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North American Bond Research – September 17, 2020

Posted on September 17, 2020
HIGH YIELD BOND RESEARCH
September 17, 2020
Bond Markets
GLOBAL MARKETS DOWN AS 860K FILE FOR UNEMPLOYMENT. THE FED’S UNCERTAINTY RATTLED MARKETS AS TO WHERE TO GO NEXT. INVESTORS ARE ALSO WAITING TO SEE WHAT CONGRESS WILL PASS.  10 Year Treasury notes were down 0.3 bps. S&P -0.84%, Dow -0.47%, NASDAQ -1.27%.

CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 30.3 MILLION+ CASES AND 950000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 6.9 MILLION+ CASES AND 203000+ 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
+   General Motors Co. 5.2% 4/1/2045 +0.8%
  Delta Airlines 7.375% 1/15/2026 +0.5%
  Oasis Petroleum Inc. 6.875% 3/15/2022 (1) +0.5%
  CBL & Associates LP 4.6% 10/15/2024 +1.0%
  Occidental Petroleum Corp. 3.5% 8/15/2029 +0.3%
–   Ford Motor Co. 4.75% 1/15/2043 -1.0%
  Southwestern Energy Co. 7.5% 4/1/2026 -0.7%
  Sprint Nextel Corp. 7.875% 9/15/2023 -0.2%
  Embraer Netherlands B.V. 5.05% 6/15/2025 -0.5%
  Plains All American Pipeline LP VAR% PERP -3.1%
General Motors Co.   5.2% 4/1/2045
Delta Airlines   7.375% 1/15/2026
Oasis Petroleum Inc.   6.875% 3/15/2022 (1)
Ford Motor Co.   4.75% 1/15/2043
CBL & Associates LP   4.6% 10/15/2024
Occidental Petroleum Corp.   3.5% 8/15/2029
Southwestern Energy Co.   7.5% 4/1/2026
Latam Finance Limited   6.875% 4/11/2024 Reg S
Sprint Nextel Corp.   7.875% 9/15/2023
Embraer Netherlands B.V.   5.05% 6/15/2025
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.10% -0.20% -0.01% 3.99% 5.55% 8.92%
Mining 0.29% -1.11% 2.06% 6.09% -6.38% -7.18%
Construction 0.07% 0.42% 5.22% 5.59% 5.15% 7.95%
Manufacturing 0.01% 0.14% 0.39% 3.85% 2.83% 6.95%
Transportion, Communication, Electric/Gas -0.03% -0.50% 0.33% 2.68% 3.96% 6.40%
Wholesale -0.02% 0.00% -1.02% 1.73% 1.28% 4.26%
Retail 0.04% 0.44% 1.78% 5.61% 2.61% 5.56%
Finance, Insurance, Real-Estate 0.01% 0.30% 0.90% 4.37% 2.26% 5.19%
Services -0.00% 0.28% 1.03% 3.76% 4.23% 5.65%
Public Administration 0.02% 0.86% 2.26% 7.28% 8.11% 11.26%
Energy 0.22% -1.14% -0.01% 3.68% -8.83% -5.68%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar
1. L Brands Inc. (USD) 6.625% 10/1/2030 144A (09/16/2020): 1000MM Senior Unsecured Notes, Price at Issuance 100, Yielding 6.63%.

2. Energizer Hldg Inc. (USD) 4.375% 3/31/2029 144A (09/16/2020): 800MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.38%.

3. Energizer Hldg Inc. (USD) 4.375% 3/31/2029 Reg S (09/16/2020): 800MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.38%.

4. L Brands Inc. (USD) 6.625% 10/1/2030 Reg S (09/16/2020): 1000MM Senior Unsecured Notes, Price at Issuance 100, Yielding 6.63%.

5. KBR Inc. (USD) 4.75% 9/30/2028 144A (09/16/2020): 250MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.75%.

6. KBR Inc. (USD) 4.75% 9/30/2028 Reg S (09/16/2020): 250MM Senior Unsecured Notes, Price at Issuance 100, Yielding 4.75%.

