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North American Bond Research – October 16, 2020

Posted on October 16, 2020
HIGH YIELD BOND RESEARCH
October 16, 2020
Bond Markets

CONSUMER SPENDING JUMPED 1.9% SENDING MARKETS HIGHER. RETAIL SALES JUMPS POINT TO REALLY GOOD THIRD QUARTER RESULTS AS THE ECONOMY REBOUNDS. 10 Year Treasury notes were up .9 bps. S&P +0.01%, Dow +0.39%, NASDAQ -0.36%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 39.5 MILLION+ CASES AND 1.1 MILLION DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 8.3 MILLION+ CASES AND 224000+ 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
+   CIT Group Inc. VAR% PERP +20.6%
  Vale Overseas LTD 3.75% 7/8/2030 +0.1%
  Pacific Gas & Electric Co. 4.75% 2/15/2044 +0.8%
  Ford Motor Co. 9% 4/22/2025 +2.0%
  General Motors Co. 6.25% 10/2/2043 +0.5%
–   Aircastle LTD 5.5% 2/15/2022 -0.2%
  Aircastle LTD 4.125% 5/1/2024 -1.3%
  Petrobras Global Finance BV 8.75% 5/23/2026 -0.6%
  EnLink Midstream Partners LP 6% PERP -0.5%
  Gulfport Energy Corp. 6.625% 5/1/2023 -0.4%
CIT Group Inc.   VAR% PERP
Aircastle LTD   5.5% 2/15/2022
Vale Overseas LTD   3.75% 7/8/2030
Pacific Gas & Electric Co.   4.75% 2/15/2044
TreeHouse Foods Inc.   4% 9/1/2028
Ford Motor Co.   9% 4/22/2025
General Motors Co.   6.25% 10/2/2043
Service Corp. Intl.   5.125% 6/1/2029
Citigroup Inc.   6.125% PERP
Aircastle LTD   4.125% 5/1/2024
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.16% 0.11% 0.21% 3.17% 5.64% 7.63%
Mining -0.37% -0.00% 71.34% 184.39% -10.22% -6.44%
Construction -0.07% 0.39% 1.52% 6.05% 6.37% 7.94%
Manufacturing -0.21% 0.27% 0.98% 4.30% 3.27% 7.10%
Transportion, Communication, Electric/Gas -0.17% 0.24% 0.10% 2.68% 4.12% 5.94%
Wholesale -0.21% 0.09% 0.47% 3.25% 3.16% 5.65%
Retail -0.26% 0.21% 0.82% 6.65% 2.97% 5.35%
Finance, Insurance, Real-Estate -0.16% 0.22% 0.56% 5.03% 2.69% 5.39%
Services -0.17% 0.14% -0.07% 4.80% 3.07% 5.22%
Public Administration -0.07% 0.40% 0.37% 6.57% 8.46% 11.00%
Energy -0.31% 0.40% 62.66% 162.36% -8.78% -5.04%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar
1. XHR LP (USD) 6.375% 8/15/2025 (10/15/2020): 200MM Secured Notes, Price at Issuance 100.25, Yielding 6.31%.

2. Canpack SA and Eastern PA Land Investment Holding LLC (USD) 3.125% 11/1/2025 144A (10/15/2020): 400MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.13%.

3. Shift4 Payments LLC (USD) 4.625% 11/1/2026 144A (10/15/2020): 450MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.63%.

4. Shift4 Payments LLC (USD) 4.625% 11/1/2026 Reg S (10/15/2020): 450MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.63%.

5. United Natural Foods Inc. (USD) 6.75% 10/15/2028 Reg S (10/15/2020): 500MM Senior Unsecured Notes, Price at Issuance 100, Yielding 6.75%.

1. Adevinta: $500MM TLB (BB-/BB+)

2. E2 Open: $600MM credit facilities: $75MM revolver; $525MM TLB

3. Weber-Stephen Products LLC: $1.5B credit facilities: $300MM revolver; $1.2MM TLB

4. Virtusa Corp.: $725MM credit facilities: $125MM revolver; $600MM TL

5. Veregy: $342.5MM credit facilities: $42.5MM revolver; $250MM TL; $50MM DD TL

6. Vander-Bend Manufacturing Inc.: $197.5MM credit facilities: $20MM revolver; $177.5MM TLB

7. Quirch Foods LLC: $675MM credit facilities: $475MM TLB; $200MM revolver

8. Mega Broadband Investments Holdings LLC: $725MM credit facilities: $75MM revolver; $650MM TLB

9. Adevinta: $500MM TLB (BB-/BB+)

10. Virtusa Corp.: $725MM credit facilities: $125MM revolver; $600MM TL

Additional Commentary

NEW ISSUANCE WATCH:   New Home Co Inc issued 250MM
Top Widening Loans Top Narrowing Loans
Oxbow Carbon & Minerals Hldg LLC (USD) TLA L+275 01/04/2022
Samsonite IP Holdings SARL (USD) TLA L+150 04/19/2023
Unifrax Corp. (USD) TL2 L+850 12/14/2026
Archroma Global Services (USD) TLB2 L+425 07/11/2024
CPV Shore LLC (USD) TLB L+375 12/27/2025
Rayonier AM Products Inc. (USD) TLA L+375 11/17/2022
EG Group (USD) TL L+800 03/23/2026
Ahlsell AB (EUR) TL E+825 03/01/2027
Concordia International (EUR) TL E+525 09/06/2024
Corialis (GBP) TL L+850 03/31/2025

