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North American Bond Research – July 21, 2020

Posted on July 21, 2020
HIGH YIELD BOND RESEARCH
July 21, 2020
Bond Markets

THE EU IS CONSIDERING INJECTING $850 BILLION IN STIMULUS AND NANCY PELOSI IS FAST TRACKING A $2 TRILLION STIMULUS PROGRAM IN THE UNITED STATES. MARKETS WERE GLOBALLY MIXED TO UP.  10 Year Treasury notes were down 1.3 bps. S&P +0.17%, Dow +0.6%, NASDAQ -0.81%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 15 MILLION+ CASES AND 616000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 4 MILLION+ CASES AND 145000+ 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. 4.95% 7/1/2050 +0.8%
  Pacific Gas & Electric Co. 3.45% 7/1/2025 +0.8%
  T-Mobile USA Inc. 3.75% 4/15/2027 144A +0.8%
  Pacific Gas & Electric Co. 3.5% 6/15/2025 +0.4%
  T-Mobile USA Inc. 3.5% 4/15/2025 144A +0.2%
–   Pacific Gas & Electric Co. 4.55% 7/1/2030 -0.0%
  Briggs & Stratton Corp. 6.875% 12/15/2020 -0.7%
  Teva Pharmaceutical Industries LTD 3.15% 10/1/2026 -0.1%
  Ford Motor Co. 9% 4/22/2025 -0.3%
  Navient Corp. 7.25% 9/25/2023 -0.6%
Pacific Gas & Electric Co.   4.55% 7/1/2030
Pacific Gas & Electric Co.   4.95% 7/1/2050
Pacific Gas & Electric Co.   3.45% 7/1/2025
T-Mobile USA Inc.   3.75% 4/15/2027 144A
Pacific Gas & Electric Co.   3.5% 6/15/2025
T-Mobile USA Inc.   3.5% 4/15/2025 144A
T-Mobile USA Inc.   3.875% 4/15/2030 144A
Petrobras Global Finance BV   6.85% 6/5/2115
Pacific Gas & Electric Co.   4.25% 3/15/2046
Enbridge Inc.   5.75% 7/15/2080
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.36% 1.23% 1.62% 5.40% 3.22% 7.36%
Mining 0.32% 1.09% -0.98% 26.78% -15.52% -9.64%
Construction 0.18% 0.84% 1.31% 8.65% 0.94% 6.38%
Manufacturing 0.21% 0.90% 1.04% 7.00% -0.06% 5.51%
Transportion, Communication, Electric/Gas 0.22% 0.89% 0.88% 6.21% 1.97% 6.40%
Wholesale 0.09% 0.66% 0.18% 10.63% -0.45% 3.96%
Retail 0.19% 0.98% 0.69% 7.29% -2.52% 2.21%
Finance, Insurance, Real-Estate 0.22% 0.88% 0.88% 7.55% -1.11% 3.82%
Services 0.24% 0.98% 0.31% 5.50% -0.56% 4.63%
Public Administration 0.82% 1.23% 1.44% 12.55% 2.65% 7.86%
Energy 0.35% 1.13% -0.60% 25.38% -12.49% -7.86%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar
1. Powdr Corp. (USD) 6% 8/1/2025 144A (07/20/2020): 300MM Secured Notes.

2. Wyndham Destinations Inc (USD) 6.625% 7/31/2026 144A (07/20/2020): 650MM Secured Notes, Price at Issuance 100, Yielding 6.63%.

3. Powdr Corp. (USD) 6% 8/1/2025 Reg S (07/20/2020): 300MM Secured Notes.

4. Wyndham Destinations Inc (USD) 6.625% 7/31/2026 Reg S (07/20/2020): 650MM Secured Notes, Price at Issuance 100, Yielding 6.63%.

5. MasTec Inc. (USD) 4.5% 8/15/2028 144A (07/21/2020): 600MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.5%.

6. MasTec Inc. (USD) 4.5% 8/15/2028 Reg S (07/21/2020): 600MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.5%.

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

2. First Brands Group LLC: $710MM TL

3. Agrofesh Solutions Inc.: $50MM covenant-lite TL

4. Huntsworth PLC: $300MM TL

5. Tosca Services LLC: $536.5MM TL

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

7. Sequa Corp.: $200MM 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. Logmein Inc.: $3.55B credit facilities: $250MM Revolver; $2.7B first lien TL; $600MM second-lien TL

10. First Brands Group LLC: $710MM TL

Additional Commentary

NEW ISSUANCE WATCH: Powdr Corp issued $300MM in notes.
Top Widening Loans Top Narrowing Loans
NCL Corp. LTD (USD) TLA L+150 01/02/2024
American Tire Distributors Inc. (USD) TL DIP PIK L+600 09/01/2023
OVH Groupe (EUR) TLB E+325 11/29/2026
Hertz Corp. (USD) RC L+275 06/30/2021
Nets Hldgs AS (EUR) TL E+700 02/06/2027
Buzz Merger Sub LTD (USD) TLB L+275 01/29/2027
DigiCert Inc. (USD) TL2 10/16/2027
CPV Shore LLC (USD) TLB L+375 12/27/2025
Affidea BV (EUR) TLB E+375 12/04/2026
Colfax Corp. (USD) TLA1 L+150 12/06/2024

