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North American Bond Research – November 19, 2020

Posted on November 19, 2020
HIGH YIELD BOND RESEARCH
November 19, 2020
Bond Markets

US MARKETS WERE UP AS UNEMPLOYMENT NUMBERS (STILL WAY TOO HIGH!) ARE SLOWLY COMING DOWN AND REAL ESTATE SALES FOR OCTOBER WERE UP A RECORD 4.3%. 10 Year Treasury notes were down 2.8 bps. S&P +0.32%, Dow +0.07%, NASDAQ +0.80%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 57 MILLION+ CASES AND 1.36 MILLION DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 12 MILLION+ CASES AND 258000+ 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 +0.7%
  Pacific Gas & Electric Co. 4.55% 7/1/2030 +0.9%
  General Motors Co. 5.2% 4/1/2045 +0.7%
  Pacific Gas & Electric Co. 3.3% 12/1/2027 +0.6%
  PBF Logistics LP 6.875% 5/15/2023 +2.6%
–   L Brands Inc. 6.875% 11/1/2035 -0.1%
  Chubb INA Hldgs Inc. 1.375% 9/15/2030 -0.1%
  EQT Corp. 3.9% 10/1/2027 -0.4%
  Service Properties Trust 5.5% 12/15/2027 -0.0%
  Carrizo Oil & Gas Inc. 6.25% 4/15/2023 -1.8%
Pacific Gas & Electric Co.   4.95% 7/1/2050
Pacific Gas & Electric Co.   4.55% 7/1/2030
General Motors Co.   5.2% 4/1/2045
Pacific Gas & Electric Co.   3.3% 12/1/2027
PBF Logistics LP   6.875% 5/15/2023
L Brands Inc.   6.875% 11/1/2035
Yum! Brands Inc.   3.625% 3/15/2031
Chubb INA Hldgs Inc.   1.375% 9/15/2030
EQT Corp.   3.9% 10/1/2027
Laredo Petroleum   9.5% 1/15/2025
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.15% 0.32% 1.09% 1.60% 6.63% 8.22%
Mining 0.34% 0.44% 5.20% 49.33% -6.21% -2.94%
Construction 0.20% 0.26% 1.09% 8.24% 8.18% 9.77%
Manufacturing 0.08% 0.02% 1.83% 3.73% 5.71% 7.67%
Transportion, Communication, Electric/Gas 0.06% 0.04% 1.34% 4.43% 5.72% 7.58%
Wholesale 0.08% -0.09% 0.28% -0.09% 2.46% 4.52%
Retail 0.06% -0.23% 1.44% 4.46% 5.05% 7.50%
Finance, Insurance, Real-Estate 0.06% 0.32% 2.34% 3.96% 4.74% 6.54%
Services 0.02% -0.14% 2.20% 3.72% 5.19% 6.69%
Public Administration -1.15% -0.05% 1.18% 2.99% 8.99% 11.07%
Energy 0.33% 0.53% 4.96% 43.11% -4.54% -0.74%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar
1. Bausch Health Companies Inc. (USD) 5% 2/15/2029 Reg S (11/18/2020): 1000MM Senior Unsecured Notes, Price at Issuance 100, Yielding 5%.

2. Bausch Health Companies Inc. (USD) 5% 2/15/2029 144A (11/18/2020): 1000MM Senior Unsecured Notes, Price at Issuance 100, Yielding 5%.

3. Bausch Health Companies Inc. (USD) 5.25% 2/15/2031 Reg S (11/18/2020): 1000MM Senior Unsecured Notes, Price at Issuance 100, Yielding 5.25%.

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

5. Bausch Health Companies Inc. (USD) 5.25% 2/15/2031 144A (11/18/2020): 1000MM Senior Unsecured Notes, Price at Issuance 100, Yielding 5.25%.

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

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. Railworks: $280MM credit facilities: $230MM TLB; $50MM revolver

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

7. Smartbear: $565MM credit facilities: $50MM revolver (B2/B-); $385MM TL (B2/B-); $130MM 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:    Bausch Health Companies Inc. issued 1000mm notes.
Top Widening Loans Top Narrowing Loans
Unifrax Corp. (USD) TL2 L+850 12/14/2026
NPC International Inc. (USD) TL L+350 04/20/2024
Compass IV LTD (EUR) TL E+800 05/09/2026
EG Group (EUR) TL E+775 03/23/2026
Alorica (USD) TLA 06/30/2021
CSM Bakery (USD) TL L+1000 02/04/2022
Hurtigruten Group AS (EUR) TLC E+800 06/16/2023
Greenway Health LLC (USD) TL L+375 02/16/2024
Juice Plus+ (USD) TL L+550 11/20/2025
NEP NCP Holdco Inc. (EUR) TLB E+350 10/20/2025

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 16 bps (basis points), as of 11/19/2020
  • Net negative capital flows into high-yield ETFs & mutual funds

 

