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North American Bond Research – June 10, 2020

Posted on June 10, 2020
HIGH YIELD BOND RESEARCH
June 10, 2020
Bond Markets

FED HELD RATES NEAR ZERO CAUSING MARKETS TO MOSTLY FALL. FED PROJECTED GDP CONTRACTION IN THE RANGE OF 4-10% NASDAQ AND TECHNOLOGY STOCKS DID HAVE AN UPDAY AGAIN. FTSE 100 -0.1%, 10 Year Treasury notes were down 8.1 basis points. S&P -.53%, Dow -1.04%, NASDAQ +0.67%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 7.4 MILLION+ CASES AND 416000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 2.1 MILLION+ CASES AND 115000+ 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
+   T-Mobile USA Inc. 3.875% 4/15/2030 144A +0.5%
  Hertz Corp. 6.25% 10/15/2022 +1.5%
  Micron Technology Inc. 5.327% 2/6/2029 +0.3%
  Enbridge Inc. VAR% 3/1/2089 +0.8%
  AMC Entertainment Hldg Inc. 5.75% 6/15/2025 +19.4%
–   T-Mobile USA Inc. 3.75% 4/15/2027 144A -0.6%
  Hertz Corp. 5.5% 10/15/2024 Reg S -1.9%
  Ford Motor Co. 9% 4/22/2025 -1.7%
  T-Mobile USA Inc. 3.5% 4/15/2025 144A -0.4%
  United Rentals North AM 4% 7/15/2030 -1.8%
T-Mobile USA Inc.   3.875% 4/15/2030 144A
Hertz Corp.   6.25% 10/15/2022
T-Mobile USA Inc.   3.75% 4/15/2027 144A
Hertz Corp.   5.5% 10/15/2024 Reg S
Ford Motor Co.   9% 4/22/2025
T-Mobile USA Inc.   3.5% 4/15/2025 144A
Micron Technology Inc.   5.327% 2/6/2029
Enbridge Inc.   VAR% 3/1/2089
United Rentals North AM   4% 7/15/2030
Sprint Capital Corp.   6.875% 11/15/2028
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.02% 1.85% 4.19% 1.88% 2.25% 8.87%
Mining 0.19% 4.55% 25.63% -1.11% -15.94% -8.75%
Construction -0.09% 1.52% 6.32% -1.15% 0.01% 7.49%
Manufacturing -0.19% 2.26% 7.59% -0.07% -0.42% 6.30%
Transportion, Communication, Electric/Gas -0.17% 1.39% 5.55% 1.71% 1.54% 7.77%
Wholesale 0.09% 2.52% 6.08% 0.38% -1.85% 3.78%
Retail -0.06% 2.50% 8.99% -2.53% -3.07% 3.22%
Finance, Insurance, Real-Estate -0.10% 2.36% 6.23% -1.68% -1.50% 5.24%
Services -0.25% 2.10% 7.60% 0.10% -0.37% 6.68%
Public Administration 0.12% 2.72% 6.48% -0.85% 0.72% 8.55%
Energy 0.27% 4.75% 22.25% 1.28% -12.36% -6.72%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar
1. American Axle & Manufacturing Inc. (USD) 6.875% 7/1/2028 (06/09/2020): 400MM Senior Unsecured Notes, Price at Issuance 100, Yielding 6.88%.

2. BWX Technologies Inc. (USD) 4.125% 6/30/2028 Reg S (06/09/2020): 400MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.13%.

3. BWX Technologies Inc. (USD) 4.125% 6/30/2028 144A (06/09/2020): 400MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.13%.

4. HTA Group Ltd (USD) 7% 12/18/2025 144A (06/09/2020): 750MM Senior Unsecured Notes, Price at Issuance 99.439, Yielding 7.12%.

5. Realogy Group LLC (USD) 7.625% 6/15/2025 Reg S (06/09/2020): 550MM Second Lien Notes, Price at Issuance 100, Yielding 7.63%.

6. Hillenbrand Inc. (USD) 5.75% 6/15/2025 (06/09/2020): 400MM Senior Unsecured Notes, Price at Issuance 100, Yielding 5.75%.

