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North American Bond Research – May 18, 2020

Posted on May 18, 2020
HIGH YIELD BOND RESEARCH
May 18, 2020
Bond Markets

MARKETS TOOK OFF AS POWELL GAVE BROAD ASSURANCES THAT THE FED WILL DO ANYTHING TO SUPPORT THE ECONOMY. HE STATED THAT IF THE CORONAVIRUS DOES NOT HAVE A SECOND WAVE THAT THE ECONOMY WOULD MOST LIKELY START RECOVERING IN THE SECOND HALF OF 2020. 10 Year Treasury notes were up 10.41 basis points. S&P +3.16%, Dow +3.83%, NASDAQ +2.41%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 4.9 MILLION+ CASES AND 320000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 1.6 MILLION+ CASES AND 92000+ 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
+   Ford Motor Co. 8.5% 4/21/2023 +2.1%
  Ford Motor Co. 9% 4/22/2025 +1.8%
  Intl Lease Finance Corp. 4.625% 4/15/2021 +0.8%
  Occidental Petroleum Corp. 2.7% 8/15/2022 +3.0%
  General Motors Co. 6.25% 10/2/2043 +3.9%
–   AerCap Ireland Capital LTD 4.625% 7/1/2022 -1.1%
  Gap Inc. 5.95% 4/12/2021 -0.2%
  Sprint Nextel Corp. 7.875% 9/15/2023 -0.1%
  Intelsat Luxembourg SA 8.125% 6/1/2023 -2.1%
  General Motors Co. 5.2% 4/1/2045 -0.7%
Ford Motor Co.   8.5% 4/21/2023
Ford Motor Co.   9% 4/22/2025
Intl Lease Finance Corp.   4.625% 4/15/2021
Occidental Petroleum Corp.   2.7% 8/15/2022
General Motors Co.   6.25% 10/2/2043
AerCap Ireland Capital LTD   4.625% 7/1/2022
Barclays Bank PLC   5.14% 10/14/2020
Ford Motor Co.   9.625% 4/22/2030
Gap Inc.   5.95% 4/12/2021
Occidental Petroleum Corp.   3.5% 8/15/2029
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.09% -0.15% 0.75% -6.32% -4.68% 6.54%
Mining -0.34% -1.30% 2.91% -28.32% -28.69% -19.33%
Construction -0.11% 0.23% 1.34% -7.66% -5.33% 3.80%
Manufacturing -0.26% -0.41% -1.29% -9.02% -7.28% 0.69%
Transportion, Communication, Electric/Gas -0.10% -0.05% 1.08% -5.19% -3.09% 4.61%
Wholesale 0.00% -0.13% 5.71% -9.07% -7.70% -1.03%
Retail -0.28% -1.38% -1.96% -11.20% -9.77% -1.32%
Finance, Insurance, Real-Estate -0.13% -0.45% -0.44% -9.65% -7.96% 0.01%
Services -0.22% -0.25% -0.75% -8.55% -7.20% 1.98%
Public Administration 0.02% -0.31% 2.22% -8.08% -5.65% 2.43%
Energy -0.23% -0.52% 5.75% -25.01% -25.30% -17.61%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar

(None Current 05/18/2020)
1. Xperi Corp. : $1.1B seven-year secured covenant lite TLB

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

3. Ziply Fiber: $790.5MM TLB

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

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

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

7. 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

8. Championx: $537MM TL

9. Alterra Mountain Co. : $400MM incremental TL (B1/B)

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

Additional Commentary

NEW ISSUANCE WATCH: No New Issues
Top Widening Loans Top Narrowing Loans
Netsmart Technologies Inc. (USD) TL L+750 10/19/2023
Fujairah Asia Power (AED) TL L+50 07/28/2030
Logoplaste (EUR) TLB E+400 10/31/2023
Tacala LLC (USD) TLB L+775 02/01/2026
Entertainment Properties Trust (USD) TL L+110 02/27/2023
Allsup’s (USD) TLB L+625 11/18/2024
Hamilton Holdco LLC (USD) TLB L+200 01/02/2027
Albea Beauty Holdings SA (USD) TLB L+300 04/12/2024
Salient CRGT Inc. (USD) TL L+575 02/24/2022
Imperva Inc. (USD) TL2 L+775 01/10/2027

