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North American Bond Research – November 18, 2020

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

GLOBAL MARKETS WERE UP MUCH OF THE DAY WITH EUROPE CLOSING UP HIGHER. THE US MARKETS TANKED IN THE AFTERNOON AS MORE RESTRICTIONS ARE BEING PUT INTO PLACE TO CURB THE VIRUS SURGE.  10 Year Treasury notes were down 3.1 bps. S&P -1.16%, Dow -1.16%, NASDAQ -0.82%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 56.5 MILLION+ CASES AND 1.35 MILLION DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 11.8 MILLION+ CASES AND 256000+ 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. 4.95% 7/1/2050 +1.9%
  Pacific Gas & Electric Co. 4% 12/1/2046 +0.9%
  Pacific Gas & Electric Co. 4.25% 8/1/2023 +0.3%
  Laredo Petroleum 9.5% 1/15/2025 +11.8%
  Macy’s Retail Hldg Inc. 4.3% 2/15/2043 +0.7%
–   Broadcom LTD 4.25% 4/15/2026 -0.3%
  Ford Motor Co. 8.5% 4/21/2023 -0.1%
  Dish DBS Corp. 5.875% 11/15/2024 -1.0%
  Lennar Corp. 4.75% 11/29/2027 -0.2%
  Delta Airlines 7.375% 1/15/2026 -1.3%
Pacific Gas & Electric Co.   4.95% 7/1/2050
Pacific Gas & Electric Co.   4% 12/1/2046
Pacific Gas & Electric Co.   4.25% 8/1/2023
Laredo Petroleum   9.5% 1/15/2025
Broadcom LTD   4.25% 4/15/2026
PBF Hldg Co. LLC   7.25% 6/15/2025
Macy’s Retail Hldg Inc.   4.3% 2/15/2043
Pacific Gas & Electric Co.   4.25% 3/15/2046
Pacific Gas & Electric Co.   3.3% 12/1/2027
QEP Resources Inc.   5.25% 5/1/2023
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.01% 0.19% 1.17% 1.51% 6.96% 8.62%
Mining 0.16% -0.03% 4.60% 48.98% -6.84% -3.57%
Construction 0.06% -0.06% 0.72% 8.02% 7.67% 9.21%
Manufacturing 0.00% -0.14% 1.71% 3.36% 5.28% 7.52%
Transportion, Communication, Electric/Gas 0.03% -0.06% 1.22% 4.05% 5.42% 7.22%
Wholesale -0.03% -0.07% 0.79% 0.52% 3.49% 5.30%
Retail -0.04% -0.38% 1.29% 4.49% 4.42% 6.56%
Finance, Insurance, Real-Estate 0.00% 0.07% 1.77% 3.62% 4.90% 6.70%
Services -0.03% -0.29% 1.85% 3.63% 4.55% 6.56%
Public Administration 0.20% 1.13% 2.38% 4.30% 10.26% 12.28%
Energy 0.21% 0.14% 4.37% 42.01% -5.57% -1.80%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar
1. Service Properties Trust (USD) 5.5% 12/15/2027 (11/17/2020): 450MM Senior Unsecured Notes, Price at Issuance 100, Yielding 5.5%.

2. NRG Energy Inc. (USD) 3.375% 2/15/2029 Reg S (11/17/2020): 500MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.38%.

3. MGM Growth Properties Operating Partnership LP (USD) 3.875% 2/15/2029 Reg S (11/17/2020): 750MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.88%.

4. NRG Energy Inc. (USD) 3.625% 2/15/2031 Reg S (11/17/2020): 1030MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.63%.

5. MGM Growth Properties Operating Partnership LP (USD) 3.875% 2/15/2029 144A (11/17/2020): 750MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.88%.

6. NRG Energy Inc. (USD) 3.625% 2/15/2031 144A (11/17/2020): 1030MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.63%.

7. NRG Energy Inc. (USD) 3.375% 2/15/2029 144A (11/17/2020): 500MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.38%.

