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North American Bond Research – October 20, 2020

Posted on October 20, 2020
HIGH YIELD BOND RESEARCH
October 20, 2020
Bond Markets

GLOBAL MARKETS MIXED TO UP AS OPTIMISM OF SOME SORT OF STIMULUS DEAL IS APPROACHING NEAR. SOME VACCINE AND THERAPEUTICS HAVE BEEN TERMINATED BUT THE ONES THAT REMAIN ARE PROGRESSING. 10 Year Treasury notes were up 3.6 bps. S&P +0.47%, Dow +0.40%, NASDAQ +0.33%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 41 MILLION+ CASES AND 1.13 MILLION DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 8.5 MILLION+ CASES AND 226000+ 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
+   Diamondback Energy Inc. 3.5% 12/1/2029 +0.9%
  Occidental Petroleum Corp. 3.4% 4/15/2026 +0.8%
  Vale Overseas LTD 6.25% 8/10/2026 +0.0%
  Centene Corp. 3% 10/15/2030 +0.1%
  T-Mobile USA Inc. 3.5% 4/15/2025 144A +0.1%
–   T-Mobile USA Inc. 3.75% 4/15/2027 144A -0.2%
  T-Mobile USA Inc. 3.875% 4/15/2030 144A -0.1%
  Broadcom LTD 4.75% 4/15/2029 -0.3%
  Broadcom LTD 4.11% 9/15/2028 -0.0%
  Pacific Gas & Electric Co. 4.3% 3/15/2045 -0.6%
T-Mobile USA Inc.   3.75% 4/15/2027 144A
T-Mobile USA Inc.   3.875% 4/15/2030 144A
Diamondback Energy Inc.   3.5% 12/1/2029
Occidental Petroleum Corp.   3.4% 4/15/2026
Millicom Intl. Cellular SA   4.5% 4/27/2031 Reg S
Broadcom LTD   4.75% 4/15/2029
Broadcom LTD   4.11% 9/15/2028
Vale Overseas LTD   6.25% 8/10/2026
Centene Corp.   3% 10/15/2030
T-Mobile USA Inc.   3.5% 4/15/2025 144A
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing 0.11% 0.07% 0.33% 2.63% 5.89% 7.63%
Mining 0.03% -0.23% 124.62% 65.94% -8.45% -4.83%
Construction 0.01% 0.17% 1.37% 5.79% 6.49% 7.78%
Manufacturing 0.01% 0.18% 0.70% 4.00% 3.56% 6.90%
Transportion, Communication, Electric/Gas -0.03% 0.10% 0.22% 2.46% 3.95% 5.70%
Wholesale 0.03% -0.00% 0.31% 2.12% 1.73% 4.03%
Retail 0.05% 0.11% 0.73% 6.24% 2.97% 5.12%
Finance, Insurance, Real-Estate -0.01% 0.23% 0.56% 4.41% 2.40% 4.77%
Services -0.07% 0.08% -0.13% 4.49% 3.04% 4.98%
Public Administration -1.82% -2.07% -1.93% 3.73% 5.77% 8.08%
Energy 0.06% 0.20% 107.97% 57.33% -7.59% -3.87%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar
1. Starwood Property Trust Inc. (USD) 5.5% 11/1/2023 144A (10/19/2020): 300MM Senior Unsecured Notes, Price at Issuance 100, Yielding 5.5%.

2. Chobani LLC (USD) 4.625% 11/15/2028 144A (10/19/2020): 425MM Secured Notes, Price at Issuance 100, Yielding 4.63%.

3. Millicom Intl. Cellular SA (USD) 4.5% 4/27/2031 144A (10/19/2020): 500MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.5%.

4. Starwood Property Trust Inc. (USD) 5.5% 11/1/2023 Reg S (10/19/2020): 300MM Senior Unsecured Notes, Price at Issuance 100, Yielding 5.5%.

5. Chobani LLC (USD) 4.625% 11/15/2028 Reg S (10/19/2020): 425MM Secured Notes, Price at Issuance 100, Yielding 4.63%.

6. Millicom Intl. Cellular SA (USD) 4.5% 4/27/2031 Reg S (10/19/2020): 500MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.5%.

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

2. J.D. Power: $100MM incremental TL

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

4. CNT Holdings I Corp.: $1.405B credit facilities: $110MM revolver (B2/B); $980MM TLB (B2/B); $315MM TL (Caa2/CCC+)

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

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

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

8. Adevinta: $500MM TLB (BB-/BB+)

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

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

Additional Commentary

NEW ISSUANCE WATCH:   Chobani LLC Inc issued 425MM
Top Widening Loans Top Narrowing Loans
Compass IV LTD (EUR) TL E+800 05/09/2026
EG Group (USD) TL L+800 03/23/2026
Areas SA (EUR) TLB1 E+475 07/01/2026
Promotora de Informaciones SA (EUR) TL3 E+400 12/31/2022
Emerald Performance Materials (USD) TL L+400 08/12/2025
Tacala LLC (USD) TLB L+350 02/05/2027
Akorn Inc. (USD) TL L+1250 04/16/2021
Casper Bidco (EUR) TL E+850 07/30/2027
Kirk Beauty Zero GmbH (EUR) RC E+375 12/26/2021
Distributed Power Inc. (USD) TLB L+325 11/02/2025

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 10/20/2020
  • Net negative capital flows into high-yield ETFs & mutual funds
INVESTMENT GRADE BOND RESEARCH
October 20, 2020
Bond Markets

