Carnival, Ryerson price; Carnival notes firm; Delta rises; Pattern Energy, Freeport-McMoRan gain

By James McCandless

San Antonio, July 15 – The spotlight in the high-yield primary market belonged to Carnival Corp., which priced another megadeal on Wednesday: 5.5-year second priority senior secured notes (Ba1/BB+) in two upsized tranches, while the secondary market was met with gains across the board.

Carnival’s issuance included $775 million of notes that priced at par to yield 10½%. The issue size increased from $550 million.

Carnival also priced €425 million of the notes at par to yield 10 1/8%. The tranche size increased from €400 million. The yield printed 12.5 basis points through the 10¼% to 10½% yield talk. Initial talk was in the 10½% area.

Joseph T. Ryerson & Son, Inc. priced a $500 million issue of eight-senior senior secured notes (B3/B) at par to yield 8½%.

In the secondary, new and established notes from Carnival Corp. & plc were firm as travel names were given a boost by vaccine-related news.

Similarly, Delta Air Lines, Inc.’s and American Airlines Group Inc.’s issues were on the rise.

Recent paper out of Freeport-McMoRan Inc. and Pattern Energy Operations LP ended the session in a better position.

Primary

The spotlight in the high-yield primary market belonged to Carnival, which priced another megadeal on Wednesday: 5.5-year second priority senior secured notes (Ba1/BB+) in two upsized tranches.

It included $775 million of notes that priced at par to yield 10½%. The issue size increased from $550 million. The yield printed at the tight end of the 10½% to 10¾% yield talk. Initial talk was in the 11% area.

The dollar-denominated tranche was heard to be playing to a $2.5 billion order book, on Wednesday morning, and an upsize was expected, a trader said.

Carnival also priced €425 million of the notes at par to yield 10 1/8%. The tranche size increased from €400 million. The yield printed 12.5 basis points through the 10¼ % to 10½% yield talk. Initial talk was in the 10½% area.

On April 1, with news of the coronavirus pandemic generating extreme volatility in the markets, Carnival became one of the first companies from sectors with maximum exposure to Covid-19 to raise cash in the debt capital markets when it priced a $4 billion issue of 11½% first-priority senior secured notes due April 2023.

Elsewhere on Wednesday Joseph T. Ryerson & Son priced a $500 million issue of eight-senior senior secured notes (B3/B) at par to yield 8½%.

The yield printed at the tight end of the 8½% to 8¾% yield talk. Early guidance was 8¾% to 9%.

And making its debut in the high-yield bond market AdaptHealth LLC priced an upsized $350 million issue of eight-year senior notes (B1/B+) at par to yield 6 1/8%.

The issue size increased from $300 million.

The yield printed at the tight end of yield talk in the 6¼% area. Initial talk was in the high 6% area.

The calendar

At Wednesday's close two deals remained parked on the active new issue calendar as business expected to clear before the end of the week.

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

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

Order books close Thursday.

Also GC EOS Buyer, Inc., doing business as BBB Industries, is in the market with a $240 million amount of five-year senior secured notes (Caa1/CCC+).

As the market awaits official talk, early guidance is in the low-to-mid 10% area, including an original issue discount.

$240 million Tuesday inflows

The dedicated high-yield bond funds saw $240 million of net daily 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 saw $127 million of inflows on the day.

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

Carnival firm

New and established notes from Carnival were given a boost, traders said.

The new 10½% senior secured notes due 2026, which priced on Wednesday, were seen ending the day at 101¼ bid.

About $106 million was on the tape by the close.

The Miami-based cruise liner’s deal was a part of a two-tranche offering of senior secured notes.

The company also priced €425 million of the notes.

Its more established 11½% notes due 2023 gained ½ point to close at 109 bid.

The notes saw about $24 million change hands.

News broke late Tuesday that biotech firm Moderna had released the interim results of its phase 1 trial of a potential coronavirus vaccine.

Moderna said that the vaccine candidate is ready to proceed to the final stage of trials.

Delta, AA rise

Similarly, Delta’s issues were on the rise, market sources said.

The 2.9% senior notes due 2024 gained 1¾ points to close at 84¼ bid. The 7 3/8% senior notes due 2026 picked up 2 points to close at 97 bid.

About $44 million of the issues combined traded.

Airlines were also carried higher by the vaccine news, as the space grapples with low demand in the short term and weak recovery prospects heading into 2021.

The company reported its second-quarter earnings on Tuesday, giving an insight on the toll the pandemic has taken on carriers.

For Q2, the name reported an earnings loss per share of $4.43, wider than what analysts had expected at a $3.97 per share loss.

Revenues just beat predictions at $1.47 billion.

Fort Worth-based sector peer American Airlines’ paper also strengthened.

The 5% senior paper due 2022 gained 3 points to close at 58½ bid. The 3¾% senior paper due 2025 tacked on 3¾ points to close at 47¾ bid.

Newer issues better

Recent notes were also spotted ending the session in better positions, traders said.

Phoenix-based mining company Freeport-McMoRan’s two fresh offerings followed the prevailing trend.

The 4 5/8% senior notes due 2030 tacked on ¾ point to close at 100¾ bid. The 4 3/8% senior notes due 2028 improved by ½ point to close at 100¾ bid.

The two tranches together saw about $34 million change hands.

San Francisco-based wind and solar utilities name Pattern Energy’s issues were also pushing upwards of par.

With about $62 million exchanged, the 4½% senior notes due 2028 closed at 102¾ bid.

Indexes

The KDP High Yield Daily index jumped up 19 basis points on Wednesday, finishing at 65.64 with the yield slipping to 6.39%.

The index went unchanged on Tuesday, rose 7 bps on Monday and lost 6 bps on Friday.

The ICE BofAML US High Yield index improved by 62 bps with the year-to-date return ending at negative 2.862%.

The index declined by 11.1 bps on Tuesday, gained 39 bps on Monday and was down 6.8 bps on Friday.

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