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North American Bond Research – July 27, 2020

Posted on July 27, 2020
HIGH YIELD BOND RESEARCH
July 27, 2020
Bond Markets
AMID COVID RESURGENCE AND STRUGGLING ECONOMY, MARKETS IN EUROPE FELL WHILE US MARKETS RALLIED AS TRUMP READIES ANOTHER $1 TRILLION STIMULUS. 10 Year Treasury notes were up 2 bps. S&P +0.74%, Dow +0.43%, NASDAQ +1.67%.

CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 16.6 MILLION+ CASES AND 656000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 4.5 MILLION+ CASES AND 151000+ 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. 4.55% 7/1/2030 +0.1%
  Petrobras Global Finance BV 8.75% 5/23/2026 +0.3%
  Pacific Gas & Electric Co. 3.5% 6/15/2025 +0.0%
  Pacific Gas & Electric Co. 4.25% 3/15/2046 +0.4%
  Teva Pharmaceutical Industries LTD 3.15% 10/1/2026 +0.8%
–   Pacific Gas & Electric Co. 4.95% 7/1/2050 -0.3%
  T-Mobile USA Inc. 3.875% 4/15/2030 144A -0.5%
  T-Mobile USA Inc. 3.5% 4/15/2025 144A -0.1%
  Aircastle LTD 4.125% 5/1/2024 -0.6%
  General Motors Co. 6.25% 10/2/2043 -0.5%
Pacific Gas & Electric Co.   4.95% 7/1/2050
Pacific Gas & Electric Co.   4.55% 7/1/2030
Petrobras Global Finance BV   8.75% 5/23/2026
Pacific Gas & Electric Co.   3.5% 6/15/2025
T-Mobile USA Inc.   3.875% 4/15/2030 144A
T-Mobile USA Inc.   3.5% 4/15/2025 144A
Aircastle LTD   4.125% 5/1/2024
General Motors Co.   6.25% 10/2/2043
Pacific Gas & Electric Co.   4.25% 3/15/2046
Pacific Gas & Electric Co.   3.3% 12/1/2027
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.01% 1.32% 2.66% 6.01% 4.25% 7.89%
Mining 0.05% 1.99% 2.09% 30.86% -12.65% -8.35%
Construction 0.05% 1.14% 2.13% 10.02% 1.78% 6.49%
Manufacturing -0.02% 1.38% 2.53% 10.05% 0.85% 6.32%
Transportion, Communication, Electric/Gas -0.08% 1.07% 2.04% 8.35% 3.08% 6.73%
Wholesale -0.05% 1.08% 1.49% 12.65% 0.70% 4.52%
Retail -0.09% 1.54% 2.54% 12.41% -1.82% 2.42%
Finance, Insurance, Real-Estate -0.00% 1.27% 2.06% 10.04% 0.26% 4.67%
Services -0.04% 1.32% 1.97% 8.58% 0.70% 5.52%
Public Administration 0.02% 1.33% 1.74% 10.74% 3.13% 7.86%
Energy 0.05% 2.01% 2.20% 29.30% -10.48% -6.18%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar
1. Summit Materials LLC (USD) 5.25% 1/15/2029 144A (07/27/2020): 700MM Senior Unsecured Notes, Price at Issuance 100, Yielding 5.25%. 1. Sequa Corp.: $200MM TL

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

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

4. Huntsworth PLC: $300MM TL

5. 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+)

6. Huntsworth PLC: $300MM TL

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

8. First Brands Group LLC: $710MM 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: Summit Materials LLC Inc. issued $700MM in notes.
Top Widening Loans Top Narrowing Loans
American Tire Distributors Inc. (USD) TL DIP PIK L+600 09/01/2023
Indivior Finance LLC (USD) TLB L+450 12/14/2022
Alera Group Holdings Inc. (USD) TLB L+450 08/01/2025
Cast & Crew Payroll LLC (USD) TLB L+375 02/07/2026
Hanjin Intl. Corp. (USD) TLB L+250 09/20/2020		 FeeCo (USD) RC 02/28/2023
NCL Corp. LTD (USD) TLA L+150 01/02/2024
Packaging Coordinators Inc. (USD) TL L+400 08/22/2023
Janus International Group LLC (USD) TL L+450 02/15/2025
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 15 bp (basis points), as of 07/27/2020
  • Net negative capital flows into high-yield ETFs & mutual funds

 

INVESTMENT GRADE BOND RESEARCH
July 27, 2020
Bond Markets
AMID COVID RESURGENCE AND STRUGGLING ECONOMY, MARKETS IN EUROPE FELL WHILE US MARKETS RALLIED AS TRUMP READIES ANOTHER $1 TRILLION STIMULUS. 10 Year Treasury notes were up 2 bps. S&P +0.74%, Dow +0.43%, NASDAQ +1.67%.

CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 16.6 MILLION+ CASES AND 656000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 4.5 MILLION+ CASES AND 151000+ 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. 3.5% 8/1/2050 +0.1%
  Pacific Gas & Electric Co. 4.55% 7/1/2030 +0.1%
  Deere & Co. 2.6% 6/8/2022 +0.1%
  Wells Fargo & Co. 2.1% 7/26/2021 +0.1%
  Simon Property Group Inc. 3.25% 9/13/2049 +0.1%
–   Dupont de Nemours Inc. 2.169% 5/1/2023 -0.3%
  AT&T Inc. 2.3% 6/1/2027 -0.8%
  Bank of America Corp. 1.898% 7/23/2031 -0.5%
  Pacific Gas & Electric Co. 4.95% 7/1/2050 -0.3%
  Pacific Gas & Electric Co. 3.15% 1/1/2026 -0.3%
Dupont de Nemours Inc.   2.169% 5/1/2023
AT&T Inc.   2.3% 6/1/2027
Bank of America Corp.   1.898% 7/23/2031
Pacific Gas & Electric Co.   4.95% 7/1/2050
Pacific Gas & Electric Co.   3.5% 8/1/2050
Pacific Gas & Electric Co.   3.15% 1/1/2026
Morgan Stanley   VAR% 4/1/2031
Pacific Gas & Electric Co.   4.55% 7/1/2030
Amazon.com Inc.   0.8% 6/3/2025
Bristol-Myers Squibb Co.   4.25% 10/26/2049
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Mining 0.03% 1.26% 3.35% 12.89% 5.82% 9.56%
Construction -0.06% 1.12% 2.48% 7.79% 4.61% 7.59%
Manufacturing 0.01% 0.81% 2.69% 5.66% 7.81% 11.68%
Transportion, Communication, Electric/Gas 0.06% 1.22% 3.74% 6.93% 9.94% 14.56%
Wholesale -0.01% 0.67% 1.96% 6.72% 6.14% 11.15%
Retail -0.05% 0.82% 2.96% 5.72% 9.44% 14.54%
Finance, Insurance, Real-Estate 0.01% 0.53% 1.59% 4.89% 5.81% 9.11%
Services -0.03% 0.76% 2.55% 5.29% 7.23% 10.95%
Public Administration 0.15% 0.06% 0.31% 0.82% 4.72% 5.44%
Energy 0.01% 1.24% 2.77% 12.63% 4.98% 9.03%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. Fifth Third Bancorp. (USD) VAR% PERP (07/27/2020): 350MM Junior Subordinated Notes, Price at Issuance 100.

2. Kinder Morgan Inc. (USD) 3.25% 8/1/2050 (07/27/2020): 500MM Senior Unsecured Notes, Price at Issuance 98.565, Yielding 3.33%.

3. Kinder Morgan Inc. (USD) 2% 2/15/2031 (07/27/2020): 750MM Senior Unsecured Notes, Price at Issuance 99.06, Yielding 2.1%.

4. Prosus NV (USD) 4.027% 8/3/2050 144A (07/27/2020): 1000MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.03%.
Additional Commentary
NEW ISSUANCE WATCH: on 07/27/2020 participants welcome a $1200MM new corporate-bond offering by
Kinder Morgan Inc.
Top Widening Loans Top Narrowing Loans
American Tire Distributors Inc. (USD) TL DIP PIK L+600 09/01/2023
Indivior Finance LLC (USD) TLB L+450 12/14/2022
Alera Group Holdings Inc. (USD) TLB L+450 08/01/2025
Cast & Crew Payroll LLC (USD) TLB L+375 02/07/2026
Hanjin Intl. Corp. (USD) TLB L+250 09/20/2020		 FeeCo (USD) RC 02/28/2023
NCL Corp. LTD (USD) TLA L+150 01/02/2024
Packaging Coordinators Inc. (USD) TL L+400 08/22/2023
Janus International Group LLC (USD) TL L+450 02/15/2025
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 15 bp (basis points), as of 07/27/2020
  • Net positive capital flows into high-yield ETFs & mutual funds

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