7. Realogy Group LLC (USD) 7.625% 6/15/2025 144A (06/09/2020): 550MM Second Lien Notes, Price at Issuance 100, Yielding 7.63%.

8. Delta Airlines (USD) 7.375% 1/15/2026 (06/10/2020): 1250MM Senior Unsecured Notes, Price at Issuance 99.986, Yielding 7.38%.

9. Level 3 Financing Inc. (USD) 4.25% 7/1/2028 (06/10/2020): 1200MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.25%.

10. Great Southern Bancorp Inc. (USD) VAR% 6/15/2030 (06/10/2020): 75MM Subordinated Notes, Price at Issuance 100.

1. Eldorado Resorts Inc./Caesars Entertainment Corp.: $6.4B credit facilities:$1B revolver at Eldorados; $3B seven-year cove-lite TLB due 2027 at Eldorado; $2.4B seven-year cove-lite TLB due 2027 at Caesars Resorts Collection

2. Hamilton Projects Acquiror LLC: $1.015B credit facilities: $115MM revolver; $900MM TLB

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

4. Mohegan Tribal Gaming Authority: $100MM first lein TL (Caa1)

5. Radio Systems Corp.: $725MM Loans: $100M ABL Facility; $625MM Senior secured bridge loan

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

7. Whole Earth Brands (ACT II GLOBAL ACQUISTION CORP.):: $235 MM credit facilities: $50MM reolver; $185MM term A

8. Xplorenet Communictations Inc.: $1.425B credit facilities (B3/B-): $150MM revolver; $1.275B first-lien TL

9. Whole Earth Brands (ACT II GLOBAL ACQUISTION CORP.):: $235 MM credit facilities: $50MM reolver; $185MM term A

10. Xplorenet Communictations Inc.: $1.425B credit facilities (B3/B-): $150MM revolver; $1.275B first-lien TL

Additional Commentary

NEW ISSUANCE WATCH: Realogy Group LLC issued $550MM in notes.
Top Widening Loans Top Narrowing Loans
Jostens Inc. (USD) TL L+950 12/21/2026
Specialty Chemical Resources Inc. (EUR) TLB1 E+450 03/05/2027
Ahlsell AB (EUR) TL E+825 03/01/2027
Paysafe Group PLC (EUR) TL E+700 12/01/2025
Concordia International (USD) TL EXIT L+550 09/06/2024
Speedster Bidco GmbH (EUR) TL E+625 02/14/2028
Albea Beauty Holdings SA (USD) TLB L+300 04/12/2024
Buzz Merger Sub LTD (USD) TLB L+275 01/29/2027
American Gaming Systems (USD) TLB L+350 02/15/2024
Alera Group Holdings Inc. (USD) TLB L+450 08/01/2025

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 06/10/2020
  • Net negative capital flows into high-yield ETFs & mutual funds

 

