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North American Bond Research – June 17, 2020

Posted on June 17, 2020
HIGH YIELD BOND RESEARCH
June 17, 2020
Bond Markets

CORONAVIRUS SPIKES IN A DOZEN STATES. EVEN THOUGH CONSUMER SPENDING REBOUNDED, COVID-19 CASES ARE STARTING TO OVERWHELM HOSPITALS IN FLORIDA AND TEXAS. 10 Year Treasury notes were down 2.3 basis points. S&P-0.36%, Dow -0.65%, NASDAQ +0.15%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 8.4 MILLION+ CASES AND 450000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 2.22 MILLION+ CASES AND 120000+ 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. 4.45% 4/15/2042 +0.2%
  Pacific Gas & Electric Co. 4.6% 6/15/2043 +2.9%
  Chesapeake Energy Corp. 11.5% 1/1/2025 Reg S +2.4%
  Delta Airlines 7.375% 1/15/2026 +1.0%
  Equinix Inc. 5.875% 1/15/2026 +0.2%
–   Pacific Gas & Electric Co. 3.3% 12/1/2027 -0.2%
  Pacific Gas & Electric Co. 2.95% 3/1/2026 -0.9%
  Pacific Gas & Electric Co. 4% 12/1/2046 -0.7%
  Occidental Petroleum Corp. 2.9% 8/15/2024 -1.0%
  Ford Motor Co. 9% 4/22/2025 -2.2%
Pacific Gas & Electric Co.   3.95% 12/1/2047
Pacific Gas & Electric Co.   3.3% 12/1/2027
Pacific Gas & Electric Co.   4.45% 4/15/2042
Pacific Gas & Electric Co.   2.95% 3/1/2026
Pacific Gas & Electric Co.   4.6% 6/15/2043
Pacific Gas & Electric Co.   3.75% 8/15/2042
Chesapeake Energy Corp.   11.5% 1/1/2025 Reg S
Pacific Gas & Electric Co.   4% 12/1/2046
Delta Airlines   7.375% 1/15/2026
Equinix Inc.   5.875% 1/15/2026
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.38% -0.90% 3.60% 8.24% 1.19% 7.64%
Mining 1.04% -1.55% 22.15% 16.40% -16.04% -9.72%
Construction 0.43% -0.41% 5.67% 3.07% -0.40% 6.44%
Manufacturing 0.60% -0.84% 7.00% 5.89% -1.59% 5.07%
Transportion, Communication, Electric/Gas 0.48% -0.49% 5.17% 9.84% 0.97% 6.82%
Wholesale 0.32% -0.47% 7.26% 11.03% -1.17% 4.45%
Retail 0.40% -0.97% 10.54% 4.07% -3.53% 2.38%
Finance, Insurance, Real-Estate 0.44% -0.23% 6.69% 3.81% -2.34% 4.11%
Services 0.57% -0.92% 6.92% 6.80% -1.40% 5.56%
Public Administration 0.53% -0.28% 6.50% 10.74% 0.44% 7.45%
Energy 1.09% -1.27% 20.59% 20.24% -13.18% -7.47%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar
1. Pacific Gas & Electric Co. (USD) 1.75% 6/16/2022 (06/16/2020): 2500MM Secured Notes, Price at Issuance 99.994, Yielding 1.75%.

2. Pacific Gas & Electric Co. (USD) 3.5% 8/1/2050 (06/16/2020): 1925MM Secured Notes, Price at Issuance 99.369, Yielding 3.53%.

3. WMG Acquisition Corp. (USD) 3.875% 7/15/2030 144A (06/16/2020): 535MM Secured Notes, Price at Issuance 100, Yielding 3.88%.

4. Smithsonian Institution (USD) 2.645% 9/1/2039 (06/16/2020): 69.945MM .

5. Illuminate Buyer LLC Illuminate Hldg IV Inc. (USD) 9% 7/1/2028 Reg S (06/16/2020): 460MM Senior Unsecured Notes, Price at Issuance 100, Yielding 9%.

