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North American Bond Research – October 21, 2020

Posted on October 21, 2020
HIGH YIELD BOND RESEARCH
October 21, 2020
Bond Markets

GLOBAL MARKETS AGAIN LOWER AS COVID CASES ARE SURGING AS THE SECOND COVID-19 WAVE WASHES OVER THE GLOBE.  STIMULUS TALKS ARE ALSO BOGGED DOWN AS SENATE REPUBLICANS WARN TRUMP NOT TO “GO BIG”. 10 Year Treasury notes were up 1.9 bps. S&P -0.22%, Dow -0.35%, NASDAQ -0.28%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 41.4 MILLION+ CASES AND 1.13 MILLION DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 8.56 MILLION+ CASES AND 227000+ 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
+   T-Mobile USA Inc. 3.875% 4/15/2030 144A +0.0%
  Diamondback Energy Inc. 3.5% 12/1/2029 +1.2%
  WPX Energy Inc. 4.5% 1/15/2030 +0.2%
  Centene Corp. 4.25% 12/15/2027 +2.2%
  Petrobras Global Finance BV 6.85% 6/5/2115 +0.2%
–   Ally Financial Inc. 3.875% 5/21/2024 -0.4%
  Millicom Intl. Cellular SA 4.5% 4/27/2031 Reg S -0.1%
  Broadcom LTD 4.75% 4/15/2029 -0.2%
  Teva Pharmaceutical Industries LTD 3.15% 10/1/2026 -0.4%
  Pacific Gas & Electric Co. 4.95% 7/1/2050 -0.2%
T-Mobile USA Inc.   3.875% 4/15/2030 144A
Ally Financial Inc.   3.875% 5/21/2024
Millicom Intl. Cellular SA   4.5% 4/27/2031 Reg S
Diamondback Energy Inc.   3.5% 12/1/2029
Broadcom LTD   4.75% 4/15/2029
Teva Pharmaceutical Industries LTD   3.15% 10/1/2026
Pacific Gas & Electric Co.   4.95% 7/1/2050
WPX Energy Inc.   4.5% 1/15/2030
Vale Overseas LTD   6.25% 8/10/2026
WPX Energy Inc.   5.25% 10/25/2027
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.05% -0.09% 0.20% 2.32% 5.70% 7.52%
Mining 0.06% -0.42% 118.53% 23.71% -10.72% -7.05%
Construction 0.04% 0.03% 1.42% 5.41% 6.49% 7.92%
Manufacturing -0.03% -0.08% 0.70% 3.57% 3.47% 6.92%
Transportion, Communication, Electric/Gas -0.03% -0.13% 0.15% 1.99% 4.01% 5.90%
Wholesale -0.02% -0.18% 0.21% 1.87% 1.79% 4.17%
Retail 0.02% -0.14% 0.74% 5.80% 3.00% 5.13%
Finance, Insurance, Real-Estate 0.01% -0.03% 0.57% 4.54% 2.75% 5.01%
Services -0.01% -0.09% -0.12% 4.16% 3.07% 4.99%
Public Administration 1.50% 0.04% 0.46% 5.56% 8.36% 10.69%
Energy 0.05% -0.11% 105.82% 21.65% -8.83% -5.04%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar
1. Dave & Buster’s Inc. (USD) 7.625% 11/1/2025 144A (10/20/2020): 550MM Secured Notes, Price at Issuance 100, Yielding 7.63%.

2. NEW Red Finance, Inc. (USD) 3.5% 2/15/2029 144A (10/20/2020): 750MM First Lien Notes, Price at Issuance 100, Yielding 3.5%.

3. Ingevity Corp. (USD) 3.875% 11/1/2028 144A (10/20/2020): 550MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.88%.

4. Dave & Buster’s Inc. (USD) 7.625% 11/1/2025 Reg S (10/20/2020): 550MM Secured Notes, Price at Issuance 100, Yielding 7.63%.

5. NEW Red Finance, Inc. (USD) 3.5% 2/15/2029 Reg S (10/20/2020): 750MM First Lien Notes, Price at Issuance 100, Yielding 3.5%.

6. Ingevity Corp. (USD) 3.875% 11/1/2028 Reg S (10/20/2020): 550MM Senior Unsecured Notes, Price at Issuance 100, Yielding 3.88%.

1. Barracuda Networks: $571MM Term loans: $206MM TL; $365 TL

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

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

4. Highline Aftermarket Acquisition LLC: $735MM TL (B2/B)

5. J.D. Power: $100MM incremental TL

6. Trugreen LP: $1.425MM TLs: $1.15B TL (B1/B); $275MM (Caa1/CCC+)

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

8. Adevinta: $500MM TLB (BB-/BB+)

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

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

Additional Commentary

NEW ISSUANCE WATCH:   Dave & Buster’s Inc. Inc issued 550MM
Top Widening Loans Top Narrowing Loans
Mattress Firm (USD) TL EXIT 11/21/2022
Unifrax Corp. (USD) TL2 L+850 12/14/2026
Compass IV LTD (EUR) TL E+800 05/09/2026
Samsonite IP Holdings SARL (USD) TLA L+150 04/19/2023
Archroma Global Services (USD) TLB2 L+425 07/11/2024
EG Group (USD) TL L+800 03/23/2026
Vertafore Inc. (USD) TL2 L+725 07/02/2026
Cvent Inc. (USD) TL L+375 11/02/2024
Tacala LLC (USD) TLB L+750 02/05/2028
Rover (USD) TLB2 L+350 11/01/2024