INVESTMENT GRADE BOND RESEARCH
June 10, 2020
Bond Markets

FED HELD RATES NEAR ZERO CAUSING MARKETS TO MOSTLY FALL. FED PROJECTED GDP CONTRACTION IN THE RANGE OF 4-10% NASDAQ AND TECHNOLOGY STOCKS DID HAVE AN UPDAY AGAIN. FTSE 100 -0.1%, 10 Year Treasury notes were down 8.1 basis points. S&P -.53%, Dow -1.04%, NASDAQ +0.67%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 7.4 MILLION+ CASES AND 416000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 2.1 MILLION+ CASES AND 115000+ 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
+   Boeing Co. 5.805% 5/1/2050 +1.2%
  CVS Health Corp. 5.05% 3/25/2048 +0.1%
  General Electric Co. 4.35% 5/1/2050 +0.6%
  Equinix Inc. 3% 7/15/2050 +0.8%
  JPMorgan Chase & Co. 5% PERP (1) +1.9%
–   Southwest Airlines Co. 1.25% 5/1/2025 -2.0%
  Southwest Airlines Co. 4.75% 5/4/2023 -0.6%
  Starbucks Corp. 3.5% 11/15/2050 -0.0%
  Charles Schwab Corp. 5.375% PERP -0.4%
  Barclays PLC VAR% 5/7/2026 -0.1%
Southwest Airlines Co.   1.25% 5/1/2025
Boeing Co.   5.805% 5/1/2050
CVS Health Corp.   5.05% 3/25/2048
General Electric Co.   4.35% 5/1/2050
Equinix Inc.   3% 7/15/2050
JPMorgan Chase & Co.   5% PERP (1)
GE Capital Intl. Funding Co.   4.418% 11/15/2035
AT&T Inc.   3.65% 6/1/2051
Southwest Airlines Co.   4.75% 5/4/2023
Citigroup Inc.   2.572% 6/3/2031
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Mining 0.23% 1.64% 7.11% 1.80% 1.78% 8.00%
Construction 0.36% 0.99% 4.55% -1.88% 1.63% 6.65%
Manufacturing 0.15% 0.56% 3.12% -0.21% 4.30% 10.62%
Transportion, Communication, Electric/Gas 0.30% 0.72% 3.31% 0.21% 4.97% 12.14%
Wholesale 0.07% 1.26% 3.71% -0.57% 3.06% 10.07%
Retail 0.32% 0.67% 3.33% 0.36% 5.20% 12.43%
Finance, Insurance, Real-Estate 0.16% 0.73% 2.56% -0.08% 3.46% 8.18%
Services 0.17% 0.47% 2.60% -1.20% 3.85% 9.56%
Public Administration 0.03% -0.18% -0.09% 0.44% 4.02% 5.15%
Energy 0.22% 1.74% 7.73% 2.90% 1.81% 8.21%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. H&R Real Estate Investment Trust (CAD) 4.071% 6/16/2025 (06/09/2020): 400MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.07%.

2. Saputo Inc. (CAD) 2.242% 6/16/2027 (06/09/2020): 700MM Unsecured Notes, Price at Issuance 100, Yielding 2.24%.

3. Pacific Premier Bancorp Inc. (USD) VAR% 6/15/2030 (06/09/2020): 150MM Subordinated Notes, Price at Issuance 100.

4. Memorial Sloan-Kettering (USD) 2.955% 1/1/2050 (06/09/2020): 450MM Unsecured Notes, Price at Issuance 100, Yielding 2.96%.

5. Hewlett-Packard Co. (USD) 3.4% 6/17/2030 (06/09/2020): 850MM Senior Unsecured Notes, Price at Issuance 99.79, Yielding 3.42%.

6. Hewlett-Packard Co. (USD) 2.2% 6/17/2025 (06/09/2020): 1150MM Senior Unsecured Notes, Price at Issuance 99.769, Yielding 2.25%.

7. Hewlett-Packard Co. (USD) 3% 6/17/2027 (06/09/2020): 1000MM Senior Unsecured Notes, Price at Issuance 99.718, Yielding 3.04%.

8. Memorial Sloan-Kettering (USD) 2.65% 1/1/2040 (06/09/2020): 50MM Unsecured Notes, Price at Issuance 100, Yielding 2.65%.

9. Credit Agricole London (USD) VAR% 6/16/2026 144A (06/09/2020): 1500MM Senior Non Preferred Notes, Price at Issuance 100.

10. Credit Agricole London (USD) 1.907% 6/16/2026 Reg S (06/09/2020): 1500MM Senior Non Preferred Notes, Price at Issuance 100, Yielding 1.91%.

Additional Commentary

NEW ISSUANCE WATCH: on 06/10/2020 participants welcome a $3000MM new corporate-bond offering by Hewlett-Packard Co.
Top Widening Loans Top Narrowing Loans
Jostens Inc. (USD) TL L+950 12/21/2026
Specialty Chemical Resources Inc. (EUR) TLB1 E+450 03/05/2027
Ahlsell AB (EUR) TL E+825 03/01/2027
Paysafe Group PLC (EUR) TL E+700 12/01/2025
Concordia International (USD) TL EXIT L+550 09/06/2024
Speedster Bidco GmbH (EUR) TL E+625 02/14/2028
Albea Beauty Holdings SA (USD) TLB L+300 04/12/2024
Buzz Merger Sub LTD (USD) TLB L+275 01/29/2027
American Gaming Systems (USD) TLB L+350 02/15/2024
Alera Group Holdings Inc. (USD) TLB L+450 08/01/2025

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 06/10/2020
  • Net positive capital flows into high-yield ETFs & mutual funds

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