GLOBAL MARKETS MIXED TO UP AS OPTIMISM OF SOME SORT OF STIMULUS DEAL IS APPROACHING NEAR. SOME VACCINE AND THERAPUTICS HAVE BEEN TERMINATED BUT THE ONES THAT REMAIN ARE PROGRESSING. 10 Year Treasury notes were up 3.6 bps. S&P +0.47%, Dow +0.40%, NASDAQ +0.33%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 41 MILLION+ CASES AND 1.13 MILLION DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 8.5 MILLION+ CASES AND 226000+ 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
+   Bank of America Corp. VAR% 10/24/2026 +0.1%
  General Electric Co. 4.35% 5/1/2050 +0.3%
  Cimarex Energy Co. 4.375% 3/15/2029 +1.0%
  United Airlines Inc. 3.45% 6/1/2029 +8.1%
  Bank of America Corp. VAR% 10/24/2024 +0.1%
–   Bank of America Corp. VAR% 10/24/2051 -0.3%
  Bank of America Corp. VAR% 10/24/2031 -0.1%
  Integris Baptist Medical Center Inc. 3.875% 8/15/2050 -1.4%
  Philip Morris Intl Inc. 4.125% 5/17/2021 -0.0%
  Boeing Co. 5.805% 5/1/2050 -0.2%
Bank of America Corp.   VAR% 10/24/2026
Bank of America Corp.   VAR% 10/24/2051
General Electric Co.   4.35% 5/1/2050
Bank of America Corp.   VAR% 10/24/2031
Cimarex Energy Co.   4.375% 3/15/2029
United Airlines Inc.   3.45% 6/1/2029
Bank of America Corp.   VAR% 10/24/2024
Integris Baptist Medical Center Inc.   3.875% 8/15/2050
Philip Morris Intl Inc.   4.125% 5/17/2021
Boeing Co.   5.805% 5/1/2050
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Mining -0.22% 0.27% -0.60% 1.34% 5.21% 6.46%
Construction -0.12% 0.33% -0.08% 1.79% 5.56% 6.71%
Manufacturing -0.21% 0.11% -0.24% 0.60% 7.40% 8.41%
Transportion, Communication, Electric/Gas -0.34% 0.21% -0.65% -0.18% 8.27% 9.42%
Wholesale -0.15% 0.21% 0.15% 1.81% 7.54% 9.34%
Retail -0.26% 0.14% -0.28% -0.31% 8.61% 10.13%
Finance, Insurance, Real-Estate -0.16% 0.06% -0.12% 0.85% 6.26% 7.37%
Services -0.19% 0.05% -0.29% 0.59% 6.92% 7.68%
Public Administration -0.23% -0.18% -0.23% -0.08% 4.63% 4.68%
Energy -0.21% 0.35% -0.81% 0.68% 4.11% 5.84%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. Ross Stores Inc. (USD) 1.875% 4/15/2031 (10/19/2020): 500MM Senior Unsecured Notes, Price at Issuance 99.631, Yielding 1.91%.

2. Ross Stores Inc. (USD) 0.875% 4/15/2026 (10/19/2020): 500MM Senior Unsecured Notes, Price at Issuance 99.436, Yielding .98%.

3. Penske Truck Leasing (USD) 1.2% 11/15/2025 144A (10/19/2020): 750MM Senior Unsecured Notes, Price at Issuance 99.839, Yielding 1.23%.

4. American Honda Finance Corp. (USD) 0.4% 10/21/2022 (10/19/2020): 550MM Senior Unsecured Notes, Price at Issuance 99.97, Yielding .42%.

5. American Honda Finance Corp. (USD) FLT% 1/21/2022 (10/19/2020): 450MM Senior Unsecured Notes, Price at Issuance 100.

6. WMG Acquisition Corp. (USD) 3% 2/15/2031 (10/19/2020): 250MM Secured Notes, Price at Issuance 97.501, Yielding 3.29%.

7. T-Mobile USA Inc. (USD) 3.6% 11/15/2060 144A (10/19/2020): 1000MM Secured Notes, Price at Issuance 99.745, Yielding 3.61%.

8. Canadian Imperial Bank of Commerce (USD) 0.95% 10/23/2025 (10/19/2020): 500MM Senior Unsecured Notes, Price at Issuance 99.961, Yielding .96%.

9. T-Mobile USA Inc. (USD) 2.25% 11/15/2031 144A (10/19/2020): 1000MM Secured Notes, Price at Issuance 99.99, Yielding 2.25%.

10. Herbie RE LTD. (USD) FLT% 1/28/2025 (10/19/2020): 100MM Unsecured Notes, Price at Issuance 100.

Additional Commentary

NEW ISSUANCE WATCH:  Ross Stores Incissued 500MM in notes.
Top Widening Loans Top Narrowing Loans
Compass IV LTD (EUR) TL E+800 05/09/2026
EG Group (USD) TL L+800 03/23/2026
Areas SA (EUR) TLB1 E+475 07/01/2026
Promotora de Informaciones SA (EUR) TL3 E+400 12/31/2022
Emerald Performance Materials (USD) TL L+400 08/12/2025
Tacala LLC (USD) TLB L+350 02/05/2027
Akorn Inc. (USD) TL L+1250 04/16/2021
Casper Bidco (EUR) TL E+850 07/30/2027
Kirk Beauty Zero GmbH (EUR) RC E+375 12/26/2021
Distributed Power Inc. (USD) TLB L+325 11/02/2025

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 10/20/2020
  • Net positive capital flows into high-yield ETFs & mutual funds


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