6. EQM Midstream Partners (USD) 6% 7/1/2025 Reg S (06/16/2020): 700MM Senior Unsecured Notes, Price at Issuance 100, Yielding 6%.

7. EQM Midstream Partners (USD) 6.5% 7/1/2027 Reg S (06/16/2020): 900MM Senior Unsecured Notes, Price at Issuance 100, Yielding 6.5%.

8. Illuminate Buyer LLC Illuminate Hldg IV Inc. (USD) 9% 7/1/2028 144A (06/16/2020): 460MM Senior Unsecured Notes, Price at Issuance 100, Yielding 9%.

9. Dana Inc. (USD) 5.62% 6/15/2028 (06/16/2020): 400MM Senior Unsecured Notes, Price at Issuance 100, Yielding 5.62%.

10. EQM Midstream Partners (USD) 6.5% 7/1/2027 144A (06/16/2020): 900MM Senior Unsecured Notes, Price at Issuance 100, Yielding 6.5%.

1. Martin Midstream Partners LP: $400MM senior secured notes

2. Martin Midstream Partners LP: $400MM senior secured notes

3. Lummus Technology Inc. : $460MM senior notes (Caa1/B-)

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

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

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

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

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

9. 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

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

Additional Commentary

NEW ISSUANCE WATCH: Pacific Gas & Electric Co. issued $4425MM in notes.
Top Widening Loans Top Narrowing Loans
ADB Safegate (EUR) TLB E+350 10/02/2024
Sandvine Corp. (USD) TL L+450 11/02/2025
Quest Software US Holdings Inc (USD) TL L+825 05/17/2026
Concordia International (USD) TL EXIT L+550 09/06/2024
Automate Intermediate Hldg II Sarl (EUR) TLB E+350 07/22/2026
Akorn Inc. (USD) TL L+1250 04/16/2021
Learning Care Group Inc. (USD) TLB L+325 03/13/2025
Fossil Inc. (USD) TL L+650 09/26/2024
Dun & Bradstreet Corp. (USD) TL L+400 02/08/2026
Excelitas Technologies Corp. (USD) TL L+350 12/04/2024

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 06/17/2020
  • Net negative capital flows into high-yield ETFs & mutual funds

 

INVESTMENT GRADE BOND RESEARCH
June 17, 2020
Bond Markets

CORONAVIRUS SPIKES IN A DOZEN STATES. EVEN THOUGH CONSUMER SPENDING REBOUNDED, COVID-19 CASES ARE STARTING TO OVERWHELM HOSPITALS IN FLORIDA AND TEXAS. 10 Year Treasury notes were down 2.3 basis points. S&P-0.36%, Dow -0.65%, NASDAQ +0.15%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 8.4 MILLION+ CASES AND 450000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 2.22 MILLION+ CASES AND 120000+ 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
+   Oracle Corp. 2.95% 4/1/2030 +0.2%
  AerCap Ireland Capital LTD 6.5% 7/15/2025 +0.2%
  Mitsubishi UFJ Financial Group Inc. 2.193% 2/25/2025 +0.5%
  AT&T Inc. 2.3% 6/1/2027 +0.1%
  Principal Financial Group Inc. 2.125% 6/12/2030 +0.2%
–   General Electric Co. 4.35% 5/1/2050 -4.1%
  GE Capital Intl. Funding Co. 4.418% 11/15/2035 -2.7%
  American Intl Group Inc. 3.4% 6/30/2030 -0.2%
  Oracle Corp. 3.6% 4/1/2050 -1.2%
  AT&T Inc. 3.65% 6/1/2051 -0.5%
Oracle Corp.   2.95% 4/1/2030
General Electric Co.   4.35% 5/1/2050
GE Capital Intl. Funding Co.   4.418% 11/15/2035
American Intl Group Inc.   3.4% 6/30/2030
Oracle Corp.   3.6% 4/1/2050
AT&T Inc.   3.65% 6/1/2051
CVS Health Corp.   5.05% 3/25/2048
Amazon.com Inc.   2.5% 6/3/2050
Comcast Corp.   1.95% 1/15/2031
Citigroup Inc.   3.106% 4/8/2026
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Mining 0.47% -0.08% 6.56% 9.94% 1.72% 8.17%
Construction 0.23% 0.53% 4.00% 3.39% 2.37% 7.33%
Manufacturing 0.23% 0.34% 2.85% 4.96% 4.77% 10.78%
Transportion, Communication, Electric/Gas 0.16% 0.42% 3.39% 7.15% 5.49% 12.51%
Wholesale 0.27% 0.64% 3.87% 4.29% 3.92% 10.43%
Retail 0.18% 0.24% 3.31% 5.53% 5.50% 12.50%
Finance, Insurance, Real-Estate 0.24% 0.40% 2.72% 4.14% 3.88% 8.43%
Services 0.30% 0.53% 3.13% 4.18% 4.34% 9.89%
Public Administration -0.01% 0.24% 0.08% 0.95% 4.28% 5.42%
Energy 0.44% -0.11% 6.65% 11.46% 2.02% 8.26%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. Pacific Gas & Electric Co. (USD) 3.5% 8/1/2050 (06/16/2020): 1925MM Secured Notes, Price at Issuance 99.369, Yielding 3.53%.

