Morning Commentary: Hilton, Silversea on deck in primary; recent high beta deals inch higher

By Paul A. Harris

Portland, Ore., April 10 – Following a big buildup of the active new issue calendar on Monday, the high-yield drive-by market reactivated on Tuesday, sources say.

Hilton Worldwide Holdings, Inc. plans to price a $500 million offering of eight-year senior notes (expected ratings Ba3/BB+) in a drive-by.

Early guidance has the deal coming with a yield in the 5¼% area.

BofA Merrill Lynch is leading the deal backing share repurchases.

Elsewhere, Monaco-based Silversea Cruise Holding Ltd. upsized its proposed add-on to the Silversea Cruise Finance 7¼% senior secured notes due Feb. 1, 2025 (existing ratings B2/BB-) to $70 million from $60 million.

The quick-to-market deal is talked to price in the 104.25 area, at the rich end of the 103.75 to 104.25 area initial guidance, and is set to price later on Tuesday.

J.P. Morgan Securities LLC is leading the capital expenditures deal.

High beta names inch higher

High yield was trading generally better on Tuesday morning, according to a trader focused on the high beta space.

Crude oil prices, a driver of the high-yield index where the energy sector comprises 15%, were sharply higher on Tuesday, the trader noted.

The barrel price of West Texas Intermediate crude for May 2018 delivery was up 2.51%, or $1.59 at mid-morning, at $65.01.

The Dow Jones industrial average was up 2%.

High-yield ETFs were higher on the morning.

The iShares iBoxx $ High Yield Corporate Bd (HYG) was up 0.26%, or 23 cents, at $85.82 per share at mid-morning.

Recent high beta deals have tended to be inching higher, the trader said.

American Greetings Corp.’s 8¾% senior notes due 2025 (Caa1/CCC+) were 91¾ bid, 92¼ offered.

Late last week they were 90½ bid, 91½ offered.

The twice-downsized and restructured $282.5 million issue priced last week at 87 to yield 11.499%.

Meanwhile, the McDermott International Inc.’s 10 5/8% senior notes due May 2024 (B2/B-) were 97 1/8% bid, 97¼ offered in active trading.

Late last week they were 96 3/8 bid, 96 7/8 offered.

The downsized $1.3 billion issue (from $1.5 billion) priced at 94.75 to yield 11.865% last Wednesday, 136.5 basis points beyond the mid-point of yield talk amid a raft of document changes.

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