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North American Bond Research – September 30, 2020

Posted on September 30, 2020
HIGH YIELD BOND RESEARCH
September 30, 2020
Bond Markets

EUROPEAN MARKETS LOWER AS DOLLAR IS LOWER AGAINST THE EURO. CORONA VIRUS IS SPIKING IN EUROPE. US MARKETS UP AS STIMULUS TALKS ARE STARTING TO SHOW MOVEMENT TO A RESOLUTION. 10 Year Treasury notes were up 3.2 bps. S&P +1.11%, Dow +1.5%, NASDAQ +1.02%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 34 MILLION+ CASES AND 1.02 MILLION DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 7.4 MILLION+ CASES AND 211000+ 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
+   Oasis Petroleum Inc. 6.875% 3/15/2022 (1) +44.7%
  Encana Corp. 6.5% 8/15/2034 +0.3%
  Goodyear Tire & Rubber Co. 5.125% 11/15/2023 +0.6%
  Petrobras Global Finance BV 6.85% 6/5/2115 +0.5%
  Continental Resources Inc. 4.375% 1/15/2028 +0.8%
–   Micron Technology Inc. 4.663% 2/15/2030 -0.4%
  Chubb INA Hldgs Inc. 1.375% 9/15/2030 -0.5%
  Newfield Exploration Co. 5.375% 1/1/2026 -0.1%
  Howmet Aerospace Inc. 6.875% 5/1/2025 -0.0%
  Transocean Inc. 6.8% 3/15/2038 -9.3%
Oasis Petroleum Inc.   6.875% 3/15/2022 (1)
Micron Technology Inc.   4.663% 2/15/2030
Encana Corp.   6.5% 8/15/2034
Goodyear Tire & Rubber Co.   5.125% 11/15/2023
Petrobras Global Finance BV   6.85% 6/5/2115
Chubb INA Hldgs Inc.   1.375% 9/15/2030
Howmet Aerospace Inc.   6.875% 5/1/2025
Continental Resources Inc.   4.375% 1/15/2028
Broadcom LTD   4.7% 4/15/2025
Newfield Exploration Co.   5.375% 1/1/2026
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Agriculture, Forestry, Fishing -0.03% -0.48% -0.81% 3.64% 4.63% 7.25%
Mining -0.04% -1.51% -3.94% 3.01% -12.22% -9.93%
Construction 0.02% -0.12% 0.17% 5.13% 4.73% 7.27%
Manufacturing 0.05% -0.40% -0.46% 4.63% 2.00% 5.68%
Transportion, Communication, Electric/Gas 0.01% -0.55% -0.98% 2.84% 3.22% 5.35%
Wholesale -0.08% -0.45% -0.53% 2.02% 0.74% 3.39%
Retail -0.05% -0.48% -0.07% 6.67% 1.58% 4.29%
Finance, Insurance, Real-Estate 0.03% -0.45% -0.50% 3.81% 0.97% 3.58%
Services 0.04% -0.60% -0.81% 4.45% 3.42% 4.39%
Public Administration 0.02% -0.65% 0.46% 5.36% 6.74% 9.81%
Energy -0.05% -1.74% -4.38% 2.42% -10.97% -8.37%
 
Total returns (non-annualized) by rating, market weighted.

New Issues Forward Calendar
1. Spirit Aerosystems Inc. (USD) 5.5% 1/15/2025 144A (09/29/2020): 500MM First Lien Notes, Price at Issuance 100, Yielding 5.5%.

2. Spirit Aerosystems Inc. (USD) 5.5% 1/15/2025 Reg S (09/29/2020): 500MM First Lien Notes, Price at Issuance 100, Yielding 5.5%.

3. Acadia Healthcare (USD) 5% 4/15/2029 144A (09/29/2020): 475MM Senior Unsecured Notes, Price at Issuance 100, Yielding 5%.

4. Acadia Healthcare (USD) 5% 4/15/2029 Reg S (09/29/2020): 475MM Senior Unsecured Notes, Price at Issuance 100, Yielding 5%.

1. Array Residential Services: $575MM TLB (B1/B+)

2. American Residential Services: $470MM TLB (B1/B)

3. Global Medical Response: $1.5B TL (B1/B)

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

5. Alera Group: $300MM TLB (B2)

6. Wheelabrator Technologies Inc.: $1.3965B TLB

7. American Residential Services: $470MM TLB (B1/B)

8. Alera Group: $300MM TLB (B2)

9. Array Residential Services: $575MM TLB (B1/B+)

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

Additional Commentary

NEW ISSUANCE WATCH:  Acadia Healthcare issued 1000MM of Notes.
Top Widening Loans Top Narrowing Loans
DigiCert Inc. (USD) TL2 10/16/2027
Alorica (USD) TLA 06/30/2021
Oxbow Carbon & Minerals Hldg LLC (USD) TLA L+275 01/04/2022
Alorica (USD) TL L+375 06/30/2022
Tecomet Inc. (USD) TL L+350 05/01/2024
NCL Corp. LTD (USD) TLA L+150 01/02/2024
Samsonite IP Holdings SARL (USD) TLA L+150 04/19/2023
Tacala LLC (USD) TLB L+350 02/05/2027
Mavenir Inc. (USD) TLB L+600 05/08/2025
Quorum Health Corp. (USD) TL EXIT L+825 04/29/2025

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 14 bp (basis points), as of 09/30/2020
  • Net negative capital flows into high-yield ETFs & mutual funds

 

