Seaspan eyes junk bonds; Carnival in focus, gains on tender offer; MultiPlan trades down

By Paul A. Harris and Abigail W. Adams

Portland, Me., July 6 – The domestic high-yield primary saw a slow return from the extended holiday weekend with no deals pricing during Tuesday’s session.

However, Hong Kong-based Seaspan Corp. began marketing a $500 million offering of eight-year senior blue transition notes (BB-/BB).

Sources were mixed on the amount of primary market activity to expect over the course of the week.

Meanwhile, it was an equally slow day in the secondary space with trading volume light and the cash bond market largely unchanged.

With activity in new and recent issues slowing down, some outstanding issues returned to focus.

Carnival Corp.’s 11½% first-priority senior secured notes due 2023 were the most actively traded name in the secondary space following a tender announcement for the notes.

MultiPlan Corp.’s 5¾% senior notes due 2028 (B3/B-) gave back their gains from the previous week with the notes trading back down to par.

Tuesday’s primary

High-yield market participants are maintaining measured paces as they return from the extended Independence Day holiday weekend in the United States, sources said on Tuesday.

No dollar deals priced.

However, in the European market, where Monday was a working day, a couple of add-on deals were priced on Tuesday (see related stories in this issue).

There was one deal added to the presently sparse active new issue calendar.

Hong Kong-based Seaspan Corp. is in the market with a $500 million offering of eight-year senior blue transition notes (BB-/BB).

The “blue transition” designation hinges on green bond principles. The containership company intends to use the proceeds from the bonds to reduce the environmental impacts of the shipping industry by making investments in LNG-powered ships, which are a viable option for the low-carbon transition of the shipping sector, according to Sustainalytics, which conferred a second party opinion on deal.

The offer is in the market with initial guidance in the low 6% area, and with some investor propulsion in the form of $250 million of reverse inquiry, a trader said.

Seaspan is essentially a green deal with a seafaring aspect, according to a debt capital markets banker.

Although some accounts that shop these ESG-friendly deals come with agendas specific to funds comprised of cash from investors interested only in deals that can pass environmental and social screens, much of the audience for the green deals has been comprised of funds that might take an interest in offers beyond the green context, the banker said.

Regardless of the specific charters each fund brings to such a deal, investors appear willing to make concessions on rate to companies willing to go out of their way to be ESG-friendly, the source added.

The week ahead

Away from Seaspan, and Tuesday's European action, nothing happened to indicate that the post-Independence Day week would be an active one in the new issue market, sources said.

Tuesday's economic headlines were hardly supportive of a quick post-Fourth of July start to the primary market, a trader remarked, noting that the heavy hand of the Chinese government weighed upon the New York Stock Exchange, where shares of ride-sharing company Didi Chuxing fell 20% on news that new users in China would not be able to download its app while the government conducts a cybersecurity review of the company.

Also on Monday, oil prices marched to a six-year high as OPEC and its oil-producing allies failed to reach an agreement on production quotas.

It could be a quiet week, the trader warned.

However, a syndicate banker countered that with rates as low as they are at present – and almost certainly poised to go higher in the intermediate term – issuers will continue to be keen to term out higher coupon debt and lock in low-cost capital.

A couple of deals can be inferred, based on the day's market news, the banker noted.

Carnival started a tender offer for up to $2.004 billion of its $4 billion outstanding 11½% first priority senior secured notes due 2023

Carnival is also planning a new note offering to reduce interest expense and extend maturities.

And AmWINS is in the market with debt repayment and acquisition funding transactions that will include $890 million of unsecured debt. That debt comes in addition to a $500 million add-on term loan set to launch on a Wednesday lender call.

Carnival in focus

Carnival’s 11½% senior secured notes due 2023 were in focus on Monday with the notes posting gains after the company announced a tender offer.

The 11½% notes rose ¾ point to close the day just shy of 114, according to a market source.

There was $73 million in reported volume.

The notes gained in high-volume activity after Carnival announced a tender offer for up to $2 billion of the 11½% notes.

The early tender payment will be $1,142.50 per $1,000 of the notes, which includes a $30 early tender payment and $1.25 consent payment, Prospect News reported. (See related article in this issue)

The 11½% notes currently have $4 billion outstanding.

Carnival priced the 11½% notes at 99 to yield 11.901% on April 1, 2020 just as the Covid-19 pandemic forced the company to cease operations.

The cruise line operator would go on to tap the market four more times, each time with tighter pricing as the reopening trade gained steam.

Carnival launched its first cruises over the weekend after a more than year-long hiatus.

MultiPlan under pressure

MultiPlan’s 5¾% senior notes due 2028 were under pressure on Monday.

The notes dropped 1½ points in active trading to close the day at par, according to a market source.

There was more than $20 million of the bonds on the tape.

While the 5¾% notes have long struggled below par, they rallied the previous week and traded as high as 101½.

However, the gains were short-lived.

Flat Friday fund flows

The cash flows of the dedicated high-yield bond funds were essentially flat on Friday, according to a market source.

Actively managed funds saw $30 million of inflows on the day.

However actively managed high-yield funds more than canceled out those inflows by sustaining $38 million of outflows on Friday, the source said.

Indexes mixed

Indexes were mixed on Tuesday.

The KDP High Yield Daily index rose 7 points to close the day at 70.32 with the yield now 3.64%.

The index posted a cumulative gain of 23 points on the week last week.

The ICE BofAML US High Yield index rose 15.5 bps with the year-to-date return now 4.039%.

The CDX High Yield 30 index fell 18 bps to close Tuesday at 110.19.

The index posted a cumulative loss of 3 bps on the week last week.

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