace (USD) TL L+375 10/10/2024

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 15 bps (basis points), as of 12/04/2020
  • Net negative capital flows into high-yield ETFs & mutual funds
INVESTMENT GRADE BOND RESEARCH
December 4, 2020
Bond Markets

GLOBAL MARKETS WERE UP AS PAYROLL NUMBERS WERE LOWER THAN EXPECTED. TIMETABLE FOR VACCINE DISTRIBUTION IS BECOMING CLEAR THAT BY JUNE 2021 THE PANDEMIC WILL BE OVER. 10 Year Treasury notes were UP 4.9 bps. S&P +0.88%, Dow +0.83%, NASDAQ +0.70%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 66.1 MILLION+ CASES AND 1.52 MILLION DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 14.7 MILLION+ CASES AND 285000+ 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. 3.25% 2/1/2028 +0.5%
  Boeing Co. 3.625% 2/1/2031 +0.3%
  Boeing Co. 5.805% 5/1/2050 +0.9%
  Suzano Austria GmbH 3.75% 1/15/2031 +1.1%
  AerCap Ireland Capital LTD 4.625% 10/15/2027 +0.4%
–   Walgreens Boots Alliance Inc. 4.8% 11/18/2044 -6.8%
  Verizon Communications Inc. 2.65% 11/20/2040 -1.5%
  Comcast Corp. 2.45% 8/15/2052 -2.3%
  General Electric Co. 4.35% 5/1/2050 -0.5%
  Anheuser-Busch Inbev Worldwide Inc. 4.5% 6/1/2050 -1.5%
Walgreens Boots Alliance Inc.   4.8% 11/18/2044
Verizon Communications Inc.   2.65% 11/20/2040
Boeing Co.   3.25% 2/1/2028
Comcast Corp.   2.45% 8/15/2052
Boeing Co.   3.625% 2/1/2031
General Electric Co.   4.35% 5/1/2050
Anheuser-Busch Inbev Worldwide Inc.   4.5% 6/1/2050
Boeing Co.   5.805% 5/1/2050
Walgreens Boots Alliance Inc.   4.1% 4/15/2050
GE Capital Intl. Funding Co.   4.418% 11/15/2035
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Mining 0.08% 0.45% 3.45% 1.93% 8.47% 8.88%
Construction 0.01% 0.00% 2.12% 3.96% 8.68% 8.64%
Manufacturing 0.00% 0.14% 2.03% 1.50% 9.42% 9.44%
Transportion, Communication, Electric/Gas -0.02% 0.16% 2.69% 1.40% 10.82% 10.75%
Wholesale -0.01% 0.29% 2.36% 2.64% 10.12% 10.61%
Retail 0.03% 0.19% 2.52% 1.75% 10.79% 10.77%
Finance, Insurance, Real-Estate -0.02% 0.09% 1.46% 1.22% 8.03% 8.16%
Services -0.02% 0.21% 2.05% 1.36% 8.66% 8.60%
Public Administration 0.01% -0.02% 0.07% 0.23% 5.06% 5.02%
Energy 0.08% 0.54% 3.84% 1.88% 7.35% 8.23%
 
Total returns (non-annualized) by rating, market weighted.
New Issues New Issues [Continued]
1. AIG Global Funding (USD) 0.45% 12/8/2023 Reg S (12/03/2020): 550MM Secured Notes, Price at Issuance 99.89, Yielding .49%.

2. FortisAlberta Inc. (CAD) 2.632% 6/8/2051 (12/03/2020): 175MM Senior Unsecured Notes, Price at Issuance 100, Yielding 2.63%.

3. AIG Global Funding (USD) 0.45% 12/8/2023 144A (12/03/2020): 550MM Secured Notes, Price at Issuance 99.89, Yielding .49%.

4. West Virginia United Health System Obligated Group (USD) 3.129% 6/1/2050 (12/03/2020): 333MM Secured Notes, Price at Issuance 100, Yielding 3.13%.

5. Barclays PLC (USD) 1.007% 12/10/2024 (12/03/2020): 1500MM Senior Unsecured Notes, Price at Issuance 100, Yielding 1.01%.

6. FS KKR Capital Corp. (USD) 3.4% 1/15/2026 (12/03/2020): 1000MM Senior Unsecured Notes, Price at Issuance 98.83, Yielding 3.65%.

7. Juniper Networks Inc. (USD) 2% 12/10/2030 (12/03/2020): 400MM Senior Unsecured Notes, Price at Issuance 99.811, Yielding 2.02%.

8. Juniper Networks Inc. (USD) 1.2% 12/10/2025 (12/03/2020): 400MM Senior Unsecured Notes, Price at Issuance 99.976, Yielding 1.2%.

9. Bank of Montreal (USD) FLT% 12/8/2023 (12/03/2020): 600MM Senior Unsecured Notes, Price at Issuance 100.

10. Bank of Montreal (USD) 0.45% 12/8/2023 (12/03/2020): 900MM Senior Unsecured Notes, Price at Issuance 99.935, Yielding .47%.

Additional Commentary

NEW ISSUANCE WATCH:  AIG Global Funding   issued 550 MM in notes. 
Top Widening Loans Top Narrowing Loans
Casper Bidco (EUR) TL E+850 07/30/2027
Robertshaw Holdings Corp (USD) TL L+350 02/28/2025
HarbourVest Partners LLC (USD) TLB L+225 03/01/2025
ADB Safegate (EUR) TLB E+350 10/02/2024
CPV Shore LLC (USD) TLB L+375 12/27/2025
AVSC Holding Corp. (USD) TLB L+450 10/15/2026
Travel Leaders Group (USD) TLB L+400 01/25/2024
Cirque Du Soleil (USD) TL 11/24/2027
Quorum Health Corp. (USD) TL EXIT L+825 04/29/2025

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 12/04/2020
  • Net positive capital flows into high-yield ETFs & mutual funds

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