Morning Commentary: Carnival talks oversubscribed two-part deal; airlines, energy pop in secondary

By Paul A. Harris

Portland, Ore., July 15 – The Wednesday new issue spotlight fell on Carnival Corp.'s two-part offering of around $1 billion equivalent of 5.5-year second-priority senior secured notes (Ba1/BB+).

A $550 million tranche has official talk of 10½% to 10¾%, inside initial talk in the 11% area.

The dollar tranche is heard to be playing to a $2.5 billion order book, with the market expecting an upsize to as much as $850 million, a trader said.

Meanwhile official talk on the €400 million tranche came at 10¼% to 10½%, at the tight end of initial talk in the 10½% area.

Books were scheduled to close midmorning, New York time.

Joseph T. Ryerson & Son, Inc. talked its $500 million offering of eight-year senior secured notes (B3/B/B) to yield 8½% to 8¾%, tight to early guidance of 8¾% to 9%.

Books close at 1:30 p.m. ET Wednesday.

At midmorning the market awaited official talk on the AdaptHealth LLC debut junk bond deal, a $300 million offering of senior notes due 2028 (B1/B+), on for Wednesday as well.

Initial talk had the deal coming to yield in the high 6% area.

The offer was heard to be playing to $575 million of demand across 32 accounts at midday Tuesday, according to a bond trader who added that demand was being stoked by approximately $350 million of reverse inquiry.

In the European market, Rome-based Gamenet Group SpA set talk in its €640 million two-part offering of five-year senior secured notes (B1/B).

A €340 million tranche of floating-rate notes are talked with a 575 to 600 basis points spread to Euribor at 98, while a €300 million tranche of fixed-rate notes is talked to yield 6¼% to 6½%.

Books close Thursday.

Vaccine hopes lift airline paper

News that biotech company Moderna announced that its potential coronavirus vaccine showed a promising immune response in an early-stage human trial gave a lift to battered airline junk bonds, according to a trader in New York.

The American Airlines Group Inc. 5% senior notes due 2022 were up 3¼ points on the morning.

The United Airlines Holdings, Inc. 5% senior notes due February 2024 were up 2¾ points, the trader said.

News that crude oil inventories declined by 7.5 million barrels in the week ending July 10 sent prices higher in the oil patch, the trader said.

The barrel price of West Texas Intermediate crude oil for August 2020 delivery was up 1.14%, or 46 cents, at $40.75, at midmorning.

Energy names were popping on the news, the trader said.

The Continental Resources, Inc. 3.8% senior notes due June 2024 were up 2½ points at 95 1/16 bid.

Among recent issues, bonds priced Tuesday by Macau-based Melco Resorts Finance Ltd. were trading at a premium to new their issue price on Wednesday morning, the trader said.

The Melco 5¾% senior notes due July 2028 (Ba2/BB) were par 3/8 bid, par 7/8 offered in fairly active trading, the source noted.

The $500 million issue priced at par.

$240 million Tuesday inflows

The dedicated high-yield bond funds saw $240 million of net daily inflows on Tuesday, according to a market source.

Actively managed high-yield funds saw $127 million of inflows on the day.

High-yield ETFs saw $113 million of inflows on Tuesday, the source said.

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