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North American Bond Research – December 8, 2020

Posted on December 8, 2020
HIGH YIELD BOND RESEARCH
December 8, 2020
Bond Markets

GLOBAL MARKETS WERE GENERALLY UP AS COVID CASES CONTINUE TO CLIMB BUT CLARITY SURROUNDING VACCINES AND IT’S ROLLOUT HELPED PUSH UP MARKETS. STIMULUS TALK HEATING UP, MAKING LIKELY SOMETHING WILL HAPPEN SOON. 10 Year Treasury notes were DOWN 1.5 bps. S&P +0.28%, Dow +0.35%, NASDAQ +0.50%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 68.5 MILLION+ CASES AND 1.56 MILLION DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 15.56 MILLION+ CASES AND 293000+ 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
+   Pacific Gas & Electric Co. 3.3% 12/1/2027 +0.3%
  Dollar General Corp. 3.25% 4/15/2023 +0.0%
  General Motors Co. 5.2% 4/1/2045 +0.5%
  United States STL Corp. New 6.25% 3/15/2026 +1.1%
  Starwood Property Trust Inc. 5% 12/15/2021 +0.2%
–   Pacific Gas & Electric Co. 4.45% 4/15/2042 -1.4%
  Equinix Inc. 5.375% 5/15/2027 -0.0%
  T-Mobile USA Inc. 3.5% 4/15/2025 144A -0.1%
  Broadcom LTD 4.7% 4/15/2025 -0.4%
  Intelsat Luxembourg SA 8.125% 6/1/2023 -7.7%
Pacific Gas & Electric Co.   3.3% 12/1/2027
Pacific Gas & Electric Co.   4.45% 4/15/2042
Dollar General Corp.   3.25% 4/15/2023
General Motors Co.   5.2% 4/1/2045
United States STL Corp. New   6.25% 3/15/2026
Starwood Property Trust Inc.   5% 12/15/2021
Teva Pharmaceuticals Fin BV   6.75% 3/1/2028
Pacific Gas & Electric Co.   4.55% 7/1/2030
Equinix Inc.   5.375% 5/15/2027
Transocean Inc.   6.8% 3/15/2038
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.02% 0.25% 1.13% 1.64% 8.30% 9.44%
Mining 0.17% 1.38% 7.10% 71.99% -2.28% 1.00%
Construction -0.08% 0.16% 1.49% 3.81% 8.88% 9.50%
Manufacturing -0.01% 0.59% 2.26% 4.81% 6.92% 8.25%
Transportion, Communication, Electric/Gas -0.03% 0.37% 1.86% 3.98% 6.69% 8.08%
Wholesale 0.15% 0.69% 2.27% 2.60% 5.05% 6.59%
Retail 0.08% 0.91% 3.22% 5.30% 7.12% 8.56%
Finance, Insurance, Real-Estate 0.00% 0.54% 2.38% 4.62% 6.04% 7.34%
Services 0.01% 0.76% 2.64% 3.66% 6.55% 7.87%
Public Administration 0.02% 0.59% 0.73% 2.66% 9.74% 11.40%
Energy 0.23% 1.65% 7.55% 62.06% -0.97% 2.79%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar
1. Kraton Polymers LLC (USD) 4.25% 12/15/2025 144A (12/07/2020): 400MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.25%.

2. Kraton Polymers LLC (USD) 4.25% 12/15/2025 Reg S (12/07/2020): 400MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.25%.

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

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

3. Commercehub Inc.: $790MM senior credit facilities: $50MM revolver; $530MM TLB; $210MM TL

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

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

6. Ozark Holdings LLC: $400MM TLB

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

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

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

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

Additional Commentary

NEW ISSUANCE WATCH: Kraton Polymers LLC issued 200 MM in notes.
Top Widening Loans Top Narrowing Loans
Pfleiderer AG (EUR) TLB E+500 04/13/2024
CSM Bakery (USD) TL L+1000 02/04/2022
Transplace (USD) TL L+375 10/10/2024
Casper Bidco (EUR) TL E+850 07/30/2027
GGP Inc. (USD) TLB L+250 08/24/2025
Aptean Inc. (USD) TL L+850 04/24/2027
StandardAero (USD) TL L+350 04/08/2026
Garrett Motion (USD) TLB L+250 09/27/2025
Averys SA (EUR) TLB E+825 09/25/2026
Greenway Health LLC (USD) TL L+375 02/16/2024

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 bps (basis points), as of 12/08/2020
  • Net negative capital flows into high-yield ETFs & mutual funds
INVESTMENT GRADE BOND RESEARCH
December 8, 2020
Bond Markets