8. Syneos Health, Inc. (USD) 3.625% 1/15/2029 144A (11/18/2020): 600MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.63%.

1. Adtalem: $1.4B credit facilities: $400MM revolver; $1B TLB

2. Amentum Holdings LLC: $980MM TL (B1/B)

3. American Public Education Inc.: $195MM credit facilities: $20MM revolver; $175MM TLB

4. Potters Industries LLC: $465MM credit facilities: $75MM revolver; $390MM TL

5. Smartbear: $565MM credit facilities: $50MM revolver (B2/B-); $385MM TL (B2/B-); $130MM TL

6. Smartbear: $565MM credit facilities: $50MM revolver (B2/B-); $385MM TL (B2/B-); $130MM TL

7. Symplr Software Inc.: $930MM TLs: $680MM TL, $250MM TL

8. Potters Industries LLC: $465MM credit facilities: $75MM revolver; $390MM TL

9. American Public Education Inc.: $195MM credit facilities: $20MM revolver; $175MM TLB

10. Amentum Holdings LLC: $980MM TL (B1/B)

Additional Commentary

NEW ISSUANCE WATCH:   MGM Growth Properties Operating Partnership LP issued 450mm notes.
Top Widening Loans Top Narrowing Loans
Capita PLC (GBP) RC 08/30/2022
NPC International Inc. (USD) TL L+350 04/20/2024
Deutsche Raststaetten Gruppe GmbH (EUR) TL 10/17/2022
Worldwide Express (USD) TL L+400 02/03/2024
Conduent Business Services LLC (USD) TLA L+175 12/07/2022
Quorum Health Corp. (USD) TL EXIT L+825 04/29/2025
Aimbridge Hospitality LLC (USD) TLB L+375 02/01/2026
Team Health Inc. (USD) TLB L+275 02/06/2024
Fortress Merger Sub Inc. (USD) TL L+400 10/21/2023
BioClinica Inc. (USD) TL L+825 10/06/2024

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 14 bps (basis points), as of 11/18/2020
  • Net negative capital flows into high-yield ETFs & mutual funds

 

INVESTMENT GRADE BOND RESEARCH
November 18, 2020
Bond Markets

GLOBAL MARKETS WERE UP MUCH OF THE DAY WITH EUROPE CLOSING UP HIGHER. THE US MARKETS TANKED IN THE AFTERNOON AS MORE RESTRICTIONS ARE BEING PUT INTO PLACE TO CURB THE VIRUS SURGE.  10 Year Treasury notes were down 3.1 bps. S&P -1.16%, Dow -1.16%, NASDAQ -0.82%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 56.5 MILLION+ CASES AND 1.35 MILLION DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 11.8 MILLION+ CASES AND 256000+ 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. 4.875% 5/1/2025 +0.2%
  Boeing Co. 2.75% 2/1/2026 +0.8%
  Verizon Communications Inc. 2.875% 11/20/2050 +0.4%
  Boeing Co. 5.93% 5/1/2060 +1.1%
  Boeing Co. 5.805% 5/1/2050 +0.5%
–   JPMorgan Chase & Co. VAR% 11/19/2031 -0.1%
  Walt Disney Co. 2.65% 1/13/2031 -0.5%
  Enbridge Inc. 3.125% 11/15/2029 -0.4%
  Walt Disney Co. 3.6% 1/13/2051 -0.4%
  Target Corp. 2.25% 4/15/2025 -0.2%
Boeing Co.   4.875% 5/1/2025
Boeing Co.   2.75% 2/1/2026
Verizon Communications Inc.   2.875% 11/20/2050
Boeing Co.   5.93% 5/1/2060
JPMorgan Chase & Co.   VAR% 11/19/2031
Boeing Co.   5.805% 5/1/2050
JPMorgan Chase & Co.   VAR% 11/19/2041
Verizon Communications Inc.   2.65% 11/20/2040
Boeing Co.   3.625% 2/1/2031
CVS Health Corp.   5.05% 3/25/2048
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Mining 0.23% 0.55% 0.92% 0.97% 6.56% 7.96%
Construction 0.11% 0.60% 1.57% 2.62% 7.89% 8.97%
Manufacturing 0.09% 0.31% 0.46% 1.18% 8.30% 9.32%
Transportion, Communication, Electric/Gas 0.14% 0.58% 0.55% 0.60% 9.37% 10.48%
Wholesale 0.01% 0.25% 0.91% 2.22% 8.73% 10.14%
Retail 0.13% 0.37% 0.57% 0.84% 9.67% 10.94%
Finance, Insurance, Real-Estate 0.08% 0.28% 0.54% 1.04% 7.33% 8.24%
Services 0.08% 0.36% 0.29% 1.00% 7.52% 8.18%
Public Administration 0.23% 0.08% 0.05% 0.32% 4.89% 5.05%
Energy 0.20% 0.53% 1.03% 0.30% 5.45% 7.28%
 
