Navios prices; Mileage Plus/United Airlines, AA, VTR on deck; Spirit AeroSystems falls

By Paul A. Harris and Abigail W. Adams

Portland, Me., June 23 – While only one deal priced on Tuesday, the domestic high-yield primary continued to set the stage for a heavy-volume end to the week with several megadeals on deck.

Navios South American Logistics Inc. priced a $500 million issue of five-year senior secured notes (B3/B) on Tuesday.

Mileage Plus/United Airlines also kicked off its highly anticipated $3 billion offering of seven-year senior secured amortizing notes with a lender conference call.

Wednesday promises to be a busy session with American Airlines, Inc. expected to price its $1.5 billion offering, VTR, Liberty Global's Chilean telecommunications unit, set to price a $1.15 billion two-part offering and Minerals Technologies Inc. on deck with a $400 million offering.

Meanwhile, the secondary space was largely unchanged on Tuesday with volume relatively light and the pipeline of new issuance slowing down.

CommScope, Inc.’s newly priced 7 1/8% senior notes due 2028 (B3/B-) were in focus and trading with a slight premium.

Colt Merger Sub, Inc.’s three tranches backing the acquisition of Caesars Entertainment Corp. by Eldorado Resorts, Inc. remained active and were improving in secondary market activity.

Outside of recent issues, Spirit AeroSystems, Inc.’s capital structure took a hit on Tuesday with its junk bonds trading off 2 to 5 points after the company warned it is in danger of breaching its financial covenants due to a reduced equipment request from Boeing.

Airlines for Wednesday

A steady stream of primary market news on Tuesday featured the anticipated kickoff of the Mileage Plus/United Airlines $3 billion offering of seven-year senior secured amortizing notes.

Initial talk is in the 7% area.

The deal from Mileage Plus Holding, LLC and Mileage Plus Intellectual Property Assets, Ltd. has an expected weighted average life of 4.7 years, and amortizes at a 20% annual rate.

Given that structure it will likely also stir interest among some asset-backed accounts, a trader opined on Tuesday morning.

United is offering its lucrative MileagePlus frequent flier program as collateral, this time, after the Chicago air carrier pulled a $2.25 billion deal in early May, a deal that engendered pushback from investors on price talk and collateral (first planes, later gates and routes).

Also on deck for Wednesday is the previously announced American Airlines $1.5 billion offering of five-year senior secured bullet notes (expected ratings Ba3/B+/BB-).

Initial guidance has the deal coming to yield in the 12% area.

LatAm deals

Meanwhile the Tuesday session saw news circulate the high-yield market on a couple of Latin American credits on the radar screens of some U.S. junk bond accounts.

Navios South American Logistics priced a $500 million issue of five-year senior secured notes (B3/B) at par to yield 10¾%.

The yield printed at the tight end of the 10¾% to 11% yield talk.

Although junk accounts were expected to be in the deal, Navios is expected to trade on the emerging markets desk, a New York-based high-yield bond trader said.

Meanwhile VTR, Liberty Global's Chilean telecommunications unit, set price talk in a $1.15 billion two-part offering of eight-year high-yield notes.

A $600 million amount of VTR Finance NV secured notes (Ba3/B+/BB+) is talked to yield 5¼% to 5½%, inside of early guidance in the high 5% area.

A $550 million tranche of VTR Comunicaciones SpA unsecured notes (B1/B/BB-) is talked to yield 6½% to 6¾%, inside of early guidance in the low 7% area.

The notes are expected to price Wednesday.

Also on deck for Wednesday, Minerals Technologies Inc. is in the market with a $400 million offering of eight-year senior notes.

Initial guidance is in the 5¼% area.

CommScope trades up

CommScope’s newly priced 7 1/8% senior notes due 2028 were trading with a slight premium in high-volume activity in the aftermarket.

The notes traded in a range of par 1/8 to par ¾ throughout Tuesday’s session with the final prints par 3/8 to par 5/8, a source said.

The notes were active with more than $71 million in reported volume during Tuesday’s session.

CommScope priced a $700 million issue of the 7 1/8% notes at par on Monday.

The yield printed in the middle of the 7% to 7¼% yield talk.

Improved

Colt Merger Sub’s three tranches backing the acquisition of Caesars by Eldorado Resorts improved in high-volume activity on Tuesday.

Eldorado Resorts’ 6¼% senior secured notes due 2025 (B1/B) traded up about 5/8 point. They were changing hands on a 101-handle throughout Tuesday’s session and closed the day at 101 3/8, according to a market source.

The notes had about $37 million in reported volume during the session.

Eldorado’s 8 1/8% senior unsecured notes due 2027 (Caa1/CCC+) popped above par after closing the previous session below.

The 8 1/8% notes were changing hands in the par to par ¼ context on Tuesday, a source said.

There was more than $51 million of the bonds on the tape heading into the market close.

Caesars 5¾% senior notes due 2025 (B1/B+) also gained with the notes trading in the 101½ to 101¾ context heading into the market close.

There was about $25 million of the bonds on the tape heading into the market close.

The three tranches priced at par last Friday.

While the secured notes have traded with a healthy premium since breaking for trade, the unsecured tranche struggled.

Spirit AeroSystems down

Spirit AeroSystems’ capital structure took a hit on Tuesday after news broke that Boeing had reduced an order for parts from the company.

Spirit AeroSystems’ 7½% senior notes due 2025 (Ba2/BB-) dropped more than 2 points to close the day at 101¼, according to a market source.

There was more than $20 million on the tape during Tuesday’s session.

The 4.6% senior notes due 2028 (B1/B) dropped more than 5 points in active trading to close Tuesday at 84.

While volume was light, the 3.95% notes due 2023 (B1/B) traded off 4½ points to close the day at 86¼.

The 7½% notes due 2025 were secured and were holding up better than the unsecured portion of the capital structure, a source said.

Spirit AeroSystems is a key supplier to Boeing.

The company announced late Monday that Boeing had directed it to cut its 2020 B737 production plan to 72 shipsets from 125, according to a company news release.

With the reduction, Spirit AeroSystems warned it could breach the financial covenants under its credit agreement in the fourth quarter unless an amendment or waiver is obtained, according to the release.

The company announced it is in discussion with lenders to obtain an amendment.

$197 million Monday inflows

The dedicated high-yield bond funds had $197 million of daily cash inflows on Monday, the most recent session for which data was available at press time, according to a market source.

Actively managed high-yield funds saw $150 million of inflows on the day.

High-yield ETFs saw $47 million of inflows on Monday, the source said.

Indexes mixed

Indexes remained mixed on Tuesday.

The KDP High Yield Daily index dropped 10 points to 65.88 with the yield now 6.12%. The index was down 11 points on Monday.

The ICE BofAML US High Yield index gained 6 bps with the year-to-date return now negative 3.201%.

The index shaved off 4.5 bps on Monday.

The CDX High Yield 30 index was flat on Tuesday, again closing the day at 100.3.

The index gained 5 bps on Monday.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.