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North American Bond Research – December 9, 2020

Posted on December 9, 2020
HIGH YIELD BOND RESEARCH
December 9, 2020
Bond Markets

GLOBAL MARKETS WERE GENERALLY DOWN AS CASES ARE CLIMBING AND REBULICANS ARE BEING VERY STINGY IN GIVING AID TO STATES THAT ARE IN TROUBLE. 10 Year Treasury notes were UP 2.8 bps. S&P -0.71%, Dow -0.35%, NASDAQ -1.94%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 69.1 MILLION+ CASES AND 1.57 MILLION DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 15.78 MILLION+ CASES AND 296000+ 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
+   Citigroup Inc. VAR% PERP (4) +0.1%
  United States STL Corp. New 6.25% 3/15/2026 +0.8%
  United Rentals Inc. 4.875% 1/15/2028 +0.3%
  Petrobras Global Finance BV 6.85% 6/5/2115 +0.4%
  Pacific Gas & Electric Co. 4.45% 4/15/2042 +1.2%
–   Vale Overseas LTD 3.75% 7/8/2030 -0.4%
  Vale Overseas LTD 6.25% 8/10/2026 -0.3%
  US Steel Corp. 6.875% 8/15/2025 -0.6%
  Pacific Gas & Electric Co. 4.55% 7/1/2030 -0.3%
  SpringLeaf Finance Corp. 8.875% 6/1/2025 -0.1%
Vale Overseas LTD   3.75% 7/8/2030
Citigroup Inc.   VAR% PERP (4)
United States STL Corp. New   6.25% 3/15/2026
Vale Overseas LTD   6.25% 8/10/2026
US Steel Corp.   6.875% 8/15/2025
United Rentals Inc.   4.875% 1/15/2028
Petrobras Global Finance BV   6.85% 6/5/2115
Occidental Petroleum Corp.   3.4% 4/15/2026
Pacific Gas & Electric Co.   4.55% 7/1/2030
Pacific Gas & Electric Co.   4.45% 4/15/2042
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.05% 0.07% 1.14% 1.88% 8.23% 9.34%
Mining 0.14% 1.32% 8.14% 61.89% -3.08% 0.20%
Construction -0.10% 0.09% 1.51% 3.87% 8.77% 9.46%
Manufacturing -0.03% 0.54% 2.21% 4.93% 6.97% 8.37%
Transportion, Communication, Electric/Gas -0.01% 0.40% 1.93% 4.23% 6.78% 8.13%
Wholesale -0.06% 0.53% 2.83% 2.97% 5.11% 6.63%
Retail 0.05% 0.93% 3.39% 5.79% 7.27% 8.69%
Finance, Insurance, Real-Estate -0.03% 0.48% 2.51% 4.78% 6.04% 7.34%
Services -0.04% 0.78% 2.80% 4.08% 6.74% 8.08%
Public Administration 0.02% 0.04% 0.73% 2.47% 9.76% 11.40%
Energy 0.14% 1.54% 8.28% 54.32% -1.28% 2.50%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar
1. GrafTech International LTD (USD) 4.625% 12/15/2028 144A (12/08/2020): 500MM First Lien Notes, Price at Issuance 100, Yielding 4.63%.

2. Empire Communities Corp. (USD) 7% 12/15/2025 144A (12/08/2020): 400MM Senior Unsecured Notes, Price at Issuance 100, Yielding 7%.

3. Jaguar Land Rover Automotive PLC (USD) 5.875% 1/15/2028 144A (12/08/2020): 650MM Senior Unsecured Notes, Price at Issuance 100, Yielding 5.88%.

4. Empire Communities Corp. (USD) 7% 12/15/2025 Reg S (12/08/2020): 400MM Senior Unsecured Notes, Price at Issuance 100, Yielding 7%.

5. GrafTech International LTD (USD) 4.625% 12/15/2028 Reg S (12/08/2020): 500MM Secured Notes, Price at Issuance 100, Yielding 4.63%.

6. Guitar Center Inc. (USD) 8.5% 1/15/2026 144A (12/08/2020): 350MM Secured Notes, Price at Issuance 100, Yielding 8.5%.

7. Jaguar Land Rover Automotive PLC (USD) 5.875% 1/15/2028 Reg S (12/08/2020): 650MM Senior Unsecured Notes, Price at Issuance 100, Yielding 5.88%.

8. Dealer Tire LLC (USD) 8% 2/1/2028 (12/08/2020): 150MM Senior Unsecured Notes, Price at Issuance 103, Yielding 7.45%.

9. OneMain Financial Holdings Inc. (USD) 4% 9/15/2030 (12/08/2020): 850MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4%.

10. Occidental Petroleum Corp. (USD) 5.5% 12/1/2025 (12/08/2020): 750MM Senior Unsecured Notes, Price at Issuance 100, Yielding 5.5%.

