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North American Bond Research – May 29, 2020

Posted on May 29, 2020
HIGH YIELD BOND RESEARCH
May 29, 2020
Bond Markets

THE  MARKETS WERE DOWN MOST OF THE DAY DUE TO THEIR CONCERN THAT PRESIDENT TRUMP WAS GOING TO ESCALATE TENSIONS WITH CHINA. MARKETS FINISHED MIXED AS PRESIDENT TRUMP STATED HE WANTED TO REVIEW ALL CHINESE COMPANIES LISTED ON US EXCHANGES.   10 Year Treasury notes were down 5.7 basis points. S&P +0.48%, Dow-0.07%, NASDAQ +1.29%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 6 MILLION+ CASES AND 365000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 1.8 MILLION+ CASES AND 105000+ 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
+   Petrobras Global Finance BV 6.85% 6/5/2115 +0.1%
  Constellation Brands Inc. 3.75% 5/1/2021 +0.1%
  ArcelorMittal SA 4.55% 3/11/2026 +0.1%
  Ford Motor Co. 8.5% 4/21/2023 +0.5%
  Ford Motor Co. 4.75% 1/15/2043 +0.4%
–   Ford Motor Co. 9% 4/22/2025 -0.5%
  Crown Castle Intl Corp. 5.25% 1/15/2023 -0.0%
  Newell Brands Inc. 4.875% 6/1/2025 -0.6%
  Ford Motor Co. 9.625% 4/22/2030 -0.2%
  Antero Resources Finance Corp. 5.375% 11/1/2021 -0.6%
Ford Motor Co.   9% 4/22/2025
Crown Castle Intl Corp.   5.25% 1/15/2023
Petrobras Global Finance BV   6.85% 6/5/2115
Newell Brands Inc.   4.875% 6/1/2025
Ford Motor Co.   9.625% 4/22/2030
Constellation Brands Inc.   3.75% 5/1/2021
ArcelorMittal SA   4.55% 3/11/2026
Ford Motor Co.   8.5% 4/21/2023
Antero Resources Finance Corp.   5.375% 11/1/2021
Ford Motor Co.   4.75% 1/15/2043
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.33% 1.02% 3.54% -1.51% -0.11% 7.63%
Mining 0.59% 2.61% 19.75% -17.31% -21.85% -13.54%
Construction 0.33% 1.46% 4.45% -4.35% -2.76% 5.52%
Manufacturing 0.31% 1.66% 4.32% -4.43% -3.85% 3.76%
Transportion, Communication, Electric/Gas 0.13% 1.10% 4.71% -0.83% -0.07% 7.27%
Wholesale 0.49% 1.73% 7.41% -3.43% -3.70% 3.08%
Retail 0.39% 1.88% 5.77% -5.84% -5.65% 2.17%
Finance, Insurance, Real-Estate 0.32% 1.37% 3.41% -6.25% -5.94% 1.63%
Services 0.29% 1.76% 4.27% -4.41% -4.39% 4.33%
Public Administration 0.12% 1.40% 4.14% -4.00% -2.71% 5.06%
Energy 0.46% 2.84% 20.82% -14.32% -18.44% -11.17%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar
1. Ortho-Clinical Diagnostics Inc. (USD) 7.375% 6/1/2025 144A (05/28/2020): 400MM Senior Unsecured Notes, Price at Issuance 100, Yielding 7.38%.

2. Diversified Hldg Corp. (USD) 9.75% 6/15/2025 (05/28/2020): 1000MM Senior Unsecured Notes, Price at Issuance 100, Yielding 9.75%.

3. Molina Healthcare Inc. (USD) 4.375% 6/15/2028 144A (05/28/2020): 800MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.38%.

4. INTL FCStone Inc. (USD) 8.625% 6/15/2025 Reg S (05/28/2020): 350MM Secured Notes, Price at Issuance 98.5, Yielding 9%.

5. Molina Healthcare Inc. (USD) 4.375% 6/15/2028 Reg S (05/28/2020): 800MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.38%.

6. Yara International ASA (USD) 3.148% 6/4/2030 144A (05/28/2020): 750MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.15%.

7. First Busey Corporation (USD) VAR% 6/1/2030 (05/28/2020): 125MM Subordinated Notes, Price at Issuance 100.

8. Ortho-Clinical Diagnostics Inc. (USD) 7.375% 6/1/2025 Reg S (05/28/2020): 400MM Senior Unsecured Notes, Price at Issuance 100, Yielding 7.38%.

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: Molina Healthcare Inc issued 800MM in notes.
Top Widening Loans Top Narrowing Loans
Neiman Marcus Group Inc. (USD) TL DIP PIK L+1275 10/07/2020
Specialty Chemical Resources Inc. (EUR) TLB1 E+450 03/05/2027
Sundyne US Purchaser (USD) TLB L+425 03/17/2027
Paysafe Group PLC (USD) TL L+350 01/02/2025
Koninklijke Ten Cate NV (EUR) TLB E+350 01/27/2023
Arbor Pharmaceuticals LLC (USD) TLB L+500 07/05/2023
Surgery Partners LLC (USD) TL L+800 08/31/2024
American Greetings Corp. (USD) TLB L+450 04/06/2024
Buzz Merger Sub LTD (USD) TLB L+275 01/29/2027
Allsup’s (USD) TLB L+625 11/18/2024

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 21 bp (basis points), as of 05/29/2020
  • Net negative capital flows into high-yield ETFs & mutual funds

 