Total returns (non-annualized) by rating, market weighted.
New Issues New Issues [Continued]
1. Alliant Energy Finance LLC (USD) 1.4% 3/15/2026 144A (11/17/2020): 200MM Senior Unsecured Notes, Price at Issuance 99.812, Yielding 1.44%.

2. Entergy Louisiana LLC (USD) 0.62% 11/17/2023 (11/17/2020): 1100MM First Lien Notes, Price at Issuance 99.982, Yielding .63%.

3. Banque Fed du Credit Mutuel (USD) 0.65% 2/27/2024 144A (11/17/2020): 1000MM Senior Preferred Security, Price at Issuance 99.859, Yielding .69%.

4. HSBC Holdings PLC (USD) VAR% 5/24/2027 (11/17/2020): 2000MM Senior Unsecured Notes, Price at Issuance 100.

5. British Airways 2020-1 Class A Pass Through Trust (USD) 4.25% 11/15/2032 144A (11/17/2020): 763MM First Lien Notes, Price at Issuance 100, Yielding 4.25%.

6. American Tower Corp. (USD) 0.6% 1/15/2024 (11/17/2020): 500MM Senior Unsecured Notes, Price at Issuance 99.825, Yielding .66%.

7. Volkswagen Group of America Finance LLC (USD) 1.625% 11/24/2027 Reg S (11/17/2020): 500MM Senior Unsecured Notes, Price at Issuance 99.645, Yielding 1.68%.

8. NRG Energy Inc. (USD) 2.45% 12/2/2027 Reg S (11/17/2020): 900MM Secured Notes, Price at Issuance 99.859, Yielding 2.47%.

9. British Airways 2020-1 Class A Pass Through Trust (USD) 8.375% 11/15/2028 144A (11/17/2020): 241MM Second Lien Notes, Price at Issuance 100, Yielding 8.38%.

10. American Tower Corp. (USD) 1.5% 1/31/2028 (11/17/2020): 650MM Senior Unsecured Notes, Price at Issuance 99.971, Yielding 1.5%.

Additional Commentary

NEW ISSUANCE WATCH:    2001 Cat RE LTD sold $210MM in notes.
Top Widening Loans Top Narrowing Loans
Capita PLC (GBP) RC 08/30/2022
NPC International Inc. (USD) TL L+350 04/20/2024
Deutsche Raststaetten Gruppe GmbH (EUR) TL 10/17/2022
Worldwide Express (USD) TL L+400 02/03/2024
Conduent Business Services LLC (USD) TLA L+175 12/07/2022
Quorum Health Corp. (USD) TL EXIT L+825 04/29/2025
Aimbridge Hospitality LLC (USD) TLB L+375 02/01/2026
Team Health Inc. (USD) TLB L+275 02/06/2024
Fortress Merger Sub Inc. (USD) TL L+400 10/21/2023
BioClinica Inc. (USD) TL L+825 10/06/2024

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 14 bps (basis points), as of 11/18/2020
  • Net positive capital flows into high-yield ETFs & mutual funds

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