Morning Commentary: Ally, American Airlines, NuStar bring drive-bys; Transocean active

By Paul A. Harris

Portland, Ore., May 16 – A line formed at the high-yield drive-through window Thursday morning as a trio of issuers – each one bringing a bullet deal – expects to issue notes before the close.

Ally Financial Inc. is in the market with a benchmark offering of three-year senior holding company notes (expected ratings BB+/BB+).

Early guidance is in the 4¼% area.

Active bookrunner RBC Capital Markets LLC will bill and deliver. Barclays, Citigroup Global Markets Inc. and J.P. Morgan Securities LLC are also active bookrunners.

NuStar Logistics, LP plans to price a $500 million offering of seven-year senior notes (expected ratings Ba2/BB-/BB).

Initial guidance has that deal coming to yield in the 6¼% area.

Joint active bookrunner RBC will bill and deliver. Mizuho Securities USA Inc., MUFG and SunTrust Robinson Humphrey Inc. are also joint active bookrunners.

And American Airlines Group Inc. plans to price a $350 million offering of three-year senior notes (B1/BB-) in a Thursday drive-by.

Early guidance is 5% to 5¼%.

JPMorgan is piloting the transaction.

The Fort Worth-based air carrier plans to use the proceeds to fund contributions to its pension fund.

Looking ahead, Berry Global Group, Inc. was scheduled to shop a $3 billion two-part offering of senior secured notes on a conference call with investors late Thursday morning.

The megadeal is set to price on Friday.

The offering includes $2 billion of first priority notes (expected ratings Ba2/BBB-) with initial guidance in the low 5% area and $1 billion of second priority notes (expected ratings B2/BB) with initial guidance in the low 6% area.

Meanwhile it has been radio silence on the Ausdrill Finance Pty Ltd. $500 million offering of seven-year senior notes (Ba2/BB), according to market sources, some of whom have undertaken the removal of the offer from active calendars.

The debt refinancing deal was announced at the beginning of May.

New RIGs trade up

Junk opened the Thursday session on solid footing, sources said.

The CDX HY32 index of credit default swaps was trading at 106.543 bid, 106.632 offered, up 0.338 basis point, a hedge fund manager said.

The new Transocean Ltd. (RIG) 5 3/8% senior secured notes due May 2023 (B1/B+) were trading in the secondary market at a premium to their new issue price, trading in the context of par ½, according to a New York-based bond trader.

The hedge fund manager had the new RIG 5 3/8% paper at par ½ bid, 101 offered.

The upsized $525 million issue (from $500 million) priced at 99.5 on Thursday.

The new Charter Communications, Inc. (CCO Holding LLC and CCO Holdings Capital Corp.) 5 3/8% senior notes due June 2029 (B1/BB/BB+) were trading Thursday morning at par bid, par 3/8 offered, the hedge fund manager said.

Those notes were 99 7/8 bid, par 3/8 offered on Wednesday, the source added.

The downsized $750 million issue (from $1 billion) priced at par on May 9.

Wednesday outflows

The daily cash flows of the dedicated high-yield bond funds were negative on Wednesday, a trader said.

High-yield ETFs sustained $19 million of outflows on the day.

Actively managed high-yield funds saw $165 million of outflows on Wednesday, after sustaining a whopping $1.65 billion of daily outflows on Tuesday, the trader said.

As the market awaits a Thursday afternoon report on the weekly cash flows of the junk funds from Lipper US Fund Flows, the combined funds are tracking $2.3 billion of net outflows over that period, the trader said.

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