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Overview: The week in corporate bonds—the rate hike

Part 4
Overview: The week in corporate bonds—the rate hike (Part 4 of 9)

Overview: High-yield debt deals—consumer and healthcare sectors

Prominent issuers of high-yield debt (HYG) last week

The Men’s Wearhouse (MW) issued $600 million in eight-year senior notes rated B2 and B- at a yield of 7%. The company plans to use the proceeds to finance its $1.8 billion buyout of another discount clothing retailer, Jos. A. Bank Clothiers Inc. (JOSB). On June 18, the companies announced that the buyout was complete.

Other prominent high-yield debt (JNK) issues included:

  • Envision Healthcare’s drive-by issue of $750 million in eight-year senior notes. The medical services provider issued the notes for refinancing purposes. The notes were rated B3 and B. The yield was 5.125% at the time of issue.
  • JBS USA Finance issued ten-year senior notes to the tune of $750 million for refinancing purposes. The Ba3 and BB notes yielded 5.875% at the time of issue.

Part 4Enlarge Graph

Secondary market activity

High-yield (or HY) mutual funds recorded positive inflows for the sixth straight week, totaling c. $277 million for the week ending June 13. However, the rate of inflows appear to be slowing down. Inflows have reduced progressively since the WE May 23, when net inflows into HY mutual funds came in at c. $744 million. Net flows into HY mutual funds are up by $6.1 billion so far in 2014.

Returns on high-yield debt compared to other asset classes

The BofA Merrill Lynch U.S. High Yield Master II Total Return Index increased by 0.23% over the week ending June 13. The index has increased by 5.16% year-to-date (or YTD). Comparatively, the BofA Merrill Lynch U.S. Corporate Master Total Return Index, which includes investment-grade corporate bonds (LQD), increased by 0.09% week-on-week and 5% YTD. YTD returns on the S&P and LSTA U.S. Leveraged Loan 100 Index have come in at 2.25% (as on June 18). For the week ending June 13, the index increased by 0.13%.

In the next section, we’ll analyze the issuance of another form of below investment-grade debt—leveraged loans.

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