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 12 bps (basis points), as of 10/21/2020
  • Net negative capital flows into high-yield ETFs & mutual funds

 

INVESTMENT GRADE BOND RESEARCH
October 21, 2020
Bond Markets

GLOBAL MARKETS AGAIN LOWER AS COVID CASES ARE SURGING AS THE SECOND COVID-19 WAVE WASHES OVER THE GLOBE.  STIMULUS TALKS ARE ALSO BOGGED DOWN AS SENATE REPUBLICANS WARN TRUMP NOT TO “GO BIG”. 10 Year Treasury notes were up 1.9 bps. S&P -0.22%, Dow -0.35%, NASDAQ -0.28%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 41.4 MILLION+ CASES AND 1.13 MILLION DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 8.56 MILLION+ CASES AND 227000+ 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
+   Textron Inc. FLT% 11/10/2020 +0.0%
  Takeda Pharmaceutical Co. LTD 2.05% 3/31/2030 +0.0%
  Bank of America Corp. 3.004% 12/20/2023 +0.0%
  General Electric Co. 4.35% 5/1/2050 +0.4%
  Bank of America Corp. VAR% 10/24/2051 +0.1%
–   Bank of America Corp. VAR% 10/24/2031 -0.1%
  GlaxoSmithKline Capital PLC 0.534% 10/1/2023 -0.1%
  Apple Inc. 2.65% 5/11/2050 -0.1%
  SMITH & NEPHEW PLC 2.032% 10/14/2030 -0.2%
  Alphabet Inc. 2.05% 8/15/2050 -1.1%
Bank of America Corp.   VAR% 10/24/2031
GlaxoSmithKline Capital PLC   0.534% 10/1/2023
Apple Inc.   2.65% 5/11/2050
Textron Inc.   FLT% 11/10/2020
SMITH & NEPHEW PLC   2.032% 10/14/2030
Takeda Pharmaceutical Co. LTD   2.05% 3/31/2030
Alphabet Inc.   2.05% 8/15/2050
Bank of America Corp.   3.004% 12/20/2023
Lowe’s Companies Inc.   3% 10/15/2050
General Electric Co.   4.35% 5/1/2050
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Mining 0.03% 0.09% -0.50% 0.55% 5.45% 6.75%
Construction -0.08% -0.04% -0.19% 2.02% 6.04% 7.01%
Manufacturing 0.01% -0.11% -0.27% 0.38% 7.38% 8.46%
Transportion, Communication, Electric/Gas -0.04% -0.15% -0.68% -0.42% 8.22% 9.34%
Wholesale -0.04% 0.10% 0.17% 1.74% 7.62% 9.50%
Retail 0.01% -0.13% -0.28% -0.46% 8.66% 10.07%
Finance, Insurance, Real-Estate 0.04% -0.04% -0.11% 0.80% 6.37% 7.48%
Services -0.01% -0.16% -0.32% 0.36% 6.85% 7.63%
Public Administration 0.23% -0.00% -0.01% 0.47% 5.02% 5.01%
Energy -0.01% 0.05% -0.77% 0.13% 4.24% 5.95%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. Bank of Montreal (USD) 1.4% 10/21/2030 (10/20/2020): 50MM Senior Unsecured Notes, Price at Issuance 100, Yielding 1.4%.

2. Banner Health (USD) 1.897% 1/1/2031 (10/20/2020): 301MM Unsecured Notes, Price at Issuance 100, Yielding 1.9%.

3. Banner Health (USD) 2.913% 1/1/2051 (10/20/2020): 301MM Unsecured Notes, Price at Issuance 100, Yielding 2.91%.

4. Southern Illinois Healthcare Enterprises Inc. (USD) 3.97% 5/15/2050 (10/20/2020): 100MM Unsecured Notes, Price at Issuance 100, Yielding 3.97%.

5. Central Pacific Financial Corp. (USD) VAR% 11/1/2030 (10/20/2020): 55MM Subordinated Notes, Price at Issuance 100.

6. National Bank of Canada (USD) 0% 11/3/2060 (10/21/2020): 50MM Senior Unsecured Notes, Price at Issuance 100, Yielding 0%.

Additional Commentary

NEW ISSUANCE WATCH:   Bank of Montreal  Incissued 50MM in notes.
Top Widening Loans Top Narrowing Loans
Mattress Firm (USD) TL EXIT 11/21/2022
Unifrax Corp. (USD) TL2 L+850 12/14/2026
Compass IV LTD (EUR) TL E+800 05/09/2026
Samsonite IP Holdings SARL (USD) TLA L+150 04/19/2023
Archroma Global Services (USD) TLB2 L+425 07/11/2024
EG Group (USD) TL L+800 03/23/2026
Vertafore Inc. (USD) TL2 L+725 07/02/2026
Cvent Inc. (USD) TL L+375 11/02/2024
Tacala LLC (USD) TLB L+750 02/05/2028
Rover (USD) TLB2 L+350 11/01/2024

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 12 bps (basis points), as of 10/20/2020
  • Net positive capital flows into high-yield ETFs & mutual funds

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