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North American Bond Research – June 4, 2020

Posted on June 4, 2020
HIGH YIELD BOND RESEARCH
June 4, 2020
Bond Markets

ANOTHER 1.7 MILLION+ US WORKERS FILED FOR UNEMPLOYMENT SENDING MARKETS MIXED TO LOWER. THIS IS CAUSING INVESTORS TO QUESTION IF THERE IS GOING TO BE A “V” SHAPE RALLY OR IS THE MARKET DOING A BEAR MARKET RALLY? 10 Year Treasury notes were up 7.8 basis points. S&P -0.34%, Dow +0.045%, NASDAQ -0.69%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 6.6 MILLION+ CASES AND 391000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 1.91 MILLION+ CASES AND 110000+ 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 +1.1%
  Ford Motor Co. 9% 4/22/2025 +1.2%
  Delta Airlines Inc. 3.4% 4/19/2021 +0.2%
  Ford Motor Co. 8.5% 4/21/2023 +0.6%
  Pacific Gas & Electric Co. 6.05% 3/1/2034 +0.4%
–   Petrobras Global Finance BV 6.85% 6/5/2115 -0.0%
  General Motors Co. 5.2% 4/1/2045 -0.2%
  United Rentals North AM 4% 7/15/2030 -0.1%
  CDK Global Inc. 4.875% 6/1/2027 -2.6%
  Centene Corp. 4.25% 12/15/2027 -0.6%
Hertz Corp.   6.25% 10/15/2022
Ford Motor Co.   9% 4/22/2025
Petrobras Global Finance BV   6.85% 6/5/2115
General Motors Co.   5.2% 4/1/2045
T-Mobile USA Inc.   3.875% 4/15/2030 144A
Delta Airlines Inc.   3.4% 4/19/2021
United Rentals North AM   4% 7/15/2030
Ford Motor Co.   8.5% 4/21/2023
Pacific Gas & Electric Co.   6.05% 3/1/2034
Antero Resources Corp.   5.625% 6/1/2023
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.49% 1.03% 3.20% -0.61% 0.92% 8.18%
Mining 1.39% 2.60% 21.88% -15.44% -20.00% -11.74%
Construction 0.47% 2.11% 5.89% -3.23% -1.36% 7.18%
Manufacturing 0.53% 1.71% 5.88% -2.81% -1.83% 6.17%
Transportion, Communication, Electric/Gas 0.42% 1.21% 5.27% -0.46% 0.93% 8.21%
Wholesale 0.42% 1.51% 6.49% -3.63% -3.59% 3.29%
Retail 0.46% 1.72% 5.97% -5.63% -4.86% 2.73%
Finance, Insurance, Real-Estate 0.60% 1.85% 4.29% -4.64% -3.73% 4.34%
Services 0.60% 2.08% 6.25% -2.24% -1.73% 6.51%
Public Administration 0.12% 1.07% 3.77% -3.94% -1.80% 6.15%
Energy 1.24% 2.62% 22.56% -12.35% -16.45% -9.90%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar
1. WPX Energy Inc. (USD) 5.875% 6/15/2028 (06/03/2020): 500MM Senior Unsecured Notes, Price at Issuance 100, Yielding 5.88%.

2. Service Properties Trust (USD) 7.5% 9/15/2025 (06/03/2020): 800MM Senior Unsecured Notes, Price at Issuance 100, Yielding 7.5%.

3. Seagate HDD Cayman (USD) 4.125% 1/15/2031 144A (06/03/2020): 500MM Senior Unsecured Notes, Price at Issuance 99.859, Yielding 4.14%.

4. TRI Pointe Group Inc (USD) 5.7% 6/15/2028 (06/03/2020): 350MM Senior Unsecured Notes, Price at Issuance 100, Yielding 5.7%.

5. Meritor Inc. (USD) 6.25% 6/1/2025 144A (06/03/2020): 300MM Senior Unsecured Notes, Price at Issuance 100, Yielding 6.25%.

6. Meritor Inc. (USD) 6.25% 6/1/2025 Reg S (06/03/2020): 300MM Senior Unsecured Notes, Price at Issuance 100, Yielding 6.25%.

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

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

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

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

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

6. 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

7. Championx: $537MM TL

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

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

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

Additional Commentary

NEW ISSUANCE WATCH: Meritor Inc issued $300 MM in notes.
Top Widening Loans Top Narrowing Loans
American Airlines Inc. (USD) RC L+225 10/14/2023
Southeast PowerGen LLC (USD) TLB L+350 11/07/2021
American Tire Distributors Inc. (USD) TL DIP PIK L+600 09/01/2023
Koninklijke Ten Cate NV (EUR) TLB E+350 01/27/2023
Diamond Resorts Intl. (USD) TLB L+375 09/02/2023
Buzz Merger Sub LTD (USD) TLB L+275 01/29/2027
Allsup’s (USD) TLB L+625 11/18/2024
American Bath (USD) TL L+425 09/30/2023
Aretec Group Inc (USD) TL L+425 10/01/2025
Dubois Chemicals Inc. (USD) TL L+850 10/08/2027

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 18 bp (basis points), as of 06/04/2020
  • Net negative capital flows into high-yield ETFs & mutual funds

 

