Eight high-yield issuers price $4.67 billion; Royal Caribbean gets junk execution

By Paul A. Harris and Abigail W. Adams

Portland, Me., May 13 – The domestic high-yield primary market saw a torrent of deals on Wednesday with eight issuers pricing a combined $4.67 billion in junk-rated deals.

In addition, another investment grade-company underwent a high-yield execution.

Live Nation Entertainment, Inc. priced an upsized $1.2 billion issue. Uber Technologies Inc. priced an upsized $900 million issue.

Boyd Gaming Corp. priced an upsized $600 million issue. Goodyear Tire & Rubber Co. priced a $600 million issue.

Outfront Media Capital LLC and Outfront Media Capital Corp. priced a $400 million issue. Power Solutions priced a $500 million issue.

HUB International Ltd. priced a $350 million add-on to its 7% senior notes due May 01, 2026 (Caa2/CCC+).

And Boyne USA, Inc. priced an upsized $120 million add-on to its 7¼% senior secured second-lien notes due May 1, 2025 (B1/B).

Royal Caribbean Cruises Ltd. priced a $3.32 billion two-tranche offering of investment-grade rated senior secured notes (Baa3/BBB-) that came in a high-yield execution on Wednesday.

The deal activity will continue on Thursday with BMC Software expected to price its $1.35 billion equivalent three-tranche offering.

Meanwhile, the influx of new paper came on a weak day for the secondary space as the sell-off in equities, which was sparked by Federal Reserve Board chairman Jerome Powell’s comments about the uncertainty surrounding economic recovery, spilled into the high-yield market.

The market, in general, was down 1 to 2 points, a source said.

It was one of the softest days for the secondary space since the Federal Reserve expanded the scope of its primary and secondary market corporate credit facilities to include fallen angels on April 9.

Ironically, it came the day after the Federal Reserve announced it would begin purchasing exchange-traded funds.

New paper remained the focus of trading activity. However, several of the deals to price during Tuesday’s session dropped below their issue prices.

Radian Group Inc.’s 6 5/8% senior notes due 2025 (Ba1/BB+/BBB-) sank several points below par during Wednesday’s session.

Springleaf Finance Corp.’s 8 7/8% senior notes due 2025 (Ba3/BB-/BB+) and Match Group, Inc.’s 4 5/8% senior notes due 2028 (Ba3/BB) were also lagging their issue prices.

However, Viking Cruises Ltd.’s 13% senior notes due 2025 (B1/B-) skyrocketed in the aftermarket with the notes several points above their issue price.

Wednesday’s drive-bys

Issuers unleashed a torrent of deals in the high-yield new issue market on Wednesday.

All issuers came through the drive-by window.

Live Nation Entertainment priced an upsized $1.2 billion issue of seven-year senior secured notes (Ba2/BB-) at par to yield 6½%.

The issue size increased from $800 million.

The yield printed in the middle of yield talk in the 6½% area. Initial talk had the notes coming to yield 6¾% to 7%.

A $2 billion order book had built by midday Wednesday, according to a trader who added that as pricing was pushed tighter a number of investors pulled out of the deal.

Uber Technologies priced an upsized $900 million issue of five-year senior notes (B3/CCC+) at par to yield 7½%.

The issue size increased from $750 million.

The yield printed in the middle of yield talk in the 7½% area, and tight to the 7½% to 7¾% initial guidance.

Boyd Gaming priced an upsized $600 million issue of five-year senior notes (Caa1/B-) at par to yield 8 5/8%.

The issue size increased from $500 million.

The yield printed at the tight end of the 8 5/8% to 8 7/8% yield talk, and inside of initial guidance in the 9% area.

Goodyear Tire & Rubber priced a $600 million issue of five-year senior notes (B2/B+/BB-) at par to yield 9½%.

The yield printed in the middle of yield talk in the 9½% area, and in line with early guidance in the mid-9% area.

Outfront Media priced a $400 million issue of five-year senior notes (B2/B+) at par to yield 6¼%.

The yield printed in the middle of yield talk in the 6¼% area, and in line with early guidance in the low-to-mid 6% area.

Power Solutions priced a $500 million issue of five-year senior secured notes (B/B+) at par to yield 6¾%.

The yield printed at the tight end of the 6¾% to 7% yield talk, and tight to early guidance in the high 6% to 7% area.

HUB International priced a $350 million add-on to its 7% senior notes due May 01, 2026 (Caa2/CCC+) at 98.76 to yield 7.259% in a Wednesday drive-by, according to market sources.

The issue price came on top of price talk.

And Boyne USA priced an upsized $120 million add-on to its 7¼% senior secured second-lien notes due May 1, 2025 (B1/B) at 101.5 to yield 6.679%.

The issue size increased from $100 million.

The issuer price came at the rich end of the 101 to 101.5 initial price talk.

Royal Caribbean as junk

Royal Caribbean Cruises priced $3.32 billion of investment-grade rated senior secured notes (Baa3/BBB-) in a two-part trade that came in a high-yield execution on Wednesday.

