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North American Bond Research – May 28, 2020

Posted on May 28, 2020
HIGH YIELD BOND RESEARCH
May 28, 2020
Bond Markets

FOR MOST OF THE DAY, MARKETS SEEMED TO SHRUG OFF THE HORRENDOUS EMPLOYMENT NUMBERS, BUT IN THE END MARKETS WERE LOWER. 2.1 MILLION MORE AMERICANS LOST THEIR JOBS. FIRST-QUARTER GROSS DOMESTIC PRODUCT (GDP) WAS DOWNWARDLY REVISED TO SHOW A 5.0% ANNUALIZED DECLINE, FROM THE 4.8% PREVIOUSLY REPORTED.  10 Year Treasury notes were up 2.5 basis points. S&P -0.21%, Dow-0.58%, NASDAQ -0.46%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 5.9 MILLION+ CASES AND 361000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 1.8 MILLION+ CASES AND 103000+ 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 +1.2%
  St Marys Cement Inc. 5.75% 1/28/2027 Reg S +1.2%
  Whiting Petroleum Corp. 5.75% 3/15/2021 +2.2%
  Latam Finance Limited 6.875% 4/11/2024 Reg S +3.6%
  Macy’s Retail Hldg Inc. 3.625% 6/1/2024 +2.1%
–   Ford Motor Co. 9% 4/22/2025 -0.2%
  EPR Properties 5.25% 7/15/2023 -3.6%
  Petrobras Global Finance BV 6.85% 6/5/2115 -1.1%
  AerCap Ireland Capital LTD 4.625% 10/30/2020 -0.1%
  Petrobras Global Finance BV 7.375% 1/17/2027 -2.2%
Ford Motor Co.   9% 4/22/2025
Ford Motor Co.   8.5% 4/21/2023
St Marys Cement Inc.   5.75% 1/28/2027 Reg S
EPR Properties   5.25% 7/15/2023
Petrobras Global Finance BV   6.85% 6/5/2115
AerCap Ireland Capital LTD   4.625% 10/30/2020
Whiting Petroleum Corp.   5.75% 3/15/2021
Latam Finance Limited   6.875% 4/11/2024 Reg S
Macy’s Retail Hldg Inc.   3.625% 6/1/2024
Petrobras Global Finance BV   7.375% 1/17/2027
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.24% 0.72% 2.81% -2.43% -0.48% 7.38%
Mining 0.96% 2.73% 16.72% -18.92% -22.20% -12.92%
Construction 0.25% 1.38% 4.20% -5.32% -3.33% 5.13%
Manufacturing 0.41% 1.61% 3.67% -5.36% -4.27% 3.54%
Transportion, Communication, Electric/Gas 0.26% 1.13% 4.06% -1.66% -0.35% 7.19%
Wholesale 0.46% 0.99% 6.12% -5.68% -5.54% 1.20%
Retail 0.50% 2.03% 5.16% -6.60% -6.03% 1.82%
Finance, Insurance, Real-Estate 0.36% 1.33% 3.12% -6.58% -5.85% 1.93%
Services 0.39% 1.79% 3.66% -4.88% -4.37% 3.92%
Public Administration 0.55% 1.40% 3.59% -5.55% -3.03% 4.52%
Energy 1.05% 3.24% 19.02% -15.39% -18.25% -10.76%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar
1. Residential RE 2020 LTD (USD) FLT% 6/6/2027 (05/27/2020): 100MM Unsecured Notes, Price at Issuance 100.

2. Macys Inc. (USD) 8.375% 6/15/2025 144A (05/27/2020): 1300MM First Lien Notes, Price at Issuance 100, Yielding 8.38%.

3. Macys Inc. (USD) 8.375% 6/15/2025 Reg S (05/27/2020): 1300MM First Lien Notes, Price at Issuance 100, Yielding 8.38%.

4. Par Petroleum Corp. (USD) 12.875% 1/15/2026 144A (05/27/2020): 105MM Secured Notes.

5. Par Petroleum Corp. (USD) 12.875% 1/15/2026 Reg S (05/27/2020): 105MM Secured Notes.

1. Ziply Fiber: $790.5MM TLB

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

3. Xperi Corp. : $1.1B seven-year secured covenant lite TLB

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

5. Segra (Mtn Infrastructure Topco Inc.): $275MM TL (B)

6. Championx: $537MM TL

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

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

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

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

Additional Commentary

NEW ISSUANCE WATCH: Par Petroleum Corp. issued 105MM in notes.
Top Widening Loans Top Narrowing Loans
ProFrac Services LLC (USD) TLB L+575 09/06/2023
Hamilton Holdco LLC (USD) TLB L+200 01/02/2027
Compass IV LTD (EUR) TLB E+450 05/09/2025
Automate Intermediate Hldg II Sarl (EUR) TLB E+350 07/22/2026
PDC Brands (USD) TL L+875 06/29/2025
Sonangol (USD) TL 12/20/2023
Paysafe Group PLC (USD) TL L+350 01/02/2025
Jazz Securities LTD (USD) TLA 06/07/2023
Matador Bidco SA R.L. (USD) TLB L+475 10/16/2026
DigiCert Inc. (USD) TL L+400 08/08/2026

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 22 bp (basis points), as of 05/28/2020
  • Net negative capital flows into high-yield ETFs & mutual funds

 