2. AT&T Inc. (USD) 3.75% 9/1/2050 (06/16/2020): 1050MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.75%.

3. Bridgewater Bancshares Inc. (USD) VAR% 7/1/2030 (06/16/2020): 50MM Subordinated Notes, Price at Issuance 100.

4. Westinghouse Air Brake Technologies Corp. (USD) 3.2% 6/15/2025 (06/16/2020): 500MM Senior Unsecured Notes, Price at Issuance 99.892, Yielding 3.22%.

5. BorgWarner Inc. (USD) 2.65% 7/1/2027 (06/16/2020): 1100MM Senior Unsecured Notes, Price at Issuance 99.719, Yielding 2.69%.

6. Principal Life Global Fund II (USD) 1.25% 6/23/2025 144A (06/16/2020): 500MM Secured Notes, Price at Issuance 99.918, Yielding 1.27%.

7. Guardian Life Global Funding (USD) 1.1% 6/23/2025 144A (06/16/2020): 400MM Secured Notes, Price at Issuance 99.908, Yielding 1.12%.

8. Welltower Inc. (USD) 2.75% 1/15/2031 (06/16/2020): 600MM Senior Unsecured Notes, Price at Issuance 99.491, Yielding 2.81%.

9. Ford Motor Credit Co. (USD) 5.125% 6/16/2025 (06/16/2020): 1750MM Senior Unsecured Notes, Price at Issuance 100, Yielding 5.13%.

10. Bank of Montreal (USD) FLT% 6/20/2022 (06/16/2020): 50MM Senior Unsecured Notes, Price at Issuance 100.

Additional Commentary

NEW ISSUANCE WATCH: on 06/17/2020 participants welcome a $1100MM new corporate-bond offering by BorgWarner Inc.
Top Widening Loans Top Narrowing Loans
ADB Safegate (EUR) TLB E+350 10/02/2024
Sandvine Corp. (USD) TL L+450 11/02/2025
Quest Software US Holdings Inc (USD) TL L+825 05/17/2026
Concordia International (USD) TL EXIT L+550 09/06/2024
Automate Intermediate Hldg II Sarl (EUR) TLB E+350 07/22/2026
Akorn Inc. (USD) TL L+1250 04/16/2021
Learning Care Group Inc. (USD) TLB L+325 03/13/2025
Fossil Inc. (USD) TL L+650 09/26/2024
Dun & Bradstreet Corp. (USD) TL L+400 02/08/2026
Excelitas Technologies Corp. (USD) TL L+350 12/04/2024

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 06/17/2020
  • Net positive capital flows into high-yield ETFs & mutual funds

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