Royal Caribbean, L Brands, Univision bring megadeals; WPX flat; Service Properties soars

By Paul A. Harris and Abigail W. Adams

Portland, Me., June 4 – Thursday was the day of the megadeal in the domestic high-yield primary market.

L Brands, Inc. priced a $1.25 billion two-tranche offering, Royal Caribbean Cruises Ltd. priced a $1 billion issue, and Univision Communications Inc. launched a massively upsized $1.5 billion offering.

Royal Caribbean’s new notes jumped in high-volume activity after breaking for trade.

While new paper remained in focus and continued to perform well, the secondary space was slightly softer on Thursday with equities weaker on the back of unemployment claims numbers.

There were some “sneaky bids” in the market, a source said. However, nothing traded meaningfully lower.

While the majority of new deals were trading with steep premiums, WPX Energy, Inc.’s 5 7/8% senior notes due 2028 (B1/BB-/BBB-) fell flat in the aftermarket.

TRI Pointe Group Inc.’s 5.7% senior notes due 2028 (Ba3/BB-) and Meritor, Inc.’s 6¼% senior notes due 2025 (B2/BB-/BB-) were well above their issue prices.

However, Service Properties Trust’s 7½% senior notes due 2025 (Baa3/BB+) were the “big winners” with the notes 4 to 5 points above their issue price, a source said.

The high-yield market continued to be awash with cash with dedicated funds seeing another multibillion-dollar inflow.

High-yield mutual and exchange-traded funds reported inflows of $5.746 billion for the week through Wednesday’s close, according to the Refinitiv Lipper US Fund Flows report.

Megadeal Thursday

With the buyside understood to have plenty of cash to put to work in the calendar, a trio of megadeals came into the high-yield new issue market on Thursday.

L Brands priced $1.25 billion of five-year notes in a two-part Thursday drive-by, according to market sources.

The deal included $750 million of senior secured notes (Ba2/BB) which priced at par to yield 6 7/8%. The yield printed at the tight end of yield talk in the 7% area. Initial guidance was in the 8% area.

The deal also included $500 million of senior unsecured bullet notes (B2/B+) which priced at par to yield 9 3/8%. The yield printed at the tight end of yield talk in the 9½% area. Initial guidance was 10½% to 10¾%.

The overall deal was well oversubscribed, according to a trader who said the secured tranche was heard to be playing to $7.9 billion of demand, as of 12:30 p.m. ET Thursday, at which time the unsecured tranche was playing to $4.4 billion of orders.

Royal Caribbean Cruises priced a $1 billion issue of three-year senior guaranteed bullet notes (Ba2/BB) at par to yield 9 1/8% in a Thursday drive-by, according to market sources.

The deal, which priced through the 9¼% to 9½% yield talk, traded as high as 103¼ bid in the secondary market, before falling back to 102 bid, 102¼ offered, traders said.

Initial guidance had the notes coming to yield in the high 9% area to 10%.

Royal Caribbean's Thursday cash raise also included a $1 billion offering of convertible notes.

And Univision Communications came Thursday, initially to take out a portion of the 5 1/8% notes due 2023 with an offering of seven-year senior secured notes (existing ratings B2/B) sized at $750 million, then, with a $450 million upsize, to take out the entire $1.2 billion amount of the outstanding 5 1/8% notes.

And before the smoke cleared Univision upsized a further $300 million, which ultimately doubled from its originally announced size, to $1.5 billion, and launched it at 6 5/8%, market sources said.

Final terms were pending at press time.

One deal remained on the calendar in the wake of Thursday's action.

NMI Holdings, Inc. is in the market with a $300 million five-year unsecured bullet (Ba2/BB).

Talk is 7¾% to 8% versus initial guidance in the mid-to-high 8% area, a trader said.

Royal Caribbean in focus

Royal Caribbean’s 9 1/8% senior notes due 2023 were in focus after breaking for trade with the notes immediately jumping to a 102-handle.

They were marked at 102¼ bid, 102¾ offered in the late afternoon.

The notes had more than $160 million in reported volume heading into the market close.

The deal was the company’s first unsecured deal, a source said.