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 27 bp (basis points), as of 05/18/2020
  • Net negative capital flows into high-yield ETFs & mutual funds

 

INVESTMENT GRADE BOND RESEARCH
May 18, 2020
Bond Markets

MARKETS TOOK OFF AS POWELL GAVE BROAD ASSURANCES THAT THE FED WILL DO ANYTHING TO SUPPORT THE ECONOMY. HE STATED THAT IF THE CORONAVIRUS DOES NOT HAVE A SECOND WAVE THAT THE ECONOMY WOULD MOST LIKELY START RECOVERING IN THE SECOND HALF OF 2020. 10 Year Treasury notes were up 10.41 basis points. S&P +3.16%, Dow +3.83%, NASDAQ +2.41%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 4.9 MILLION+ CASES AND 320000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 1.6 MILLION+ CASES AND 92000+ 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
+   Coca-Cola Co. 2.6% 6/1/2050 +0.7%
  Walt Disney Co. 3.6% 1/13/2051 +1.4%
  Lowe’s Companies Inc. 5% 4/15/2040 +0.3%
  Viacom Inc. 4.95% 5/19/2050 +1.5%
  Viacom Inc. 4.2% 5/19/2032 +1.5%
–   Intl Business Machines Corp. 1.95% 5/15/2030 -0.2%
  Diageo Capital PLC 2% 4/29/2030 -0.1%
  Apple Inc. 2.65% 5/11/2050 -0.5%
  Exxon Mobil Corp. 3.452% 4/15/2051 -0.1%
  Intel Corp. 2.45% 11/15/2029 -0.2%
Coca-Cola Co.   2.6% 6/1/2050
Lowe’s Companies Inc.   5% 4/15/2040
Walt Disney Co.   3.6% 1/13/2051
Viacom Inc.   4.95% 5/19/2050
Viacom Inc.   4.2% 5/19/2032
Boeing Co.   5.93% 5/1/2060
Walt Disney Co.   2.65% 1/13/2031
Southwest Airlines Co.   1.25% 5/1/2025
Intl Business Machines Corp.   1.95% 5/15/2030
UnitedHealth Group Inc.   2.9% 5/15/2050
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.37% -0.79% 0.16% -3.47% -0.56% 4.69%
Mining 0.07% 0.46% 1.98% -6.07% -4.14% 3.52%
Construction 0.08% -0.09% 1.13% -3.75% -0.89% 5.10%
Manufacturing 0.07% 0.39% -0.26% -0.66% 1.56% 9.21%
Transportion, Communication, Electric/Gas 0.05% 0.10% -0.07% -0.89% 1.94% 10.80%
Wholesale 0.02% 0.06% 0.24% -2.25% -0.57% 7.10%
Retail 0.02% 0.17% -0.74% -0.25% 1.99% 10.53%
Finance, Insurance, Real-Estate 0.03% 0.22% 0.21% -0.78% 1.04% 7.22%
Services 0.01% 0.01% -0.59% -1.28% 0.91% 8.70%
Public Administration -0.00% 0.07% 0.51% 3.19% 4.18% 6.50%
Energy 0.10% 0.60% 2.04% -6.28% -4.44% 3.25%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. Royal Bank of Canada (CAD) 2.7% 5/22/2035 (05/18/2020): 50MM Senior Unsecured Notes, Price at Issuance 100, Yielding 2.7%.
Additional Commentary

NEW ISSUANCE WATCH: on 05/18/2020 participants welcome a $50MM new corporate-bond offering by Royal Bank of Canada.
Top Widening Loans Top Narrowing Loans
Netsmart Technologies Inc. (USD) TL L+750 10/19/2023
Fujairah Asia Power (AED) TL L+50 07/28/2030
Logoplaste (EUR) TLB E+400 10/31/2023
Tacala LLC (USD) TLB L+775 02/01/2026
Entertainment Properties Trust (USD) TL L+110 02/27/2023
Allsup’s (USD) TLB L+625 11/18/2024
Hamilton Holdco LLC (USD) TLB L+200 01/02/2027
Albea Beauty Holdings SA (USD) TLB L+300 04/12/2024
Salient CRGT Inc. (USD) TL L+575 02/24/2022
Imperva Inc. (USD) TL2 L+775 01/10/2027

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 27 bp (basis points), as of 05/18/2020
  • Net positive capital flows into high-yield ETFs & mutual funds

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