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North American Bond Research – July 16, 2020

Posted on July 16, 2020
HIGH YIELD BOND RESEARCH
July 16, 2020
Bond Markets

AMERICAN LOST ANOTHER 1.3 MILLION JOBS, BEATING EXPECTATIONS, PUSHING MARKETS DOWN. RETAIL NUMBERS BOUNCED WAY BACK, BUT THEY REPRESENT A COVID ECONOMY THAT NEEDS JOBS AND STABILITY. 10 Year Treasury notes were down 1.8 bps. S&P -0.34%, Dow -0.5%, NASDAQ -0.73%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 13.9 MILLION+ CASES AND 590000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 3.7 MILLION+ CASES AND 141000+ DEATHS.  Among high-grade bonds showing topmost price gains at appreciable volumes traded, Hertz Corp (The) (USD) 7% 1/15/2028made analysts’ ‘Conviction Buy’ list. (See the chart below for Hertz Corp  bonds) Pierre Robert
Key Gainers and Losers Volume Leaders
+   Pacific Gas & Electric Co. 4.55% 7/1/2030 +0.9%
Pacific Gas & Electric Co. 4.95% 7/1/2050 +1.2%
T-Mobile USA Inc. 3.5% 4/15/2025 144A +0.1%
T-Mobile USA Inc. 3.875% 4/15/2030 144A +0.3%
Pacific Gas & Electric Co. 3.95% 12/1/2047 +0.4%
–   Carpenter Technology 6.375% 7/15/2028 -2.4%
Fibria Overseas Finance LTD 5.5% 1/17/2027 -1.9%
Pacific Gas & Electric Co. 3.75% 8/15/2042 -0.1%
Western Midstream Operating, LP 4.05% 2/1/2030 -0.5%
Western Midstream Operating, LP 3.1% 2/1/2025 -1.1%
Pacific Gas & Electric Co.   4.55% 7/1/2030
Pacific Gas & Electric Co.   4.95% 7/1/2050
T-Mobile USA Inc.   3.5% 4/15/2025 144A
T-Mobile USA Inc.   3.875% 4/15/2030 144A
Pacific Gas & Electric Co.   3.95% 12/1/2047
Pacific Gas & Electric Co.   3.3% 12/1/2027
Pacific Gas & Electric Co.   3.75% 2/15/2024
Pacific Gas & Electric Co.   4.75% 2/15/2044
Pacific Gas & Electric Co.   3.5% 6/15/2025
Pacific Gas & Electric Co.   4% 12/1/2046
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.22% 0.80% 1.43% 4.92% 2.26% 6.26%
Mining 0.41% 0.20% 0.31% 23.10% -15.50% -10.14%
Construction 0.18% 0.44% 1.39% 8.56% 0.16% 5.46%
Manufacturing 0.20% 0.37% 1.32% 6.08% -0.92% 4.54%
Transportion, Communication, Electric/Gas 0.18% 0.30% 0.77% 6.09% 1.65% 5.92%
Wholesale 0.09% -0.11% 0.21% 14.77% -0.60% 3.73%
Retail 0.21% 0.03% 0.50% 6.42% -3.32% 1.52%
Finance, Insurance, Real-Estate 0.13% 0.13% 0.98% 6.95% -1.68% 3.41%
Services 0.20% 0.31% 0.26% 5.67% -1.61% 4.62%
Public Administration 0.02% -0.18% 1.56% 9.89% 1.45% 6.48%
Energy 0.41% 0.29% 0.23% 23.74% -12.69% -8.48%
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar
1. Carnival Corp. (USD) 10.5% 2/1/2026 144A (07/15/2020): 775MM Second Lien Notes, Price at Issuance 100, Yielding 10.5%.

2. Carnival Corp. (USD) 10.5% 2/1/2026 Reg S (07/15/2020): 775MM Second Lien Notes, Price at Issuance 100, Yielding 10.5%.

3. AdaptHealth LLC (USD) 6.125% 8/1/2028 144A (07/15/2020): 350MM Senior Unsecured Notes, Price at Issuance 100, Yielding 6.13%.

4. Joseph T Ryerson & Son Inc. (USD) 8.5% 8/1/2028 144A (07/15/2020): 500MM Secured Notes, Price at Issuance 100, Yielding 8.5%.

5. AdaptHealth LLC (USD) 6.125% 8/1/2028 Reg S (07/15/2020): 350MM Senior Unsecured Notes, Price at Issuance 100, Yielding 6.13%.

6. Joseph T Ryerson & Son Inc. (USD) 8.5% 8/1/2028 Reg S (07/15/2020): 100MM Secured Notes, Price at Issuance 100, Yielding 8.5%.

(None Current 07/16/2020)
1. Agrofesh Solutions Inc.: $50MM covenant-lite TL

2. Alion Science & Technology Corp.: $400MM credit facilities: $40MM Revolver (Ba1/BB); $360MM TL (B1/BB-)

3. Authentic Brands Group LLC: $150MM TL (B2/B)

4. First Brands Group LLC: $710MM TL

5. Tosca Services LLC: $536.5MM TL

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

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

8. Thyssenkrupp Elevator: $2.875B seven-year first-lien term loan B (B1/B/B+); ¬1.1015B seven-year first-lien first-lien term loan B (B1/B/B+)