INVESTMENT GRADE BOND RESEARCH
November 19, 2020
Bond Markets

US MARKETS WERE UP AS UNEMPLOYMENT NUMBERS (STILL WAY TOO HIGH!) ARE SLOWLY COMING DOWN AND REAL ESTATE SALES FOR OCTOBER WERE UP A RECORD 4.3%. 10 Year Treasury notes were down 2.8 bps. S&P +0.32%, Dow +0.07%, NASDAQ +0.80%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 57 MILLION+ CASES AND 1.36 MILLION DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 12 MILLION+ CASES AND 258000+ 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
+   Verizon Communications Inc. 2.875% 11/20/2050 +0.7%
  Bristol-Myers Squibb Co. 2.55% 11/13/2050 +1.0%
  Suzano Austria GmbH 7% 3/16/2047 Reg S +0.9%
  Waste Management Inc. 1.5% 3/15/2031 +0.1%
  Amgen Inc. 3.15% 2/21/2040 +0.5%
–   Toyota Motor Credit Corp. 1.15% 5/26/2022 -0.0%
  Reinsurance Group of America 6.75% 12/15/2065 -0.3%
  Verizon Communications Inc. 2.65% 11/20/2040 -0.2%
  Bank of America Corp. VAR% 6/19/2026 -0.0%
  Suzano Austria GmbH 3.75% 1/15/2031 -0.2%
Verizon Communications Inc.   2.875% 11/20/2050
Bristol-Myers Squibb Co.   2.55% 11/13/2050
Suzano Austria GmbH   7% 3/16/2047 Reg S
Waste Management Inc.   1.5% 3/15/2031
Amgen Inc.   3.15% 2/21/2040
HSBC Hldg PLC   VAR% 5/24/2027
Comcast Corp.   4.95% 10/15/2058
Verizon Communications Inc.   3% 11/20/2060
Toyota Motor Credit Corp.   1.15% 5/26/2022
CVS Health Corp.   4.25% 4/1/2050
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Mining 0.13% 0.75% 1.10% 1.01% 6.73% 8.00%
Construction 0.15% 0.89% 1.85% 3.31% 7.61% 8.62%
Manufacturing 0.08% 0.49% 0.65% 1.26% 8.54% 9.46%
Transportion, Communication, Electric/Gas 0.13% 0.82% 0.74% 0.90% 9.68% 10.65%
Wholesale 0.06% 0.44% 1.03% 2.26% 8.87% 10.08%
Retail 0.12% 0.63% 0.69% 1.35% 9.70% 10.71%
Finance, Insurance, Real-Estate 0.02% 0.36% 0.60% 1.08% 7.30% 8.09%
Services 0.06% 0.56% 0.51% 1.19% 7.62% 8.17%
Public Administration 0.01% 0.10% -0.05% 0.07% 5.01% 5.11%
Energy 0.20% 0.79% 1.24% 0.90% 5.76% 7.40%
 
Total returns (non-annualized) by rating, market weighted.
New Issues New Issues [Continued]
1. Veon Hldg BV (USD) 3.375% 11/25/2027 144A (11/18/2020): 1250MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.38%.

2. JAB Holdings BV (USD) 2.2% 11/23/2030 144A (11/18/2020): 500MM Senior Unsecured Notes, Price at Issuance 99.688, Yielding 2.23%.

3. Stryker Corp. (USD) 0.6% 12/1/2023 (11/18/2020): 600MM Senior Unsecured Notes, Price at Issuance 99.913, Yielding .63%.

4. TJX Cos. Inc. (USD) 1.6% 5/15/2031 (11/18/2020): 500MM Senior Unsecured Notes, Price at Issuance 99.876, Yielding 1.61%.

5. TJX Cos. Inc. (USD) 1.15% 5/15/2028 (11/18/2020): 500MM Senior Unsecured Notes, Price at Issuance 99.808, Yielding 1.18%.

6. American Electric Power Co. Inc. (USD) 1% 11/1/2025 (11/18/2020): 450MM Senior Unsecured Notes, Price at Issuance 99.769, Yielding 1.05%.

7. American Electric Power Co. Inc. (USD) 0.75% 11/1/2023 (11/18/2020): 450MM Senior Unsecured Notes, Price at Issuance 99.916, Yielding .78%.

8. American Electric Power Co. Inc. (USD) FLT% 11/1/2023 (11/18/2020): 600MM Senior Unsecured Notes, Price at Issuance 100.

9. Trustmark Corp. (USD) VAR% 12/1/2030 (11/18/2020): 125MM Subordinated Notes, Price at Issuance 100.

10. FEL Energy VI Sarl (USD) 5.75% 12/1/2040 144A (11/18/2020): 953MM Secured Notes, Price at Issuance 100, Yielding 5.75%.

Additional Commentary

NEW ISSUANCE WATCH:    Veon Hldg BV sold $1250MM in notes.
Top Widening Loans Top Narrowing Loans
Unifrax Corp. (USD) TL2 L+850 12/14/2026
NPC International Inc. (USD) TL L+350 04/20/2024
Compass IV LTD (EUR) TL E+800 05/09/2026
EG Group (EUR) TL E+775 03/23/2026
Alorica (USD) TLA 06/30/2021
CSM Bakery (USD) TL L+1000 02/04/2022
Hurtigruten Group AS (EUR) TLC E+800 06/16/2023
Greenway Health LLC (USD) TL L+375 02/16/2024
Juice Plus+ (USD) TL L+550 11/20/2025
NEP NCP Holdco Inc. (EUR) TLB E+350 10/20/2025

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 16 bps (basis points), as of 11/19/2020
  • Net positive capital flows into high-yield ETFs & mutual funds

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