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North American Bond Research – June 12, 2020

Posted on June 12, 2020
INVESTMENT GRADE BOND RESEARCH
June 12, 2020
Bond Markets

MARKETS REBOUND BUT STILL END THE WEEK DOWN. VIX IS UP ALMOST 50%. THIS WEEK POINTING TO MORE ANXIETY BUILDING UP IN THE GLOBAL FINANCIAL SYSTEMS.  10 Year Treasury notes were up 4.6 basis points. S&P +1.31%, Dow +1.9%, NASDAQ +1.01%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 7.7 MILLION+ CASES AND 427000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 2.1 MILLION+ CASES AND 117000+ 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 +1.0%
  Boeing Co. 5.15% 5/1/2030 +0.8%
  General Electric Co. 4.35% 5/1/2050 +3.0%
  Boeing Co. 5.93% 5/1/2060 +2.1%
  CVS Health Corp. 5.05% 3/25/2048 +0.2%
–   Pfizer Inc. 2.7% 5/28/2050 -1.1%
  Walt Disney Co. 2.65% 1/13/2031 -0.1%
  Amazon.com Inc. 2.7% 6/3/2060 -0.2%
  AT&T Inc. 3.85% 6/1/2060 -0.7%
  Amazon.com Inc. 2.5% 6/3/2050 -0.3%
Boeing Co.   5.805% 5/1/2050
Boeing Co.   5.15% 5/1/2030
General Electric Co.   4.35% 5/1/2050
Boeing Co.   5.93% 5/1/2060
Walt Disney Co.   2.65% 1/13/2031
Amazon.com Inc.   2.7% 6/3/2060
CVS Health Corp.   5.05% 3/25/2048
Amazon.com Inc.   1.2% 6/3/2027
Steel Dynamics   3.25% 1/15/2031
AT&T Inc.   3.85% 6/1/2060
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Mining -0.23% 1.13% 7.38% 5.43% 1.55% 8.08%
Construction 0.12% 1.04% 2.83% -0.27% 2.67% 7.49%
Manufacturing -0.05% 0.78% 3.38% 1.49% 4.70% 11.08%
Transportion, Communication, Electric/Gas -0.04% 1.24% 4.09% 2.59% 5.52% 12.98%
Wholesale 0.01% 1.29% 4.48% 1.09% 3.56% 10.68%
Retail 0.01% 1.13% 3.88% 1.92% 5.63% 12.89%
Finance, Insurance, Real-Estate -0.03% 0.78% 2.87% 1.31% 3.67% 8.46%
Services -0.01% 0.83% 3.20% 0.21% 3.97% 9.98%
Public Administration 0.07% 0.16% 0.18% 0.90% 4.26% 5.55%
Energy -0.28% 1.19% 7.81% 6.93% 1.77% 8.34%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. Alpine Banks Of Colorado (USD) VAR% 6/15/2030 (06/11/2020): 50MM Senior Unsecured Notes, Price at Issuance 100.

2. Alpine Banks Of Colorado (USD) VAR% 6/15/2030 (06/11/2020): 50MM Senior Unsecured Notes, Price at Issuance 100.

3. Fidelis Insur HLD LTD (USD) 4.875% 6/30/2030 Reg S (06/11/2020): 300MM Senior Unsecured Notes, Price at Issuance 99.021, Yielding 5%.

4. Bemis Co. Inc. (USD) 2.63% 6/19/2030 (06/12/2020): 500MM Senior Unsecured Notes, Price at Issuance 100, Yielding 2.63%.

5. Black Hills Corp. (USD) 2.5% 6/15/2030 (06/12/2020): 400MM Senior Unsecured Notes, Price at Issuance 99.658, Yielding 2.54%.

6. Morgan Stanley (USD) 6.25% 6/29/2035 (06/12/2020): 50MM Senior Unsecured Notes, Price at Issuance 100, Yielding 6.25%.

7. United Community Banks Inc. (USD) 5% 6/15/2030 (06/12/2020): 100MM Senior Unsecured Notes, Price at Issuance 100, Yielding 5%.

Additional Commentary

NEW ISSUANCE WATCH: on 06/10/2020 participants welcome a $500MM new corporate-bond offering by Bemis Co. Inc.
Top Widening Loans Top Narrowing Loans
OVH Groupe (EUR) TLB E+325 11/29/2026
Eaglepicher Inc. (USD) TL L+725 03/09/2026
Koninklijke Ten Cate NV (EUR) TLB E+350 01/27/2023
NN Inc. (USD) TL L+525 10/19/2022
Nets Hldgs AS (EUR) TL E+700 02/06/2027
Buzz Merger Sub LTD (USD) TLB L+275 01/29/2027
Flint Group (USD) TLB2 L+300 09/07/2021
Welbilt Corp. (USD) TL L+250 10/24/2025
CH Guenther & Son Inc. (USD) TLB L+275 03/23/2025
SMG (USD) Bridge TL L+250 01/23/2025

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 14 bp (basis points), as of 06/11/2020
  • Net positive capital flows into high-yield ETFs & mutual funds

 