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 bp (basis points), as of 07/20/2020
  • Net negative capital flows into high-yield ETFs & mutual funds

 

INVESTMENT GRADE BOND RESEARCH
July 21, 2020
Bond Markets

THE EU IS CONSIDERING INJECTING $850 BILLION IN STIMULUS AND NANCY PELOSI IS FAST TRACKING A $2 TRILLION STIMULUS PROGRAM IN THE UNITED STATES. MARKETS WERE GLOBALLY MIXED TO UP.  10 Year Treasury notes were down 1.3 bps. S&P +0.17%, Dow +0.6%, NASDAQ -0.81%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 14.9 MILLION+ CASES AND 612000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 4 MILLION+ CASES AND 144000+ 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
+   Bank of America Corp. VAR% 6/19/2041 +0.3%
  General Electric Co. FLT% PERP (1) +5.1%
  AT&T Inc. 2.75% 6/1/2031 +0.5%
  Boeing Co. 5.15% 5/1/2030 +0.9%
  Pacific Gas & Electric Co. 4.95% 7/1/2050 +0.5%
–   Pacific Gas & Electric Co. 4.55% 7/1/2030 -0.0%
  Noble Energy Inc. 5.25% 11/15/2043 -2.1%
  McDonald’s Corp. 3.6% 7/1/2030 -0.2%
  Bank of America Corp. 3.824% 1/20/2028 -0.2%
  Owl Rock Capital Corp. 4.25% 1/15/2026 -0.3%
Bank of America Corp.   VAR% 6/19/2041
General Electric Co.   FLT% PERP (1)
AT&T Inc.   2.75% 6/1/2031
Boeing Co.   5.15% 5/1/2030
Pacific Gas & Electric Co.   4.55% 7/1/2030
Pacific Gas & Electric Co.   4.95% 7/1/2050
Anheuser-Busch Inbev Worldwide Inc.   4.5% 6/1/2050
Wells Fargo & Co.   VAR% 5/22/2028
Amazon.com Inc.   1.5% 6/3/2030
Jefferies Group Inc.   5% 6/10/2035
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Mining 0.22% 0.68% 1.59% 10.92% 3.99% 8.49%
Construction 0.03% 0.47% 1.42% 5.38% 4.54% 7.57%
Manufacturing 0.10% 0.55% 1.94% 4.85% 6.97% 11.04%
Transportion, Communication, Electric/Gas 0.16% 0.78% 2.59% 6.00% 8.67% 13.61%
Wholesale 0.04% 0.49% 1.02% 5.56% 5.28% 10.19%
Retail 0.20% 0.60% 2.30% 5.13% 8.75% 14.03%
Finance, Insurance, Real-Estate 0.02% 0.28% 1.18% 4.43% 5.37% 8.79%
Services 0.13% 0.47% 1.91% 4.70% 6.53% 10.40%
Public Administration -0.25% 0.01% 0.02% 0.53% 4.05% 5.14%
Energy 0.23% 0.72% 1.35% 10.86% 3.69% 8.09%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. FLIR Systems Inc. (USD) 2.5% 8/1/2030 (07/20/2020): 500MM Senior Unsecured Notes, Price at Issuance 99.807, Yielding 2.52%.

2. The Doris Duke Charitable Foundation (USD) 2.345% 7/1/2050 (07/21/2020): 100MM Unsecured Notes, Price at Issuance 100, Yielding 2.35%.

3. BCI Quadreal Realty (CAD) 1.747% 7/24/2030 (07/21/2020): 350MM Senior Unsecured Notes, Price at Issuance 100, Yielding 1.75%.

Additional Commentary

NEW ISSUANCE WATCH: on 07/17/2020 participants welcome a $500MM new corporate-bond offering by FLIR Systems Inc.
Top Widening Loans Top Narrowing Loans
NCL Corp. LTD (USD) TLA L+150 01/02/2024
American Tire Distributors Inc. (USD) TL DIP PIK L+600 09/01/2023
OVH Groupe (EUR) TLB E+325 11/29/2026
Hertz Corp. (USD) RC L+275 06/30/2021
Nets Hldgs AS (EUR) TL E+700 02/06/2027
Buzz Merger Sub LTD (USD) TLB L+275 01/29/2027
DigiCert Inc. (USD) TL2 10/16/2027
CPV Shore LLC (USD) TLB L+375 12/27/2025
Affidea BV (EUR) TLB E+375 12/04/2026
Colfax Corp. (USD) TLA1 L+150 12/06/2024

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 bp (basis points), as of 07/20/2020
  • Net positive capital flows into high-yield ETFs & mutual funds

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