INVESTMENT GRADE BOND RESEARCH
June 4, 2020
Bond Markets

ANOTHER 1.7 MILLION+ US WORKERS FILED FOR UNEMPLOYMENT SENDING MARKETS MIXED TO LOWER. THIS IS CAUSING INVESTORS TO QUESTION IF THERE IS GOING TO BE A “V” SHAPE RALLY OR IS THE MARKET DOING A BEAR MARKET RALLY? 10 Year Treasury notes were up 7.8 basis points. S&P -0.34%, Dow +0.045%, NASDAQ -0.69%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 6.6 MILLION+ CASES AND 391000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 1.91 MILLION+ CASES AND 110000+ 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
+   Southwest Airlines Co. 1.25% 5/1/2025 +4.6%
  Boeing Co. 5.15% 5/1/2030 +0.6%
  Citigroup Inc. 2.572% 6/3/2031 +0.0%
  Boeing Co. 5.93% 5/1/2060 +0.2%
  HCA Inc. 4.125% 6/15/2029 +0.4%
–   Amazon.com Inc. 2.7% 6/3/2060 -1.8%
  Boeing Co. 5.805% 5/1/2050 -1.0%
  Anheuser-Busch Inbev Worldwide Inc. 4.75% 1/23/2029 -0.9%
  Southwest Airlines Co. 4.75% 5/4/2023 -0.9%
  Amazon.com Inc. 1.5% 6/3/2030 -0.6%
Southwest Airlines Co.   1.25% 5/1/2025
Amazon.com Inc.   2.7% 6/3/2060
Boeing Co.   5.15% 5/1/2030
Boeing Co.   5.805% 5/1/2050
Anheuser-Busch Inbev Worldwide Inc.   4.75% 1/23/2029
Southwest Airlines Co.   4.75% 5/4/2023
Amazon.com Inc.   1.5% 6/3/2030
Citigroup Inc.   2.572% 6/3/2031
Boeing Co.   5.93% 5/1/2060
Citigroup Inc.   4.412% 3/31/2031
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Mining 0.15% 1.18% 5.84% -2.71% 0.03% 6.87%
Construction -0.01% 0.54% 2.78% -3.24% 0.27% 4.66%
Manufacturing -0.03% 0.44% 1.54% -0.22% 3.94% 10.44%
Transportion, Communication, Electric/Gas -0.09% 0.58% 1.38% -0.65% 4.28% 11.48%
Wholesale 0.21% 0.82% 2.29% -1.26% 2.10% 9.15%
Retail -0.14% 0.54% 1.51% 0.42% 4.56% 11.58%
Finance, Insurance, Real-Estate 0.06% 0.60% 1.47% -0.57% 2.78% 7.64%
Services -0.02% 0.50% 1.18% -0.87% 3.49% 9.35%
Public Administration -0.08% -0.00% 0.16% 1.46% 4.15% 5.36%
Energy 0.22% 1.35% 6.49% -2.21% 0.21% 6.66%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. New York Life Global Funding (USD) 1.75% 6/10/2030 144A (06/03/2020): 100MM Secured Notes, Price at Issuance 99.572, Yielding 1.8%.

2. FirstEnergy Corp. (USD) 2.25% 9/1/2030 (06/03/2020): 450MM Senior Unsecured Notes, Price at Issuance 99.85, Yielding 2.27%.

3. FirstEnergy Corp. (USD) 1.6% 1/15/2026 (06/03/2020): 300MM Senior Unsecured Notes, Price at Issuance 99.85, Yielding 1.63%.

4. Seagate HDD Cayman (USD) 4.125% 1/15/2031 144A (06/03/2020): 500MM Senior Unsecured Notes, Price at Issuance 99.859, Yielding 4.14%.

5. Harley-Davidson Financial Services Inc. (USD) 3.35% 6/8/2025 144A (06/03/2020): 700MM Senior Unsecured Notes, Price at Issuance 99.863, Yielding 3.38%.

6. AerCap Ireland Capital LTD (USD) 6.5% 7/15/2025 (06/03/2020): 1250MM Senior Unsecured Notes, Price at Issuance 98.923, Yielding 6.75%.

7. Steel Dynamics (USD) 2.4% 6/15/2025 (06/03/2020): 400MM Senior Unsecured Notes, Price at Issuance 99.619, Yielding 2.48%.

8. Steel Dynamics (USD) 3.25% 1/15/2031 (06/03/2020): 500MM Senior Unsecured Notes, Price at Issuance 98.96, Yielding 3.37%.

9. Royal Bank of Canada (USD) 1.15% 6/10/2025 (06/03/2020): 1500MM Senior Unsecured Notes, Price at Issuance 99.652, Yielding 1.22%.

10. Southwest Airlines Co. (USD) 5.125% 6/15/2027 (06/03/2020): 1300MM Senior Unsecured Notes, Price at Issuance 100, Yielding 5.13%.

Additional Commentary

NEW ISSUANCE WATCH: on 06/04/2020 participants welcome a $1000MM new corporate-bond offering by Nordea Bank AB.
Top Widening Loans Top Narrowing Loans
American Airlines Inc. (USD) RC L+225 10/14/2023
Southeast PowerGen LLC (USD) TLB L+350 11/07/2021
American Tire Distributors Inc. (USD) TL DIP PIK L+600 09/01/2023
Koninklijke Ten Cate NV (EUR) TLB E+350 01/27/2023
Diamond Resorts Intl. (USD) TLB L+375 09/02/2023
Buzz Merger Sub LTD (USD) TLB L+275 01/29/2027
Allsup’s (USD) TLB L+625 11/18/2024
American Bath (USD) TL L+425 09/30/2023
Aretec Group Inc (USD) TL L+425 10/01/2025
Dubois Chemicals Inc. (USD) TL L+850 10/08/2027

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 18 bp (basis points), as of 06/04/2020
  • Net positive capital flows into high-yield ETFs & mutual funds

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