GLOBAL MARKETS WERE GENERALLY UP AS COVID CASES CONTINUE TO CLIMB BUT CLARITY SURROUNDING VACCINES AND IT’S ROLLOUT HELPED PUSH UP MARKETS. STIMULUS TALK HEATING UP, MAKING LIKELY SOMETHING WILL HAPPEN SOON. 10 Year Treasury notes were DOWN 1.5 bps. S&P +0.28%, Dow +0.35%, NASDAQ +0.50%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 68.5 MILLION+ CASES AND 1.56 MILLION DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 15.56 MILLION+ CASES AND 293000+ 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
+   Charles Schwab Corp. 5.375% PERP +0.8%
  Oneok Inc. 6.35% 1/15/2031 +0.4%
  Verizon Communications Inc. 2.875% 11/20/2050 +0.0%
  CVS Health Corp. 5.05% 3/25/2048 +0.1%
  BP Capital Markets America Inc. 2.939% 6/4/2051 +0.3%
–   Wells Fargo & Co. 5.013% 4/4/2051 -0.8%
  Exxon Mobil Corp. 1.571% 4/15/2023 -0.1%
  Verizon Communications Inc. 3% 11/20/2060 -1.0%
  Abbvie Inc. 2.3% 11/21/2022 -0.1%
  Morgan Stanley VAR% 7/22/2028 -0.3%
Wells Fargo & Co.   5.013% 4/4/2051
Exxon Mobil Corp.   1.571% 4/15/2023
Verizon Communications Inc.   3% 11/20/2060
Abbvie Inc.   2.3% 11/21/2022
Charles Schwab Corp.   5.375% PERP
Oneok Inc.   6.35% 1/15/2031
Verizon Communications Inc.   2.875% 11/20/2050
Morgan Stanley   VAR% 7/22/2028
Verizon Communications Inc.   4.016% 12/3/2029
Bank of America Corp.   VAR% 7/21/2028
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Mining -0.00% 0.14% 2.18% 2.69% 8.59% 9.61%
Construction -0.16% -0.11% 1.44% 3.99% 8.55% 8.98%
Manufacturing -0.01% -0.22% 0.85% 2.06% 9.55% 9.99%
Transportion, Communication, Electric/Gas -0.02% -0.21% 1.20% 2.09% 10.78% 11.29%
Wholesale 0.00% 0.23% 1.52% 3.31% 10.51% 11.31%
Retail 0.07% -0.37% 0.95% 2.33% 10.81% 11.19%
Finance, Insurance, Real-Estate -0.03% -0.06% 0.71% 1.67% 8.08% 8.55%
Services 0.01% -0.13% 1.03% 1.86% 8.79% 9.14%
Public Administration -0.02% 0.15% 0.04% 0.06% 5.09% 5.21%
Energy -0.03% 0.24% 2.63% 2.67% 7.65% 9.00%
 
Total returns (non-annualized) by rating, market weighted.
New Issues New Issues [Continued]
1. Systems Energy Resources Inc. (USD) 2.14% 12/9/2025 (12/07/2020): 200MM First Lien Notes, Price at Issuance 99.967, Yielding 2.15%.

2. CVS Health Corp (USD) 1.875% 2/28/2031 (12/07/2020): 1250MM Senior Unsecured Notes, Price at Issuance 99.988, Yielding 1.88%.

3. Guardian Life Global Funding (USD) 0.875% 12/10/2025 144A (12/07/2020): 500MM Secured Notes, Price at Issuance 99.932, Yielding .89%.

4. Key Bank NA (USD) VAR% 1/3/2024 (12/07/2020): 750MM Senior Unsecured Notes, Price at Issuance 100.

5. Nasdaq Inc. (USD) 1.65% 1/15/2031 (12/07/2020): 650MM Senior Unsecured Notes, Price at Issuance 99.667, Yielding 1.69%.

6. Morgan Stanley (USD) VAR% 12/10/2026 (12/07/2020): 2500MM Senior Unsecured Notes, Price at Issuance 100.

7. Nasdaq Inc. (USD) 0.445% 12/21/2022 (12/07/2020): 600MM Senior Unsecured Notes, Price at Issuance 100, Yielding .45%.

8. Key Bank NA (USD) FLT% 1/3/2024 (12/07/2020): 350MM Senior Unsecured Notes, Price at Issuance 100.

9. Nasdaq Inc. (USD) 2.5% 12/21/2040 (12/07/2020): 650MM Senior Unsecured Notes, Price at Issuance 100, Yielding 2.5%.

10. Canadian Imperial Bank of Commerce (USD) FLT% 12/14/2023 (12/07/2020): 600MM Senior Unsecured Notes, Price at Issuance 100.

Additional Commentary

NEW ISSUANCE WATCH:  Systems Energy Resources Inc. issued 200 MM in notes.
Top Widening Loans Top Narrowing Loans
Pfleiderer AG (EUR) TLB E+500 04/13/2024
CSM Bakery (USD) TL L+1000 02/04/2022
Transplace (USD) TL L+375 10/10/2024
Casper Bidco (EUR) TL E+850 07/30/2027
GGP Inc. (USD) TLB L+250 08/24/2025
Aptean Inc. (USD) TL L+850 04/24/2027
StandardAero (USD) TL L+350 04/08/2026
Garrett Motion (USD) TLB L+250 09/27/2025
Averys SA (EUR) TLB E+825 09/25/2026
Greenway Health LLC (USD) TL L+375 02/16/2024

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 bps (basis points), as of 12/08/2020
  • Net positive capital flows into high-yield ETFs & mutual funds

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