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 12 bps (basis points), as of 10/16/2020
  • Net negative capital flows into high-yield ETFs & mutual funds

 

INVESTMENT GRADE BOND RESEARCH
October 16, 2020
Bond Markets

CONSUMER SPENDING JUMPED 1.9% SENDING MARKETS HIGHER. RETAIL SALES JUMPS POINT TO REALLY GOOD THIRD QUARTER RESULTS AS THE ECONOMY REBOUNDS. 10 Year Treasury notes were up .9 bps. S&P +0.01%, Dow +0.39%, NASDAQ -0.36%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 39.5 MILLION+ CASES AND 1.1 MILLION DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 8.3 MILLION+ CASES AND 224000+ 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
+   Lowe’s Companies Inc. 3% 10/15/2050 +0.3%
  Boeing Co. 5.805% 5/1/2050 +2.1%
  Caterpillar Inc. 2.6% 4/9/2030 +0.1%
  Boeing Co. 5.93% 5/1/2060 +2.1%
  Lowe’s Companies Inc. 1.7% 10/15/2030 +0.1%
–   Bank of America Corp. 1.898% 7/23/2031 -0.2%
  CVS Health Corp. 5.05% 3/25/2048 -0.3%
  Mitsubishi UFJ Financial Group Inc. 2.95% 3/1/2021 -0.0%
  JPMorgan Chase & Co. VAR% 6/1/2024 -0.1%
  Morgan Stanley 2.75% 5/19/2022 -0.0%
Bank of America Corp.   1.898% 7/23/2031
Lowe’s Companies Inc.   3% 10/15/2050
Boeing Co.   5.805% 5/1/2050
CVS Health Corp.   5.05% 3/25/2048
Caterpillar Inc.   2.6% 4/9/2030
Boeing Co.   5.93% 5/1/2060
Lowe’s Companies Inc.   1.7% 10/15/2030
Thomson Reuters Corp.   3.35% 5/15/2026
Franklin Resources Inc.   1.6% 10/30/2030
GE Capital Intl. Funding Co.   4.418% 11/15/2035
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Mining -0.18% 0.57% -0.19% 1.83% 5.63% 6.90%
Construction -0.11% 0.36% 1.00% 2.42% 5.88% 7.02%
Manufacturing -0.16% 0.33% 0.03% 0.99% 7.64% 8.71%
Transportion, Communication, Electric/Gas -0.15% 0.54% -0.19% 0.47% 8.59% 9.71%
Wholesale -0.10% 0.45% 0.31% 2.35% 7.78% 10.03%
Retail -0.15% 0.36% 0.11% 0.28% 8.70% 10.36%
Finance, Insurance, Real-Estate -0.10% 0.24% 0.06% 1.08% 6.49% 7.78%
Services -0.16% 0.25% -0.09% 0.88% 7.33% 8.23%
Public Administration 0.01% 0.07% -0.01% 0.20% 5.10% 4.91%
Energy -0.15% 0.61% -0.45% 1.22% 4.45% 6.13%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. W.K. Kellogg Foundation Trust (USD) 2.443% 10/1/2050 144A (10/15/2020): 300MM Unsecured Notes, Price at Issuance 100, Yielding 2.44%.

2. United Natural Foods Inc. (USD) 6.75% 10/15/2028 144A (10/15/2020): 500MM Senior Unsecured Notes.

3. W.K. Kellogg Foundation Trust (USD) 2.443% 10/1/2050 Reg S (10/15/2020): 300MM Unsecured Notes, Price at Issuance 100, Yielding 2.44%.

Additional Commentary

NEW ISSUANCE WATCH:  W.K. Kellogg Foundation Trust issued 300MM in notes.
Top Widening Loans Top Narrowing Loans
Oxbow Carbon & Minerals Hldg LLC (USD) TLA L+275 01/04/2022
Samsonite IP Holdings SARL (USD) TLA L+150 04/19/2023
Unifrax Corp. (USD) TL2 L+850 12/14/2026
Archroma Global Services (USD) TLB2 L+425 07/11/2024
CPV Shore LLC (USD) TLB L+375 12/27/2025
Rayonier AM Products Inc. (USD) TLA L+375 11/17/2022
EG Group (USD) TL L+800 03/23/2026
Ahlsell AB (EUR) TL E+825 03/01/2027
Concordia International (EUR) TL E+525 09/06/2024
Corialis (GBP) TL L+850 03/31/2025

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 12 bps (basis points), as of 10/16/2020
  • Net positive capital flows into high-yield ETFs & mutual funds

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