INVESTMENT GRADE BOND RESEARCH
May 28, 2020
Bond Markets

FOR MOST OF THE DAY, MARKETS SEEMED TO SHRUG OFF THE HORRENDOUS EMPLOYMENT NUMBERS, BUT IN THE END MARKETS WERE LOWER. 2.1 MILLION MORE AMERICANS LOST THEIR JOBS. FIRST-QUARTER GROSS DOMESTIC PRODUCT (GDP) WAS DOWNWARDLY REVISED TO SHOW A 5.0% ANNUALIZED DECLINE, FROM THE 4.8% PREVIOUSLY REPORTED.  10 Year Treasury notes were up 2.5 basis points. S&P -0.21%, Dow-0.58%, NASDAQ -0.46%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 5.9 MILLION+ CASES AND 361000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 1.8 MILLION+ CASES AND 103000+ 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. 5.15% 5/1/2030 +1.8%
  Boeing Co. 5.93% 5/1/2060 +1.8%
  Boeing Co. 5.705% 5/1/2040 +1.7%
  AT&T Inc. 2.75% 6/1/2031 +0.0%
  Boeing Co. 5.805% 5/1/2050 +1.9%
–   AT&T Inc. 3.85% 6/1/2060 -0.4%
  AT&T Inc. 3.65% 6/1/2051 -0.9%
  Boeing Co. 4.508% 5/1/2023 -0.6%
  Pfizer Inc. 2.7% 5/28/2050 -0.5%
  Stryker Corp. 1.95% 6/15/2030 -0.6%
Boeing Co.   5.15% 5/1/2030
Boeing Co.   5.93% 5/1/2060
Boeing Co.   5.705% 5/1/2040
AT&T Inc.   2.75% 6/1/2031
Boeing Co.   5.805% 5/1/2050
AT&T Inc.   3.85% 6/1/2060
AT&T Inc.   2.3% 6/1/2027
AT&T Inc.   3.65% 6/1/2051
Boeing Co.   4.508% 5/1/2023
AT&T Inc.   3.5% 6/1/2041
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Mining 0.40% 1.86% 6.00% -3.30% -0.79% 6.60%
Construction 0.26% 1.17% 1.67% -2.12% 1.36% 6.96%
Manufacturing 0.07% 0.56% 1.07% 0.22% 3.35% 11.15%
Transportion, Communication, Electric/Gas 0.04% 0.73% 0.80% -0.25% 3.77% 12.43%
Wholesale 0.28% 0.93% 1.71% -1.22% 1.06% 8.96%
Retail 0.05% 0.64% 0.91% 0.62% 3.87% 12.53%
Finance, Insurance, Real-Estate 0.10% 0.51% 1.11% -0.51% 2.11% 8.06%
Services 0.10% 0.62% 0.68% -0.40% 2.80% 9.83%
Public Administration 0.01% 0.04% 0.33% 2.31% 4.16% 6.15%
Energy 0.45% 2.11% 6.25% -3.22% -0.87% 6.55%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. Keyera Corp. (CAD) 3.959% 5/29/2030 (05/27/2020): 400MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.96%.

2. Hershey Co. (USD) 0.9% 6/1/2025 (05/27/2020): 300MM Senior Unsecured Notes, Price at Issuance 99.815, Yielding .94%.

3. Hershey Co. (USD) 1.7% 6/1/2030 (05/27/2020): 350MM Senior Unsecured Notes, Price at Issuance 99.771, Yielding 1.72%.

4. Hershey Co. (USD) 2.65% 6/1/2050 (05/27/2020): 350MM Senior Unsecured Notes, Price at Issuance 99.671, Yielding 2.67%.

5. CCL Industries Inc (USD) 3.05% 6/1/2030 144A (05/27/2020): 600MM Senior Unsecured Notes, Price at Issuance 99.752, Yielding 3.08%.

6. Macquarie Bank LTD (USD) 3.624% 6/3/2030 144A (05/27/2020): 750MM Subordinated Notes, Price at Issuance 100, Yielding 3.62%.

7. Santander Holdings USA (USD) 3.45% 6/2/2025 (05/27/2020): 1000MM Senior Unsecured Notes, Price at Issuance 99.804, Yielding 3.49%.

8. CCL Industries Inc (USD) 3.05% 6/1/2030 Reg S (05/27/2020): 600MM Senior Unsecured Notes, Price at Issuance 99.752, Yielding 3.08%.

9. Macquarie Bank LTD (USD) 3.624% 6/3/2030 Reg S (05/27/2020): 750MM Subordinated Notes, Price at Issuance 100, Yielding 3.62%.

10. Barclays Bank PLC (USD) FLT% 12/1/2020 (05/28/2020): 250MM Secured Notes, Price at Issuance 100.

Additional Commentary

NEW ISSUANCE WATCH: on 05/28/2020 participants welcome a $1000MM new corporate-bond offering by Hershey Co.
Top Widening Loans Top Narrowing Loans
ProFrac Services LLC (USD) TLB L+575 09/06/2023
Hamilton Holdco LLC (USD) TLB L+200 01/02/2027
Compass IV LTD (EUR) TLB E+450 05/09/2025
Automate Intermediate Hldg II Sarl (EUR) TLB E+350 07/22/2026
PDC Brands (USD) TL L+875 06/29/2025
Sonangol (USD) TL 12/20/2023
Paysafe Group PLC (USD) TL L+350 01/02/2025
Jazz Securities LTD (USD) TLA 06/07/2023
Matador Bidco SA R.L. (USD) TLB L+475 10/16/2026
DigiCert Inc. (USD) TL L+400 08/08/2026

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 22 bp (basis points), as of 05/28/2020
  • Net positive capital flows into high-yield ETFs & mutual funds

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