Transocean prices drive-by; W&T on deck; Ford gains continue; Carnival at new heights

By Paul A. Harris and Abigail W. Adams

Portland, Me., Jan. 9 – The Jan. 9 week got off to a purposeful start in the high-yield new-issue market, which generated several headlines on Monday.

In drive-by action Transocean Titan Financing Ltd. priced an upsized $525 million issue (from $500 million) of amortizing five-year senior secured notes (B2/B-) at par to yield 8 3/8%.

The yield printed at the tight end of yield talk in the 8½% area. Initial guidance was in the 9% area.

The deal was heard to be eight-times oversubscribed.

Elsewhere W&T Offshore Inc. started a roadshow for a $275 million offering of three-year senior second lien secured notes.

Initial guidance is in the 12% area.

The deal is set to price later in the Jan. 9 week.

Meanwhile in the crossover space Regal Rexnord Corp. priced $4.7 billion of split-rated senior notes (Baa3/BB+/BBB-) in four tranches.

It included $1.1 billion of 6.05% three-year notes that priced at Treasuries plus 215 basis points (talk 245 bps area), $1.25 billion of 6.05% five-year notes that priced at 240 bps (talk 270 bps area), $1.1 billion of 6.3% seven-year notes that priced at 270 bps (talk 300 bps area) and $1.25 billion of 6.4% 10-year notes that priced at 290 bps (talk 320 bps area).

The deal, which priced on the investment-grade desk and will trade on the crossover desk, was a huge blowout, playing to a massive $19 billion of demand across all four tranches, according to a sellside source.

All four tranches, trading at spreads, were eight bps to 15 bps tighter heading into the Monday close, a trader said.

The deal had been playing to interest among high-yield investors, according to market sources.

Meanwhile, it was another strong start to the week for the secondary space with the cash bond market continuing to add after rising more than 2 points in the first week of the year.

The cash bond market added another ½ point with ETF-buying continuing to lift the space.

Ford Motor Credit Co. LLC’s recently priced tranches (Ba2/BB+/BB+) continued their strong upward momentum with the notes climbing to a 102-handle.

Carnival Corp.’s senior notes continued to add in heavy volume with the cruise line operator’s 10 3/8% senior priority notes due 2028 (B2/B+) hitting fresh heights in heavy volume.

Transocean’s latest offering helped lift its outstanding notes which jumped during Monday’s session.

Ford gains

Ford’s recently priced tranches continued to rise in heavy volume on Monday.

The notes each rose another 1 point to trade up to a 102-handle after hitting a 101-handle the previous session.

The 6.95% senior notes due 2026 launched Monday on a 101-handle but continued to climb as the session progressed.

The notes closed the session in the 102 to 102 1/8 context, a source said.

Ford’s 7.35% senior notes due 2030 launched Monday at 101 7/8 and continued to climb as the session progressed.

The notes closed the session in the 102 to 102½ context.

Ford’s recently priced tranches were the first new paper of the year.

The deal played to solid demand during bookbuilding and has traded with a premium since hitting the aftermarket.

Ford priced a $1.3 billion tranche of the 6.95% notes at 99.873 and a $1.15 billion tranche of the 7.35% notes at 99.877 on Jan. 3.

Carnival’s new heights

Carnival’s 10 3/8% senior notes due 2028 hit fresh heights on Monday as ETF-buying continued to lift the secondary space.

The 10 3/8% notes rose another ½ point to break above a 105-handle.

The notes traded as high as 106 3/8 in intraday activity before settling into the 105¾ to 106 context heading into the close.

The level marks a new all-time high for the notes which have been on a strong uptrend since the start of the year.

The 10 3/8% notes have gained almost 3 points since last Tuesday.

Transocean higher

Transocean’s junk bonds jumped higher on Monday after the offshore drilling contractor announced a new debt offering.

Transocean’s 7½% senior notes due 2031 (C/CCC) rose 4½ points to close the day wrapped around 74, according to a market source.

The yield was 12 5/8%.

Transocean’s 8% senior notes due 2027 (C/CCC) rose 2 points to 82 with the yield 13¾%.

The notes were on the rise after Transocean announced and priced an upsized $525 million offering of five-year senior secured notes at par to yield 8.375%.

Proceeds will be used, in part, to fund a debt service reserve account.

The demand for the new offering and the strong execution was a boon to the credit, a source said.

It helped assuage concern over refinancing risks, which are running high in the market.

ETFS see $1.48 billion Friday inflows

High-yield ETFs saw a whopping $1.48 billion of daily cash inflows on Friday, the most recent session for which data was available at press time, according to a market source.

Actively managed high-yield funds were negative on the day, sustaining $194 million of inflows on Friday, the source said.

The combined funds are tracking $2 billion of net inflows for the week that will conclude with Wednesday's close, according to the market source.

Indexes

The KDP High Yield Daily index gained 31 points to close Monday at 53.05 with the yield 6.98%.

The ICE BofAML US High Yield index rose 66.4 bps on Monday with the year-to-date return now 2.942%.

The CDX High Yield 30 index fell 6 bps to close Monday at 101.9.

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