INVESTMENT GRADE BOND RESEARCH
September 30, 2020
Bond Markets

EUROPEAN MARKETS LOWER AS DOLLAR IS LOWER AGAINST THE EURO. CORONA VIRUS IS SPIKING IN EUROPE. US MARKETS UP AS STIMULUS TALKS ARE STARTING TO SHOW MOVEMENT TO A RESOLUTION. 10 Year Treasury notes were up 3.2 bps. S&P +1.11%, Dow +1.5%, NASDAQ +1.02%.
CORONA VIRUS UPDATE: GLOBAL CORONAVIRUS TO DATE HAS HAD 34 MILLION+ CASES AND 1.02 MILLION DEATHS. IN THE UNITED STATES THE CORONAVIRUS COUNT IS 7.4 MILLION+ CASES AND 211000+ 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
+   Deutsche Bank AG VAR% 9/18/2031 +0.2%
  Coca-Cola Co. 1.375% 3/15/2031 +0.2%
  Southern Co. 4% 1/15/2051 +2.2%
  Cigna Corp. 3.4% 9/17/2021 +0.2%
  Wells Fargo & Co. 3.068% 4/30/2041 +0.1%
–   Gilead Sciences Inc. 2.8% 10/1/2050 -0.1%
  Cisco Systems Inc. 1.85% 9/20/2021 -0.0%
  B.A.T. Capital Corp. 2.726% 3/25/2031 -0.4%
  Gilead Sciences Inc. 2.6% 10/1/2040 -0.2%
  Coca-Cola Co. 1% 3/15/2028 -0.4%
Gilead Sciences Inc.   2.8% 10/1/2050
Cisco Systems Inc.   1.85% 9/20/2021
B.A.T. Capital Corp.   2.726% 3/25/2031
Gilead Sciences Inc.   2.6% 10/1/2040
Deutsche Bank AG   VAR% 9/18/2031
Coca-Cola Co.   1% 3/15/2028
Quanta Services Inc.   2.9% 10/1/2030
Wells Fargo & Co.   2.879% 10/30/2030
Oracle Corp.   1.9% 9/15/2021
Coca-Cola Co.   1.375% 3/15/2031
Industry Returns Tracker
Industry Past Day Past Week Past Month Past Quarter YTD Past Year
Mining 0.01% -0.71% -0.44% 2.82% 5.16% 6.14%
Construction -0.21% -0.35% 1.29% 3.35% 5.78% 6.72%
Manufacturing 0.10% -0.36% 0.34% 1.98% 7.06% 8.09%
Transportion, Communication, Electric/Gas 0.05% -0.53% 0.27% 2.11% 8.29% 9.26%
Wholesale 0.04% -0.30% 0.43% 2.53% 6.91% 8.93%
Retail 0.14% -0.37% 0.48% 1.42% 8.23% 9.78%
Finance, Insurance, Real-Estate 0.11% -0.24% 0.16% 1.55% 6.00% 7.26%
Services 0.09% -0.34% 0.36% 1.92% 6.65% 7.56%
Public Administration 0.31% 0.29% 0.28% 0.69% 5.22% 4.97%
Energy 0.02% -0.86% -0.67% 2.04% 3.90% 5.28%
 
Total returns (non-annualized) by rating, market weighted.

New Issues New Issues [Continued]
1. Danaher Corp. (USD) 2.6% 10/1/2050 (09/29/2020): 1000MM Senior Unsecured Notes, Price at Issuance 98.97, Yielding 2.65%.

2. BPCE SA (USD) VAR% 10/6/2026 144A (09/29/2020): 1350MM Senior Non Preferred Notes, Price at Issuance 100.

3. South Plains Financial Inc. (USD) VAR% 9/30/2030 (09/29/2020): 50MM Subordinated Notes, Price at Issuance 100.

4. South Plains Financial Inc. (USD) VAR% 9/30/2030 (09/29/2020): 50MM Subordinated Notes, Price at Issuance 100.

5. BPCE SA (USD) VAR% 10/6/2026 Reg S (09/29/2020): 1350MM Senior Non Preferred Notes, Price at Issuance 100.

6. Telus Corp. (CAD) 2.05% 10/7/2030 (09/29/2020): 500MM Senior Unsecured Notes, Price at Issuance 99.793, Yielding 2.07%.

7. Sun Life Financial Inc. (CAD) VAR% 10/1/2035 (09/29/2020): 750MM Subordinated Notes, Price at Issuance 99.919.

8. Entergy Texas Inc. (USD) 1.75% 3/15/2031 (09/29/2020): 600MM First Lien Notes, Price at Issuance 99.63, Yielding 1.79%.

9. Best Buy Co. Inc. (USD) 1.95% 10/1/2030 (09/29/2020): 650MM Senior Unsecured Notes, Price at Issuance 99.612, Yielding 1.99%.

10. CubeSmart LP (USD) 2% 2/15/2031 (09/29/2020): 450MM Senior Unsecured Notes, Price at Issuance 99.074, Yielding 2.1%.

Additional Commentary

NEW ISSUANCE WATCH:  Danaher Corp. issued 1000MM in notes.
Top Widening Loans Top Narrowing Loans
DigiCert Inc. (USD) TL2 10/16/2027
Alorica (USD) TLA 06/30/2021
Oxbow Carbon & Minerals Hldg LLC (USD) TLA L+275 01/04/2022
Alorica (USD) TL L+375 06/30/2022
Tecomet Inc. (USD) TL L+350 05/01/2024
NCL Corp. LTD (USD) TLA L+150 01/02/2024
Samsonite IP Holdings SARL (USD) TLA L+150 04/19/2023
Tacala LLC (USD) TLB L+350 02/05/2027
Mavenir Inc. (USD) TLB L+600 05/08/2025
Quorum Health Corp. (USD) TL EXIT L+825 04/29/2025

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 14bp (basis points), as of 09/30/2020
  • Net positive capital flows into high-yield ETFs & mutual funds

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