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:  GrafTech International LTD issued 500 MM in notes.
Top Widening Loans Top Narrowing Loans
Casmar Holdings Australia PTY LTD (USD) TLB L+450 12/07/2023
Aptean Inc. (USD) TL L+850 04/24/2027
Altisource Portfolio Solutions (USD) TLB L+400 04/03/2023
NCL Corp. LTD (USD) TLA L+150 01/02/2024
Conduent Business Services LLC (USD) TLA L+175 12/07/2022
Vertical Midco GmbH (EUR) RC 01/14/2027
Ascena Retail Group Inc. (USD) DD L+1175 01/23/2021
Casper Bidco (EUR) TL E+850 07/30/2027
LTI Hldg Inc. (USD) TL L+475 07/24/2026
Samsonite IP Holdings SARL (USD) TLA L+150 04/19/2023

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 12/09/2020
  • Net negative capital flows into high-yield ETFs & mutual funds
INVESTMENT GRADE BOND RESEARCH
December 9, 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 69.1 MILLION+ CASES AND 1.57 MILLION DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 15.78 MILLION+ CASES AND 296000+ 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
+   Juniper Networks Inc. 1.2% 12/10/2025 +0.1%
  Block Financial LLC 3.875% 8/15/2030 +0.0%
  Barclays Bank PLC 1.7% 5/12/2022 +0.2%
  Goldman Sachs Group Inc. VAR% 12/9/2026 +0.1%
  Boeing Co. 5.805% 5/1/2050 +0.1%
–   Verizon Communications Inc. 2.875% 11/20/2050 -0.6%
  Anheuser-Busch Inbev Worldwide Inc. 4.9% 2/1/2046 -0.9%
  CVS Health Corp. 1.875% 2/28/2031 -0.5%
  Boeing Co. 5.15% 5/1/2030 -0.3%
  GE Capital Intl. Funding Co. 4.418% 11/15/2035 -0.4%
Verizon Communications Inc.   2.875% 11/20/2050
Anheuser-Busch Inbev Worldwide Inc.   4.9% 2/1/2046
CVS Health Corp.   1.875% 2/28/2031
Boeing Co.   5.15% 5/1/2030
Juniper Networks Inc.   1.2% 12/10/2025
GE Capital Intl. Funding Co.   4.418% 11/15/2035
Juniper Networks Inc.   2% 12/10/2030
Block Financial LLC   3.875% 8/15/2030
HSBC Hldg PLC   VAR% 5/18/2024
JPMorgan Chase & Co.   VAR% 11/19/2031
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Mining -0.02% 0.32% 2.22% 2.67% 8.61% 9.63%
Construction -0.01% -0.10% 1.31% 4.41% 9.11% 9.46%
Manufacturing -0.06% -0.10% 0.90% 2.05% 9.44% 9.87%
Transportion, Communication, Electric/Gas -0.05% -0.13% 1.23% 2.11% 10.86% 11.36%
Wholesale -0.11% 0.28% 1.41% 3.25% 10.11% 10.89%
Retail -0.07% -0.24% 0.94% 2.44% 10.71% 11.10%
Finance, Insurance, Real-Estate -0.08% -0.04% 0.75% 1.68% 8.29% 8.70%
Services -0.08% -0.03% 1.04% 1.92% 8.70% 9.05%
Public Administration 0.06% 0.02% 0.16% 0.38% 5.11% 5.22%
Energy -0.02% 0.36% 2.71% 2.75% 7.73% 9.05%
 
Total returns (non-annualized) by rating, market weighted.
New Issues New Issues [Continued]
1. Charles Schwab Corp. (USD) VAR% PERP (12/08/2020): 2500MM Junior Subordinated Notes, Price at Issuance 100.

2. Gladstone Capital Corp. (USD) 5.125% 1/31/2026 (12/08/2020): 100MM Senior Unsecured Notes, Price at Issuance 100, Yielding 5.13%.

3. Charles Schwab Corp. (USD) 0.9% 3/11/2026 (12/08/2020): 1250MM Senior Unsecured Notes, Price at Issuance 99.878, Yielding .92%.

4. CBOE Hldgs Inc (USD) 1.625% 12/15/2030 (12/08/2020): 500MM Senior Unsecured Notes, Price at Issuance 99.395, Yielding 1.69%.

5. Charles Schwab Corp. (USD) 1.65% 3/11/2031 (12/08/2020): 750MM Senior Unsecured Notes, Price at Issuance 99.804, Yielding 1.67%.

6. Toyota Motor Credit Corp. (USD) FLT% 12/13/2021 (12/08/2020): 2000MM Senior Unsecured Notes, Price at Issuance 100.

7. Summit Industrial Income Reit (CAD) 1.82% 4/1/2026 (12/08/2020): 200MM Senior Unsecured Notes, Price at Issuance 99.951, Yielding 1.83%.

8. Phoenician RE LTD. (USD) FLT% 12/14/2023 (12/09/2020): 95MM Unsecured Notes, Price at Issuance 100.

Additional Commentary

NEW ISSUANCE WATCH:  Charles Schwab Corp issued 2500 MM in notes.
Top Widening Loans Top Narrowing Loans
Casmar Holdings Australia PTY LTD (USD) TLB L+450 12/07/2023
Aptean Inc. (USD) TL L+850 04/24/2027
Altisource Portfolio Solutions (USD) TLB L+400 04/03/2023
NCL Corp. LTD (USD) TLA L+150 01/02/2024
Conduent Business Services LLC (USD) TLA L+175 12/07/2022
Vertical Midco GmbH (EUR) RC 01/14/2027
Ascena Retail Group Inc. (USD) DD L+1175 01/23/2021
Casper Bidco (EUR) TL E+850 07/30/2027
LTI Hldg Inc. (USD) TL L+475 07/24/2026
Samsonite IP Holdings SARL (USD) TLA L+150 04/19/2023

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 12/09/2020
  • Net positive capital flows into high-yield ETFs & mutual funds

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