When Royal Caribbean tapped the market in May with a $3.32 billion two-tranche offering of secured notes they had to put up “all types of collateral,” a source said.

Royal Caribbean priced a $1 billion issue of 10 7/8% notes due 2023 at 98 to yield 11.673% and a $2.32 billion tranche of 11½% notes due 2025 at 97 to yield 12.314% on May 13.

However, the company was able to price its unsecured notes with a yield of 9 1/8%.

“That says a lot,” the source said.

WPX Energy flat

WPX Energy’s 5 7/8% notes due 2028 fell flat in the aftermarket with the notes wrapped around par in high-volume activity.

The 5 7/8% notes had more than $155 million in reported volume during Thursday’s session.

While the notes were split-rated, the pricing was tight for unsecured notes from an oil and gas company, a source said.

WPX Energy priced a $500 million issue of the 5 7/8% notes at par on Wednesday.

The deal priced tight to talk for a yield of 6% to 6¼%. Initial talk was in the mid 6% area.

The deal was heard to have played to $3 billion of demand.

TRI Pointe trades up

TRI Pointe’s 5.7% senior notes due 2028 held on to the large premium gained after a strong break on Wednesday.

The 5.7% notes were marked at 102 bid, 102¼ offered late Thursday afternoon.

The notes shot up to a 102-handle soon after breaking for trade on Wednesday.

“That seems to be the theme,” a source said.

TRI Pointe priced an upsized $350 million issue of the 5.7% notes at par on Wednesday.

The issue size was increased from $300 million.

The yield priced tighter than talk for a yield in the 5 7/8% area. Initial talk was in the low 6% area.

Meritor gains

Meritor’s 6¼% notes due 2025 were also trading up on Thursday.

The 6¼% notes were marked at 101½ bid, 102 offered in the late afternoon, a source said. They were changing hands at 101¾ with more than $31 million in reported volume.

The level was an indication of the general richness of the market, a source said.

Meritor priced a $300 million issue of the 6¼% notes at par on Wednesday.

The yield printed at the tight end of the 6¼% to 6½% yield talk. Initial talk was in the high 6% area.

Service Properties skyrockets

Service Properties Trust’s 7½% senior notes due 2025 were “the big winners” of the deals to price during Wednesday’s session, a source said.

The split-rated notes rocketed out of the gate and continued to add to their steep premium on Thursday.

The notes were marked at 104½ bid, 105½ offered and were changing hands at 105¼ late Thursday.

The bonds remained active with more than $34 million in reported volume during Thursday’s session.

The notes shot up to a 104-handle after breaking for trade on Wednesday.

The deal was heavily oversubscribed with the coupon hefty for a company that is a solid credit, sources said.

Service Properties priced an upsized $800 million issue of the 7½% notes at par on Wednesday.

The deal was upsized from $500 million.

The yield printed tighter than talk for a yield in the 7¾% area. Earlier talk was in the 8% area.

While the deal was a collaboration between high-yield and high-grade syndicate desks, it traded off the high-yield desk.

$1.98 billion Wednesday inflows

The dedicated high-yield bond funds saw $1.98 billion of daily net inflows on Wednesday, the most recent session for which data was available at press time, according to a market source.

The Wednesday inflow number was the fourth daily inflow in the past five sessions to top the $1 billion mark, the biggest being Tuesday's $2.5 billion daily inflow.

High-yield ETFs saw $1.38 billion of inflows on Wednesday, the source said.

Actively managed high-yield funds saw $595 million of inflows on the day.

News of Wednesday's daily flows came ahead of a report that the combined funds had $5.746 billion of net inflows in the week to Wednesday's close, according to Lipper US Fund flows.

Indexes mixed

Indexes were mixed on Thursday after posting consecutive gains for most of the week.

The ICE BofAML US High Yield index gained 10.4 bps with the year-to-date return now negative 3.611%. The index was up 96.7 bps on Wednesday, 73.7 bps on Tuesday and 29.4 bps on Monday.

The CDX High Yield 30 index took off 13 bps to close Thursday at 101.55. The index gained 94 bps on Wednesday, 139 bps on Tuesday and 106 bps on Monday.

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