Hilton, Silversea upsize; junk market strong; Sprint up on merger news; Tenneco down

By Paul A. Harris and Abigail W. Adams

Portland, Me., April 10 – The primary market saw $1.57 billion in two deals price on Tuesday. In a deal that was upsized by $1 billion, Hilton Worldwide Holdings, Inc. priced a $1.5 billion issue of eight-year senior notes (Ba2/BB+) at par to yield 5 1/8%.

In a much smaller amount, Silversea Cruise Holding Ltd. priced an upsized $70 million add-on to the Silversea Cruise Finance 7¼% senior secured notes due Feb. 1, 2025 (B2/expected BB-) at 104.50 to yield 6.148% in a drive-by.

While the primary market prepared new paper, the secondary space was strong on Tuesday with the uptick in equity markets.

Bids were coming in higher and most bonds were seen trading up ¼ to ½ point, a market source said.

Recent deals from Tronox Inc., Charles River Laboratories International Inc., McDermott International Inc., American Greetings Corp. and Targa Resources Partners LP were all quoted slightly higher on Tuesday.

California Resources Corp.’s 8% senior secured second-lien notes due 2022 were up about 1 point as the energy sector firmed.

However, Sprint Corp.’s junk bonds were the major gainers of the day, surging 3 points after Sprint and T-Mobile reinitiated a merger.

While most of the market was up, Tenneco Inc.’s 5 3/8% senior notes due 2024 (Ba2/BB) were quoted down 1 point after news broke the automotive components maker would purchase Federal-Mogul LLC.

Hilton’s massive upsize

Hilton Worldwide Holdings priced a massively upsized $1.5 billion issue of eight-year senior notes (Ba2/BB+) at par to yield 5 1/8% on Tuesday.

The issue size was increased from $500 million.

The yield printed in the middle of yield talk in the 5 1/8% area and tight to early guidance in the 5¼% area.

BofA Merrill Lynch was the lead left bookrunner.

The McLean, Va.-based hospitality company plans to use the proceeds, together with available cash and a draw on its revolver, to repurchase 10,000,000 shares of Hilton common stock beneficially owned by HNA Tourism Group Co., Ltd., with any remaining proceeds to be used for general corporate purposes.

Silversea upsizes

Monaco-based Silversea Cruise Holding priced an upsized $70 million add-on to the Silversea Cruise Finance 7¼% senior secured notes due Feb. 1, 2025 (B2/expected BB-) at 104.50 to yield 6.148% in a Tuesday drive-by.

The issue size was increased from $60 million.

The reoffer price came rich to price talk in the 104.25 area; initial guidance was 103.75 to 104.25.

The deal traded higher in the Tuesday secondary market where it was seen going out at 105¼ bid, 105¾ offered, according to a buyside source.

JP Morgan managed the capital expenditures deal.

Recent deals higher

Several recent deals were seen higher on Tuesday as the market firmed following the rally in equities.

Tronox’s 6½% senior notes due 2026 (B3/B-) were quoted at 100¼ bid, 101 offered on Tuesday. The notes were quoted at 99 5/8 bid, 100 3/8 offered on Monday.

The notes have struggled and were seen trading below their par issue price after entering the market on March 28.

Charles River Laboratories 5½% senior notes due 2026 (B1/BB+) were seen at 102 1/8 bid, 102 5/8 offered on Tuesday after being quoted at 101 7/8 bid, 102 3/8 offered on Monday.

The 5½% notes have traded up since the $500 million issue was priced at par on March 28.

McDermott’s 10 5/8% senior notes due 2024 (B2/B-) were seen at 97 1/8% bid, 97¼ offered in active trading on Tuesday.

They were quoted at 96 3/8 bid, 96 7/8 offered late last week, a market source said.

McDermott priced a downsized $1.3 billion issue at 94.75 to yield 11.865% on April 4.

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

They were seen at 90½ bid, 91½ offered late last week.

American Greetings priced a downsized and restructured $282.5 million issue at 87 to yield 11.499% on April 5.

Recent high beta deals, such as issues from American Greetings and McDermott, are tending to inch higher, a trader said.

Targa Resources Partners LP’s 5 7/8% senior notes due 2026 (existing ratings Ba3/BB-) were also seen slightly higher on Tuesday.

The notes were seen at 100 7/8 bid, 101 7/8 offered on Tuesday after they were seen at 100 3/8 bid, 100 7/8 offer on Monday.

Targa’s notes were seen closing at par ¾ bid, 101¼ offered, a market source said.

Targa priced an upsized $1 billion issue of the 5 7/8% notes at par on April 5.

Energy sector up

Energy prints were a little better in Junkbondland on Tuesday with California Resources 8% senior notes leading the charge, a market source said.

The 8% notes were up about 1 point, the source said, and were seen trading at 79¾.

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

The barrel price of West Texas Intermediate crude for May 2018 delivery was up on Tuesday closing the day at $65.72, an increase of 21 cents, or 0.32%.

Sprint jumps

Junk bonds from Sprint were on the rise on Tuesday after news broke Sprint and T-Mobile were again negotiating a potential merger. “That story came out of nowhere,” a market source said.

Sprint’s 7 7/8% senior notes due 2025 and 2026 (B3/B) were up about 3 points at their height during Tuesday’s session, the source said. However, the notes dropped back down a point by market close.

The 7 7/8% notes due 2025 were seen trading as high as 106 before closing the day at 104¾. Prior to Tuesday, the notes were trading at 100¾.

The 7 7/8% notes were seen trading as high as 105 before closing the day at 103 7/8. Prior to Tuesday, the notes were wrapped around 99.

After several unsuccessful attempts, T-Mobile and Sprint, the third and fourth largest wireless carries in the telecommunications industry are again in merger negotiations, the Wall Street Journal reported.

The most recent merger negotiation between the two companies ended in November, due to disagreement over who would control the combined business.

Tenneco down

While Sprint’s junk bonds were up on news of a merger, Tenneco’s 5 3/8% senior notes due 2024 (Ba2/BB) traded down after news broke the company would acquire Federal-Mogul in a $5.4 billion deal.

The 5 3/8% notes were seen quoted down a point at 99½ bid, par ½ offer, a market source said. Tenneco’s 5% senior notes due 2026 (Ba2/BB) were also down a point on Tuesday, the source said.

In a $5.4 billion deal, Tenneco will acquire competing auto-parts manufacturer Federal-Mogul from activist investor Carl Icahn’s Icahn Enterprises. Tenneco plans to separate into two publicly traded companies after the deal closes, Reuters reported.

Icahn Enterprises plans to take a stake in Tenneco.

Indexes

The KDP High Yield index again saw gains on Tuesday, the fourth consecutive trading day in a row.

The index was up 14 basis points to 70.59 shaving the yield down to 5.76%.

The index climbed 7 basis points on Monday after gaining a total of 22 basis points on Thursday and Friday.

The Merrill Lynch High Yield index improved dramatically on Tuesday after seeing large gains on Monday.

The index was up 28.7 bps on Tuesday shaving the negative year-to-date return to 0.201% after gaining 11.4 bps on Monday. return was 0.602% on Friday.

The CDX high yield 30 index also continued to see improvement with the index up 44 bps on Tuesday.

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