7. NEW Red Finance, Inc. (USD) 4% 10/15/2030 144A (09/16/2020): 1400MM Second Lien Notes, Price at Issuance 100, Yielding 4%.

8. NEW Red Finance, Inc. (USD) 4% 10/15/2030 Reg S (09/16/2020): 1400MM Second Lien Notes, Price at Issuance 100, Yielding 4%.

9. NFP Corp. (USD) 6.875% 8/15/2028 (09/16/2020): 225MM Senior Unsecured Notes, Price at Issuance 104, Yielding 6.23%.

 1. Michaels Cos Inc.: $1.62B TLB (B+)

2. Omnitracs LLC: $355MM TLs: $160MM TL (B2/B-); $195MM TL (Caa2/CCC)

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

4. Allegro Microsystems Inc.: $325MM TL

5. MAG Aerospace: $290.7MM TL (B3/B)

6. CJ Foods Inc.: $285MM TLB

7. ECI Software Solutions: $990MM TLs: $710MM TL (B2/B-); $280MM TL (Caa2/CCC)

8. EFS Cogen Holdings LLC: $1.05B credit facilities: $100MM revolver (Ba2/BB-); $950MM TLB (Ba3/BB-)

9. Amwins Group Inc.: $100MM TLB (Ba3/B+)

10. Michael Cos Inc.: $1.62B TLB (B+)
Additional Commentary
NEW ISSUANCE WATCH:  L Brands Inc.  issued 1000MM in notes
Top Widening Loans Top Narrowing Loans
NCL Corp. LTD (USD) TLA L+150 01/02/2024
Aimbridge Hospitality LLC (USD) TLB L+375 02/01/2026
CPM Holdings Inc. (USD) TL2 L+825 11/16/2026
Autokiniton US Hldg, Inc. (USD) TLB L+575 05/22/2025
Cast & Crew Payroll LLC (USD) TLB L+375 02/07/2026		 Samsonite IP Holdings SARL (USD) TLA L+150 04/19/2023
SSH Group Hldg Inc. (USD) TL2 L+825 07/30/2026
Acetow (USD) TLB L+550 04/21/2023
Tacala LLC (USD) TLB L+350 02/05/2027
United PF Holdings LLC (USD) TL L+400 01/06/2027

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 15 bp (basis points), as of 09/17/2020
  • Net negative capital flows into high-yield ETFs & mutual funds

 

INVESTMENT GRADE BOND RESEARCH
September 17, 2020
Bond Markets
GLOBAL MARKETS DOWN AS 860K FILE FOR UNEMPLOYMENT. THE FED’S UNCERTAINTY RATTLED MARKETS AS TO WHERE TO GO NEXT. INVESTORS ARE ALSO WAITING TO SEE WHAT CONGRESS WILL PASS.  10 Year Treasury notes were down .3 bps. S&P -0.84%, Dow -0.47%, NASDAQ -1.27%.

CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 30.3 MILLION+ CASES AND 950000+ DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 6.9 MILLION+ CASES AND 203000+ 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
+   GE Capital Intl. Funding Co. 4.418% 11/15/2035 +1.4%
  Fluor Corp. 3.5% 12/15/2024 +3.4%
  General Electric Co. 4.35% 5/1/2050 +2.4%
  Microsoft Corp. 2.525% 6/1/2050 +0.7%
  Deutsche Bank AG VAR% 9/18/2031 +0.2%
–   Coca-Cola Co. 1.375% 3/15/2031 -0.6%
  Boeing Co. 5.805% 5/1/2050 -0.0%
  Royal Bank of Canada 1.6% 4/17/2023 -0.0%
  Oracle Corp. 1.9% 9/15/2021 -0.0%
  American Honda Finance Corp. 1% 9/10/2025 -0.1%
GE Capital Intl. Funding Co.   4.418% 11/15/2035
Coca-Cola Co.   1.375% 3/15/2031
Boeing Co.   5.805% 5/1/2050
Fluor Corp.   3.5% 12/15/2024
Royal Bank of Canada   1.6% 4/17/2023
General Electric Co.   4.35% 5/1/2050
Microsoft Corp.   2.525% 6/1/2050
Deutsche Bank AG   VAR% 9/18/2031
Boeing Co.   5.04% 5/1/2027
General Electric Co.   4.25% 5/1/2040
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Mining 0.00% 0.00% -0.09% 3.42% 5.63% 7.76%
Construction 0.05% 0.39% 0.17% 3.52% 5.89% 8.19%
Manufacturing -0.00% 0.23% 0.17% 2.76% 7.38% 9.66%
Transportion, Communication, Electric/Gas 0.00% 0.18% -0.29% 3.03% 8.69% 11.34%
Wholesale -0.07% 0.25% 0.33% 2.82% 7.00% 10.31%
Retail 0.03% 0.32% -0.06% 2.12% 8.43% 11.40%
Finance, Insurance, Real-Estate -0.01% 0.11% 0.08% 2.25% 6.24% 8.39%
Services -0.02% 0.28% 0.30% 2.90% 6.97% 9.14%
Public Administration -0.04% -0.02% 0.10% 0.55% 5.04% 5.42%
Energy 0.02% -0.02% -0.71% 2.75% 4.72% 7.20%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. Sienna Senior Living Inc. (CAD) 3.45% 2/27/2026 (09/16/2020): 175MM Senior Unsecured Notes, Price at Issuance 99.988, Yielding 3.45%.

2. VW Credit Inc. (CAD) 1.2% 9/25/2023 (09/16/2020): 500MM Senior Unsecured Notes, Price at Issuance 99.973, Yielding 1.21%.

3. VW Credit Inc. (CAD) 1.5% 9/23/2025 (09/16/2020): 500MM Senior Unsecured Notes, Price at Issuance 99.789, Yielding 1.54%.

4. Equitable Bank (CAD) 1.774% 9/21/2023 (09/16/2020): 200MM Senior Unsecured Notes, Price at Issuance 100, Yielding 1.77%.

5. Ally Financial Inc. (USD) 1.45% 10/2/2023 (09/16/2020): 750MM Senior Unsecured Notes, Price at Issuance 99.374, Yielding 1.66%.

6. OWL Rock Technology Finance Corp. (USD) 4.75% 12/15/2025 (09/16/2020): 400MM Senior Unsecured Notes, Price at Issuance 99.336, Yielding 4.89%.

7. Pacific Life Global Fdg MTN (USD) 0.5% 9/23/2023 144A (09/16/2020): 600MM Second Lien Notes, Price at Issuance 99.875, Yielding .54%.

8. Pacific Life Global Fdg MTN (USD) 0.5% 9/23/2023 Reg S (09/16/2020): 600MM Second Lien Notes, Price at Issuance 99.875, Yielding .54%.

9. Liberty Utilities Co (USD) 2.05% 9/15/2030 144A (09/16/2020): 600MM Senior Unsecured Notes, Price at Issuance 99.74, Yielding 2.08%.

10. Barclays PLC (USD) 3.564% 9/23/2035 (09/16/2020): 1000MM Subordinated Notes, Price at Issuance 100, Yielding 3.56%.
Additional Commentary
NEW ISSUANCE WATCH: VW Credit Inc. issued 1000MM in notes.
Top Widening Loans Top Narrowing Loans
NCL Corp. LTD (USD) TLA L+150 01/02/2024
Aimbridge Hospitality LLC (USD) TLB L+375 02/01/2026
CPM Holdings Inc. (USD) TL2 L+825 11/16/2026
Autokiniton US Hldg, Inc. (USD) TLB L+575 05/22/2025
Cast & Crew Payroll LLC (USD) TLB L+375 02/07/2026		 Samsonite IP Holdings SARL (USD) TLA L+150 04/19/2023
SSH Group Hldg Inc. (USD) TL2 L+825 07/30/2026
Acetow (USD) TLB L+550 04/21/2023
Tacala LLC (USD) TLB L+350 02/05/2027
United PF Holdings LLC (USD) TL L+400 01/06/2027

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 15 bp (basis points), as of 09/17/2020
  • Net positive capital flows into high-yield ETFs & mutual funds

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