9. Huntsworth PLC: $300MM TL

10. First Brands Group LLC: $710MM TL

Additional Commentary

NEW ISSUANCE WATCH: Carnival Corp issued $775MM in notes.
Top Widening Loans Top Narrowing Loans
Casper Bidco (EUR) TL E+850 07/30/2027
Automate Intermediate Hldg II Sarl (USD) TLB L+425 07/22/2026
Automate Intermediate Hldg II Sarl (EUR) TLB E+350 07/22/2026
Affidea BV (EUR) TLB E+375 12/04/2026
Aristotle Corp. (USD) TLA L+450 05/31/2021
Carestream Health Inc. (USD) RC 08/07/2022
Conduent Business Services LLC (USD) TLA L+175 12/07/2022
TTM Technologies Inc. (USD) TL L+250 09/29/2024
Excelitas Technologies Corp. (USD) TL L+350 12/04/2024
Northwest Fiber LLC (USD) TLB L+550 05/01/2027

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

 

INVESTMENT GRADE BOND RESEARCH
July 16, 2020
Bond Markets

AMERICAN LOST ANOTHER 1.3 MILLION JOBS, BEATING EXPECTATIONS, PUSHING MARKETS DOWN. RETAIL NUMBERS BOUNCED WAY BACK, BUT THEY REPRESENT A COVID ECONOMY THAT NEEDS JOBS AND STABILITY. 10 Year Treasury notes were down 1.8 bps. S&P -0.34%, Dow -0.5%, NASDAQ -0.73%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 13.9 MILLION+ CASES AND 590000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 3.7 MILLION+ CASES AND 141000+ 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
+   Pacific Gas & Electric Co. 4.55% 7/1/2030 +0.9%
  Morgan Stanley VAR% 4/1/2031 +0.4%
  Verizon Communications Inc. 4.329% 9/21/2028 +0.4%
  Pacific Gas & Electric Co. 3.5% 8/1/2050 +1.2%
  Mastercard Inc. 3.35% 3/26/2030 +0.5%
–   CVS Health Corp. 4.3% 3/25/2028 -0.2%
  Goldman Sachs Group Inc. VAR% 10/31/2022 -0.1%
  Ecopetrol SA 4.125% 1/16/2025 -0.1%
  Dupont de Nemours Inc. 2.169% 5/1/2023 -0.0%
  Starbucks Corp. 2.55% 11/15/2030 -0.1%
Pacific Gas & Electric Co.   4.55% 7/1/2030
Morgan Stanley   VAR% 4/1/2031
Verizon Communications Inc.   4.329% 9/21/2028
Pacific Gas & Electric Co.   3.5% 8/1/2050
Mastercard Inc.   3.35% 3/26/2030
Pacific Gas & Electric Co.   4.95% 7/1/2050
CVS Health Corp.   4.3% 3/25/2028
Goldman Sachs Group Inc.   VAR% 10/31/2022
Ecopetrol SA   4.125% 1/16/2025
Pacific Gas & Electric Co.   3.3% 8/1/2040
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Mining 0.17% 0.51% 2.09% 10.59% 3.40% 7.90%
Construction 0.02% 0.29% 1.63% 5.86% 3.80% 7.10%
Manufacturing 0.08% 0.50% 2.15% 4.62% 6.65% 11.07%
Transportion, Communication, Electric/Gas 0.08% 0.84% 2.74% 6.13% 8.10% 13.50%
Wholesale 0.02% 0.17% 1.39% 5.79% 4.89% 10.73%
Retail 0.04% 0.56% 2.34% 4.62% 8.06% 13.86%
Finance, Insurance, Real-Estate 0.05% 0.25% 1.52% 4.32% 5.11% 8.87%
Services 0.05% 0.45% 2.25% 4.60% 6.02% 10.21%
Public Administration 0.02% 0.07% 0.32% 0.93% 4.62% 5.53%
Energy 0.14% 0.40% 1.78% 10.66% 3.00% 7.56%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. Tengizchevroil Finance Co. SAr.L (USD) 2.625% 8/15/2025 144A (07/15/2020): 500MM Secured Notes, Price at Issuance 99.412, Yielding 2.75%.

2. Tengizchevroil Finance Co. SAr.L (USD) 3.25% 8/15/2030 144A (07/15/2020): 750MM Secured Notes, Price at Issuance 98.939, Yielding 3.37%.

3. Multicare Health System (USD) 2.803% 8/15/2050 (07/15/2020): 300MM Unsecured Notes, Price at Issuance 100, Yielding 2.8%.

4. Drexel University (USD) 3.215% 5/1/2050 (07/15/2020): 104MM Unsecured Notes, Price at Issuance 100, Yielding 3.22%.

5. Owl Rock Capital Corp. (USD) 4.25% 1/15/2026 (07/16/2020): 500MM Senior Unsecured Notes, Price at Issuance 99.254, Yielding 4.4%.

6. US Bancorp (USD) 1.375% 7/22/2030 (07/16/2020): 1250MM Senior Unsecured Notes, Price at Issuance 99.359, Yielding 1.44%.

Additional Commentary

NEW ISSUANCE WATCH: on 07/16/2020 participants welcome a $1250MM new corporate-bond offering by US Bankcorp.
Top Widening Loans Top Narrowing Loans
Casper Bidco (EUR) TL E+850 07/30/2027
Automate Intermediate Hldg II Sarl (USD) TLB L+425 07/22/2026
Automate Intermediate Hldg II Sarl (EUR) TLB E+350 07/22/2026
Affidea BV (EUR) TLB E+375 12/04/2026
Aristotle Corp. (USD) TLA L+450 05/31/2021
Carestream Health Inc. (USD) RC 08/07/2022
Conduent Business Services LLC (USD) TLA L+175 12/07/2022
TTM Technologies Inc. (USD) TL L+250 09/29/2024
Excelitas Technologies Corp. (USD) TL L+350 12/04/2024
Northwest Fiber LLC (USD) TLB L+550 05/01/2027

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

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