HIGH YIELD BOND RESEARCH
June 12, 2020
Bond Markets

MARKETS REBOUND BUT STILL END THE WEEK DOWN. VIX IS UP ALMOST 50%. THIS WEEK POINTING TO MORE ANXIETY BUILDING UP IN THE GLOBAL FINANCIAL SYSTEMS.  10 Year Treasury notes were up 4.6 basis points. S&P +1.31%, Dow +1.9%, NASDAQ +1.01%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 7.6 MILLION+ CASES AND 422000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 2.1 MILLION+ CASES AND 117000+ 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
+   Hertz Corp. 6.25% 10/15/2022 +43.6%
  Petrobras Global Finance BV 6.85% 6/5/2115 +1.2%
  T-Mobile USA Inc. 3.875% 4/15/2030 144A +0.5%
  Ford Motor Co. 8.5% 4/21/2023 +1.3%
  Delta Airlines 7.375% 1/15/2026 +1.8%
–   General Motors Co. 5.2% 4/1/2045 -1.1%
  Summit Midstream Hldg LLC 5.75% 4/15/2025 -0.9%
  Qorvo Inc. 5.5% 7/15/2026 (1) -0.1%
  Group 1 Automotive 5% 6/1/2022 -0.3%
  CenterPoint Energy Inc. VAR% PERP -2.0%
Hertz Corp.   6.25% 10/15/2022
Petrobras Global Finance BV   6.85% 6/5/2115
T-Mobile USA Inc.   3.875% 4/15/2030 144A
Ford Motor Co.   8.5% 4/21/2023
Delta Airlines   7.375% 1/15/2026
T-Mobile USA Inc.   3.5% 4/15/2025 144A
Ford Motor Co.   9% 4/22/2025
General Motors Co.   5.2% 4/1/2045
Occidental Petroleum Corp.   2.7% 8/15/2022
Micron Technology Inc.   4.975% 2/6/2026
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.44% 0.03% 3.37% 2.75% 1.43% 8.63%
Mining -1.65% 2.45% 21.61% 2.30% -17.48% -10.66%
Construction -0.61% -0.18% 5.27% -1.07% -0.94% 6.18%
Manufacturing -0.69% 0.24% 5.67% 0.61% -1.26% 5.25%
Transportion, Communication, Electric/Gas -0.62% 0.00% 4.68% 2.57% 1.00% 7.22%
Wholesale -0.49% 1.19% 6.21% 2.55% -2.29% 2.95%
Retail -0.67% 0.75% 7.80% -1.88% -2.96% 3.25%
Finance, Insurance, Real-Estate -0.54% 0.71% 6.18% -1.36% -2.66% 3.60%
Services -0.77% -0.13% 6.50% -0.02% -1.41% 5.49%
Public Administration -0.28% 0.94% 6.04% 3.44% 0.35% 7.45%
Energy -1.54% 2.05% 19.08% 5.45% -14.09% -8.26%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar
1. Watco Cos Inc. (USD) 6.5% 6/15/2027 144A (06/11/2020): 500MM Senior Unsecured Notes, Price at Issuance 100, Yielding 6.5%.

2. Watco Cos Inc. (USD) 6.5% 6/15/2027 Reg S (06/11/2020): 500MM Senior Unsecured Notes, Price at Issuance 100, Yielding 6.5%.

3. Fidelis Insur HLD LTD (USD) 4.875% 6/30/2030 144A (06/11/2020): 300MM Senior Unsecured Notes, Price at Issuance 99.021, Yielding 5%.

4. Wynn Macau LTD (USD) 5.5% 1/15/2026 144A (06/12/2020): 750MM Senior Unsecured Notes, Price at Issuance 100, Yielding 5.5%.

5. Wynn Macau LTD (USD) 5.5% 1/15/2026 Reg S (06/12/2020): 750MM Senior Unsecured Notes, Price at Issuance 100, Yielding 5.5%.

6. WR Grace & Co. (USD) 4.875% 6/15/2027 144A (06/12/2020): 750MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.88%.

7. WR Grace & Co. (USD) 4.875% 6/15/2027 Reg S (06/12/2020): 750MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.88%.

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

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

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

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

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

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

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

Additional Commentary

NEW ISSUANCE WATCH: WR GRACE & Co. issued $750MM in notes.
Top Widening Loans Top Narrowing Loans
OVH Groupe (EUR) TLB E+325 11/29/2026
Eaglepicher Inc. (USD) TL L+725 03/09/2026
Koninklijke Ten Cate NV (EUR) TLB E+350 01/27/2023
NN Inc. (USD) TL L+525 10/19/2022
Nets Hldgs AS (EUR) TL E+700 02/06/2027
Buzz Merger Sub LTD (USD) TLB L+275 01/29/2027
Flint Group (USD) TLB2 L+300 09/07/2021
Welbilt Corp. (USD) TL L+250 10/24/2025
CH Guenther & Son Inc. (USD) TLB L+275 03/23/2025
SMG (USD) Bridge TL L+250 01/23/2025

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 14 bp (basis points), as of 06/12/2020
  • Net negative capital flows into high-yield ETFs & mutual funds

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