INVESTMENT GRADE BOND RESEARCH
May 29, 2020
Bond Markets

THE  MARKETS WERE DOWN MOST OF THE DAY DUE TO THEIR CONCERN THAT PRESIDENT TRUMP WAS GOING TO ESCALATE TENSIONS WITH CHINA. MARKETS FINISHED MIXED AS PRESIDENT TRUMP STATED HE WANTED TO REVIEW ALL CHINESE COMPANIES LISTED ON US EXCHANGES.   10 Year Treasury notes were down 5.7 basis points. S&P +0.48%, Dow-0.07%, NASDAQ +1.29%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 6 MILLION+ CASES AND 365000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 1.8 MILLION+ CASES AND 105000+ 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 +2.3%
  Boeing Co. 5.15% 5/1/2030 +0.8%
  Boeing Co. 5.705% 5/1/2040 +1.4%
  AT&T Inc. 2.75% 6/1/2031 +0.5%
  AT&T Inc. 3.65% 6/1/2051 +0.7%
–   AT&T Inc. 2.3% 6/1/2027 -0.1%
  Mondelez Intl Inc. 2.75% 4/13/2030 -0.1%
  Viacom Inc. 4.2% 5/19/2032 -0.5%
  Santander Hldg USA 3.45% 6/2/2025 -0.1%
  General Electric Co. FLT% PERP (1) -0.6%
Boeing Co.   5.805% 5/1/2050
Boeing Co.   5.15% 5/1/2030
Boeing Co.   5.705% 5/1/2040
AT&T Inc.   2.75% 6/1/2031
AT&T Inc.   3.65% 6/1/2051
Wells Fargo & Co.   VAR% 6/2/2028
Boeing Co.   5.93% 5/1/2060
Walt Disney Co.   3.6% 1/13/2051
Boeing Co.   4.508% 5/1/2023
Boeing Co.   4.875% 5/1/2025
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Mining 0.21% 1.32% 6.15% -3.13% -0.68% 6.52%
Construction 0.14% 1.02% 1.81% -2.12% 1.08% 6.30%
Manufacturing 0.07% 0.44% 1.09% 0.13% 3.53% 11.07%
Transportion, Communication, Electric/Gas 0.10% 0.55% 0.85% -0.36% 3.84% 12.27%
Wholesale 0.10% 0.71% 1.54% -1.49% 1.11% 8.97%
Retail 0.13% 0.44% 0.96% 0.45% 3.99% 12.40%
Finance, Insurance, Real-Estate 0.12% 0.47% 1.13% -0.55% 2.24% 8.03%
Services 0.03% 0.45% 0.66% -0.51% 3.05% 9.98%
Public Administration -0.01% 0.02% 0.26% 2.06% 4.14% 6.02%
Energy 0.24% 1.59% 6.49% -2.77% -0.58% 6.62%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. BCI Quadreal Realty (CAD) 1.68% 3/3/2025 (05/28/2020): 350MM Secured Notes, Price at Issuance 99.983, Yielding 1.68%.

2. Inter Pipeline LTD (CAD) 4.23% 6/1/2027 (05/28/2020): 700MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.23%.

3. Ferguson Finance PLC (USD) 3.25% 6/2/2030 Reg S (05/28/2020): 600MM Senior Unsecured Notes, Price at Issuance 99.552, Yielding 3.3%.

4. Element Fleet Mgmt Corp. (USD) 3.85% 6/15/2025 Reg S (05/28/2020): 400MM Senior Unsecured Notes, Price at Issuance 99.985, Yielding 3.85%.

5. Health Care Service Corp. (USD) 3.2% 6/1/2050 Reg S (05/28/2020): 750MM Senior Unsecured Notes, Price at Issuance 99.103, Yielding 3.25%.

6. Health Care Service Corp. (USD) 2.2% 6/1/2030 Reg S (05/28/2020): 750MM Senior Unsecured Notes, Price at Issuance 99.599, Yielding 2.24%.

7. Health Care Service Corp. (USD) 1.5% 6/1/2025 Reg S (05/28/2020): 500MM Senior Unsecured Notes, Price at Issuance 99.765, Yielding 1.55%.

8. HSBC Holdings PLC (USD) VAR% 6/4/2026 (05/28/2020): 2000MM Senior Unsecured Notes, Price at Issuance 100.

9. Yara International ASA (USD) 3.148% 6/4/2030 Reg S (05/28/2020): 750MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.15%.

10. HSBC Holdings PLC (USD) VAR% 6/4/2031 (05/28/2020): 1500MM Senior Unsecured Notes, Price at Issuance 100.

Additional Commentary

NEW ISSUANCE WATCH: on 05/29/2020 participants welcome a $2000MM new corporate-bond offering by Health Care Service Corp.
Top Widening Loans Top Narrowing Loans
Neiman Marcus Group Inc. (USD) TL DIP PIK L+1275 10/07/2020
Specialty Chemical Resources Inc. (EUR) TLB1 E+450 03/05/2027
Sundyne US Purchaser (USD) TLB L+425 03/17/2027
Paysafe Group PLC (USD) TL L+350 01/02/2025
Koninklijke Ten Cate NV (EUR) TLB E+350 01/27/2023
Arbor Pharmaceuticals LLC (USD) TLB L+500 07/05/2023
Surgery Partners LLC (USD) TL L+800 08/31/2024
American Greetings Corp. (USD) TLB L+450 04/06/2024
Buzz Merger Sub LTD (USD) TLB L+275 01/29/2027
Allsup’s (USD) TLB L+625 11/18/2024

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

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