The deal featured a $1 billion 10 7/8% three-year bullet tranche that priced at 98 to yield 11.673%. The coupon came tight to coupon talk in the 11% area. The issue price came on top of price talk. The yield came tight to yield talk in the 11.8% area. Initial indications called for an 11¼% coupon at around 98 to yield in the 12% area.

Royal Caribbean also priced a $2.32 billion amount of 11½% five-year non-call-two notes at 97 to yield 12.314%. The coupon and price came on top of talk, while the yield came in line with yield talk in the 12.3% area. Early indications called for an 11¾% coupon at around 97 to yield in the 12½% area.

A trader, noting that the Viking Cruises Ltd. 13% senior secured notes due May 2025 (B1/B-), which priced Tuesday at 97, traded as much as four points higher on Wednesday, wondered aloud why people weren't cashing in the Vikings in order to buy the new Royal Caribbean paper.

It's much better rated, and it's the only secured paper in the Royal Caribbean stack said the source (the company does have bank loans outstanding, according to a market source).

Both companies put up ships as collateral, the trader noted.

However, the Viking ships tend to be narrow keel, shallow-draft ships designed for rivers and fjords, whereas the Royal Caribbean ships are blue water vessels capable of calling at any port in the world, rendering them easier to dispose of in a liquidation scenario.

BMC Software for Thursday

BMC Software set price talk for an upsized $1.35 billion equivalent amount of senior secured notes in three tranches, which it plans to price Thursday.

It includes an upsized $600 million tranche of first-lien notes due Oct. 2, 2025 talked at 7 1/8% to 7¼%. The tranche is upsized from $500 million.

The deal also includes €370 million of first-lien notes due Oct. 2, 2025 talked to yield 6½% to 6 5/8%.

There is, as well, a $350 million tranche of senior secured second-lien notes due March 1, 2026, which will become callable after Sept. 1, 2021 talked to yield 9 1/8% to 9¼%.

The overall amount across all three tranches increased from $1.25 billion equivalent.

Radian Group tanks

While Radian Group’s 6 5/8% senior notes due 2025 were in demand during bookbuilding with the offering upsizing and pricing tight, the notes tanked in the aftermarket.

The 6 5/8% notes closed Wednesday at 97½ bid, 98 offered, according to a market source.

The notes from the mortgage insurance company are unsecured and the company will be negatively impacted by a prolonged economic downturn due to the coronavirus, a source said.

Radian priced an upsized $525 million issue of the 6 5/8% notes at par in a Tuesday drive-by.

The issue size increased from $400 million.

The yield printed at the tight end of yield talk in the 6¾% area.

Springleaf lags

Springleaf’s 8 7/8% senior notes due 2025 were also lagging their issue price on Wednesday.

The notes closed the day at 99¼ bid, 99¾ offered, a source said.

The consumer finance company priced an upsized $600 million issue of the 8 7/8% notes at par in a Wednesday drive-by.

The issue size increased from $400 million.

The yield printed tight to yield talk in the 9% area.

Match flat

Match Group’s 4 5/8% senior notes due 2028 fell largely flat in the aftermarket.

The notes were, at times, lagging their issue price.

They closed the day at 99¾ bid, par offered, a source said.

Match priced a $500 million issue of the 4 5/8% notes at par in a Wednesday drive-by.

The notes priced tight to talk for a yield of 4 5/8% to 4¾%. Initial talk was in the 5% area.

Viking Cruises skyrockets

Viking Cruises’ 13% senior notes due 2025 skyrocketed in the aftermarket with the notes several points above their discounted offer price.

The 13% notes closed Wednesday at par ¾ bid, 101 offered, a market source said.

The success of the notes in the aftermarket was attributed to their yield.

Viking priced an upsized $675 million issue of 13% notes at 97 to yield 13.851%.

The issue size increased from $600 million.

The coupon came on top of coupon talk. The issue price came at the rich end of the 96 to 97 price talk.

$959 million Tuesday inflows

The dedicated high-yield bond funds had $959 million of net inflows on Tuesday, the most recent session for which data was available at press time, according to a market source.

Actively managed high-yield funds had $570 million of inflows on the day.

High-yield ETFs had $389 million of inflows on Tuesday, the source said.

With only Wednesday's daily fund flows number remaining to go in the tally the combined funds are tracking $3.55 billion of net inflows for the week to Wednesday's close, according to the market source.

Indexes in the red

Indexes were in the red on Wednesday.

The KDP High Yield Daily index dropped 19 basis points on Wednesday to close the day at 62.92 with the yield now 7.43%.

The index gained 19 bps on Tuesday after dropping 10 bps on Monday.

The ICE BofAML US High Yield index dropped 42.6 bps with the year-to-date return now negative 9.2%.

The index gained 42.8 bps on Tuesday and was largely flat on Monday, shaving off 0.4 bps.

The CDX High Yield 30 index plummeted 122 bps to close Wednesday at 92.91. The index was down 13 bps on Tuesday and 24 bps on Monday.

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