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North American Bond Research – July 22, 2020

Posted on July 22, 2020
HIGH YIELD BOND RESEARCH
July 22, 2020
Bond Markets
US MARKETS UP AS DRUG COMPANIES SIGN BIG DEALS TO SELL VACCINES TO THE UNITED STATES GOVERNMENT. THIS NEWS HELPED OFFSET CONTINUED RISING TENSIONS BETWEEN THE UNITED STATES AND CHINA OVER THE CHINESE HOUSTON CONSULATE CLOSURE.  10 Year Treasury notes were down 1.2 bps. S&P +0.57%, Dow +0.62%, NASDAQ +0.24%.

CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 15.3 MILLION+ CASES AND 625000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 4.1 MILLION+ CASES AND 146000+ 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
+   HCA Inc. 3.5% 9/1/2030 +0.5%
  BED Bath & Beyond Inc. 5.165% 8/1/2044 +1.8%
  Pacific Gas & Electric Co. 3.85% 11/15/2023 +0.9%
  Freeport McMoRan Copper & Gold Inc. 5.45% 3/15/2043 +2.4%
  Petrobras Global Finance BV 6.85% 6/5/2115 +0.5%
–   T-Mobile USA Inc. 3.875% 4/15/2030 144A -0.1%
  Pacific Gas & Electric Co. 4.95% 7/1/2050 -0.6%
  Pacific Gas & Electric Co. 4.55% 7/1/2030 -0.3%
  Pacific Gas & Electric Co. 3.75% 7/1/2028 -0.2%
  T-Mobile USA Inc. 3.5% 4/15/2025 144A -0.1%
T-Mobile USA Inc.   3.875% 4/15/2030 144A
Pacific Gas & Electric Co.   4.95% 7/1/2050
Pacific Gas & Electric Co.   4.55% 7/1/2030
Pacific Gas & Electric Co.   3.75% 7/1/2028
T-Mobile USA Inc.   3.5% 4/15/2025 144A
HCA Inc.   3.5% 9/1/2030
Enbridge Inc.   5.75% 7/15/2080
BED Bath & Beyond Inc.   5.165% 8/1/2044
Pacific Gas & Electric Co.   3.85% 11/15/2023
T-Mobile USA Inc.   3.75% 4/15/2027 144A
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.13% 1.35% 1.82% 5.82% 3.43% 7.57%
Mining 0.60% 1.75% 0.34% 32.47% -14.21% -8.50%
Construction 0.20% 1.25% 1.70% 9.63% 1.48% 6.74%
Manufacturing 0.24% 1.30% 1.41% 8.54% 0.13% 5.78%
Transportion, Communication, Electric/Gas 0.22% 1.15% 1.19% 7.23% 2.91% 7.25%
Wholesale 0.12% 0.99% 0.64% 12.07% -0.50% 3.73%
Retail 0.16% 1.20% 0.96% 8.64% -2.25% 2.36%
Finance, Insurance, Real-Estate 0.23% 1.11% 1.21% 8.52% -0.55% 4.36%
Services 0.28% 1.36% 0.60% 6.73% -0.36% 4.77%
Public Administration -0.08% 1.03% 1.24% 8.92% 2.47% 7.65%
Energy 0.64% 1.91% 0.74% 30.73% -11.14% -6.58%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar
1. Clear Channel Intl. BV (USD) 6.625% 8/1/2025 144A (07/21/2020): 375MM First Lien Notes, Price at Issuance 100, Yielding 6.63%.

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

3. 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. Tosca Services LLC: $536.5MM TL

2. 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+)

3. Sequa Corp.: $200MM TL

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

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

6. Huntsworth PLC: $300MM TL

7. First Brands Group LLC: $710MM TL

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

9. 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+)

10. Sequa Corp.: $200MM TL
Additional Commentary
NEW ISSUANCE WATCH: Clear Channel Intl. issued $375MM in notes.
Top Widening Loans Top Narrowing Loans
Samsonite IP Holdings SARL (USD) TLA L+150 04/19/2023
CSM Bakery (USD) TL L+1000 02/04/2022
Carrols Restaurant Group (USD) TLB1 L+625 04/30/2026
Bay Club Co. (USD) TL2 L+775 09/05/2026
Tacala LLC (USD) TLB L+750 02/05/2028		 TCW Group (USD) TLB L+175 12/27/2024
Mavenir Inc. (USD) TLB L+600 05/08/2025
Affinion Group Inc. (USD) TL L+775 05/10/2022
Buzz Merger Sub LTD (USD) TLB L+275 01/29/2027
Inmar Inc. (USD) TL L+350 05/01/2024

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 14 bp (basis points), as of 07/22/2020
  • Net negative capital flows into high-yield ETFs & mutual funds
INVESTMENT GRADE BOND RESEARCH
July 22, 2020
Bond Markets
US MARKETS UP AS DRUG COMPANIES SIGN BIG DEALS TO SELL VACCINES TO THE UNITED STATES GOVERNMENT. THIS NEWS HELPED OFFSET CONTINUED RISING TENSIONS BETWEEN THE UNITED STATES AND CHINA OVER THE CHINESE HOUSTON CONSULATE CLOSURE.  10 Year Treasury notes were down 1.2 bps. S&P +0.57%, Dow +0.62%, NASDAQ +0.24%.

CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 15.3 MILLION+ CASES AND 625000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 4.1 MILLION+ CASES AND 146000+ 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
+   FLIR Systems Inc. 2.5% 8/1/2030 +0.0%
  Walt Disney Co. 2.65% 1/13/2031 +0.1%
  Takeda Pharmaceutical Co. LTD 3.175% 7/9/2050 +0.2%
  Boeing Co. 5.93% 5/1/2060 +0.1%
  Dupont de Nemours Inc. 2.169% 5/1/2023 +0.0%
–   Bank of America Corp. VAR% 6/19/2041 -0.4%
  Pacific Gas & Electric Co. 4.95% 7/1/2050 -0.6%
  Pacific Gas & Electric Co. 4.55% 7/1/2030 -0.3%
  FirstEnergy Corp. 2.65% 3/1/2030 -4.6%
  AT&T Inc. 4.5% 3/9/2048 -0.2%
Bank of America Corp.   VAR% 6/19/2041
FLIR Systems Inc.   2.5% 8/1/2030
Walt Disney Co.   2.65% 1/13/2031
Takeda Pharmaceutical Co. LTD   3.175% 7/9/2050
Pacific Gas & Electric Co.   4.95% 7/1/2050
Pacific Gas & Electric Co.   4.55% 7/1/2030
Boeing Co.   5.93% 5/1/2060
Dupont de Nemours Inc.   2.169% 5/1/2023
FirstEnergy Corp.   2.65% 3/1/2030
JP Morgan Chase & Co.   4.6% PERP
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Mining 0.30% 1.08% 2.29% 11.76% 5.07% 9.56%
Construction 0.19% 0.72% 1.64% 5.60% 4.75% 7.73%
Manufacturing 0.19% 0.77% 2.24% 5.20% 7.36% 11.42%
Transportion, Communication, Electric/Gas 0.25% 1.02% 2.94% 6.32% 9.16% 14.11%
Wholesale 0.19% 0.83% 1.31% 6.35% 5.68% 10.97%
Retail 0.19% 0.80% 2.45% 5.31% 8.92% 13.88%
Finance, Insurance, Real-Estate 0.15% 0.46% 1.38% 4.71% 5.64% 9.07%
Services 0.19% 0.74% 2.23% 4.92% 7.07% 11.13%
Public Administration 0.29% 0.07% 0.29% 0.79% 4.49% 5.58%
Energy 0.29% 1.09% 1.89% 11.57% 4.49% 8.80%
 
Total returns (non-annualized) by rating, market weighted.

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

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

3. Mizuho Securities USA Inc. (USD) FLT% 8/23/2021 (07/22/2020): 85MM Senior Unsecured Notes, Price at Issuance 100.

4. Lennox International Inc. (USD) 1.35% 8/1/2025 (07/22/2020): 300MM Senior Unsecured Notes, Price at Issuance 99.908, Yielding 1.37%.

5. Lennox International Inc. (USD) 1.7% 8/1/2027 (07/22/2020): 300MM Senior Unsecured Notes, Price at Issuance 99.705, Yielding 1.74%.

6. Andrew W Mellon Foundation (USD) 0.947% 8/1/2027 (07/22/2020): 300MM Unsecured Notes, Price at Issuance 100, Yielding .95%.
Additional Commentary
NEW ISSUANCE WATCH: on 07/17/2020 participants welcome a $300MM new corporate-bond offering by Lennox International.
Top Widening Loans Top Narrowing Loans
Samsonite IP Holdings SARL (USD) TLA L+150 04/19/2023
CSM Bakery (USD) TL L+1000 02/04/2022
Carrols Restaurant Group (USD) TLB1 L+625 04/30/2026
Bay Club Co. (USD) TL2 L+775 09/05/2026
Tacala LLC (USD) TLB L+750 02/05/2028		 TCW Group (USD) TLB L+175 12/27/2024
Mavenir Inc. (USD) TLB L+600 05/08/2025
Affinion Group Inc. (USD) TL L+775 05/10/2022
Buzz Merger Sub LTD (USD) TLB L+275 01/29/2027
Inmar Inc. (USD) TL L+350 05/01/2024

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 14 bp (basis points), as of 07/22/2020
  • Net positive capital flows into high-yield ETFs & mutual funds

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