Oversubscribed primary; Lumen moves up; Carnival better; United mixed; U.S. Steel improves

By Paul A. Harris and James McCandless

San Antonio, Nov. 24 – The domestic primary junk bond market is still hot with two issuers pricing deals that were robustly oversubscribed and tightly priced.

In the secondary, new issuance from Lumen Technologies Inc. and Carnival Corp. were both on the rise throughout the day.

In the travel space, United Airlines Holdings, Inc.’s issues varied while American Airlines Group Inc.’s paper picked up steam.

Steel producer United States Steel Corp.’s notes gained ground during the day after the company’s stock received an analyst upgrade.

Rock-bottom pricing

Big demand allowed two dollar-denominated junk bond issuers to upsize their deals while realizing rock-bottom pricing on Tuesday.

Ancestry.com's two-part deal was heard to be playing to books filled with over $5 billion of orders, each.

The upsized $1.2 billion deal (from $1 billion) featured $700 million of 4¼% 7.5-year first-lien notes (B1/B) that came at par, at the tight end of talk, and $500 million of 6 1/8% eight-year unsecured notes (Caa1/CCC+) that priced at par, inside of talk.

In a drive-by CNX Resources Corp. priced an upsized $500 million issue (from $400 million) of 6% senior notes due Jan. 15, 2029 (B3/BB-/BB) at par, also inside of talk, playing to orders in excess of $4 billion, a trader said.

Also of note on Tuesday, Deutsche Lufthansa AG made its debut-high yield notes sale, pricing an upsized €1 billion issue (from €750 million) of 3% long five-year senior notes (existing ratings Ba2/BB-) at 99.39 to yield 3 1/8%, inside of talk.

The deal played to more than €4 billion of orders, a market source said (see related stories in this issue).

The dollar-denominated market may catch a breather on Wednesday, as the market heads into what will be a four-day Thanksgiving holiday weekend for many participants.

Lumen, Carnival rise

Newer issuance spearheaded a rise in the Tuesday high-yield secondary market, traders said.

Lumen’s new 4½% senior notes due 2029 gained 1 point to close at 102 bid.

The Monroe, La.-based communications services provider priced the upsized $1 billion issue on Monday after initially being shopped at $750 million.

About $62 million of the notes were on the tape.

The yield printed in the middle of yield talk in the 4½% area with initial guidance of 4¾%.

Meanwhile, Miami-based cruise company Carnival’s recently priced issues were also on an upward track.

The 7 5/8% senior notes due 2026 added 2 points to close at 106 bid.

Those notes priced on Friday at an upsized $1.45 billion, with a €500 million issue also part of the deal.

By the end of the day, about $56 million had changed hands.

The issue sizes increased from $1.425 billion and €350 million.

United varies, AA up

Meanwhile, in travel, United Airlines’ paper diverged, market sources said.

The 5% senior paper due 2024 tacked on 1¾ points to close at 98½ bid. The 4¼% senior paper due 2022 shaved off ¼ point to close at 99¾ bid.

On Monday, the Chicago-based airline announced a plan to raise $1 billion in new capital through a stock sale.

In a Securities and Exchange Commission filing, the company said that it would raise the money through a common stock sale of 25.3 million shares.

The industry has been waiting for a new round of government stimulus, issuing thousands of furloughs until payrolls are subsidized.

Fort Worth-based air travel name American Airlines’ notes picked up steam.

The 5% senior notes due 2022 picked up 3¼ points to close at 83¼ bid. The 11¾% senior notes due 2025 reached up ¾ point to close at 110¾ bid.

U.S. Steel

Steelmaker U.S. Steel’s notes gained ground during the day, traders said.

The 6 7/8% senior notes due 2025 moved up 1 point to close at 92½ bid. The 12% senior secured notes due 2025 added ¼ point to close at 114¼ bid.

The Pittsburgh-based steel manufacturer’s structure saw a spike through the Tuesday session after receiving an analyst upgrade.

An analyst at GLJ Research said in a note that the company’s common stock has been upgraded from Hold to Buy.

In the note, the analyst said that he foresees a revival in the high-end auto steel markets and rises in global steel prices.

The analyst also predicted that more government stimulus from the next administration is expected.

$310 million Monday inflows

The dedicated high-yield bond funds had $310 million of net inflows on Monday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs saw $340 million of inflows on the day.

However actively managed high-yield funds were negative, sustaining $30 million of outflows on Monday, according to the source.

Indexes better

Three high-yield indexes were in a better position by the close.

The KDP High Yield Daily index shot up 18 basis points to 67.87 to finish Tuesday with the yield slipping to 4.87%.

The index rose 2 points to close Monday.

The ICE BofAML US High Yield index garnered 40.5 bps with the year-to-date return now at 4.032%.

The index gained 21 bps on Monday.

The CDX High Yield 30 index grabbed 31.34 bps to cap the session at 108.49.

The index spiked by 51 bps on Monday.

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