NMI prices; PG&E on tap; L Brands above 105 and 107; Royal Caribbean, Univision gain

By Paul A. Harris and Abigail W. Adams

Portland, Me., June 5 – The domestic high-yield primary market was quiet on Friday with one small offering clearing the market after an action-packed week when more than $11 billion in junk-rated deals price.

NMI Holdings, Inc. priced an upsized $400 million offering of five-year senior secured bullet notes (Ba2/BB).

Ardagh Packaging Finance plc and Ardagh Holdings USA Inc. returned to the market, albeit this time in Europe, to price a massively upsized €790 million issue of non-fungible 2 1/8% senior secured mirror notes due Aug. 15, 2026.

While the forward calendar was empty heading into the weekend, PG&E Corp. is expected to show up in the debt capital markets in the coming week in an effort to finance its exit from Chapter 11 bankruptcy.

Meanwhile, the secondary space, which was already on fire, “ripped” on Friday on the heels of a better-than-expected jobs report that saw a surprise reduction in the unemployment rate in May, sources said.

Several names were trading at “head-scratching” levels, a source said.

Among them were L Brands, Inc.’s newly priced two tranches of senior notes, which skyrocketed in secondary activity.

After a strong break, Royal Caribbean Cruises Ltd.’s 9 1/8% senior notes due 2023 (Ba2/BB) continued to gain in high-volume activity.

While Univision Communications Inc.’s 6 5/8% senior notes due 2027 (B2/B) were trading about 1 point above their issue price, the notes’ performance was poor compared to other recent deals and the move in the market on Friday, a source said.

NMI, deep inside of talk

NMI Holdings priced an upsized $400 million offering of five-year senior secured bullet notes (Ba2/BB) at par to yield 7 3/8%, which was deep inside of price talk.

The deal size was initially $300 million.

Earlier Friday, talk ratcheted down to 7 5/8% from the original 7¾% to 8%.

The deal came into the market earlier in the week with guidance in the mid-to-high 8% area.

The issue played to a book that was four-times deal-size and the bonds shot to 104 3/8 bid on Friday afternoon, a bond trader said.

Ardagh upsizes

In Europe, Ardagh Packaging Finance plc and Ardagh Holdings USA priced a massively upsized €790 million issue of non-fungible 2 1/8% senior secured mirror notes due Aug. 15, 2026 at 96.5 to yield 2.743% in a Friday drive-by.

The issue size increased from €350 million.

The issue price came at the rich end of the 96 to 96.5 price talk. Initial price talk was 95 to 95.5.

Friday's mirror notes deal came slightly more than a week after the Dublin, Ireland-based glass and metal packaging manufacturer priced a $715 million add-on to the 4 1/8% senior secured notes due Aug. 15, 2026, on May 28, a deal which, itself, came just two days after a $1 billion tap of the 5¼% senior notes due Aug. 15, 2027, which priced on May 26.

The week ahead...PG&E

As the June 1 week wound down the high-yield market was in the throes of a massive rally, sources told Prospect News.

Oversubscribed deals are being priced on the tights, allocations tend to be mean, and investors are chasing paper into the secondary market as deals price and trade up two-, three- and four points or more, sources say.

Given these dynamics there is no reason to expect that new issue market volume will lighten anytime soon, a syndicate banker said on Friday afternoon.

PG&E Corp. is expected to show up in the debt capital markets during the week ahead in an attempt to finance its exit from Chapter 11 bankruptcy.

Tranches of the financing are expected to include a new term loan, as well as investment-grade and high-yield corporate bonds, sources say.

J.P. Morgan Securities LLC is expected to lead the bank debt and junk bond portions. BofA Securities Inc. is expected to lead the investment-grade bond portion.

L Brands skyrockets

L Brands’ newly priced two tranches of senior notes skyrocketed in the secondary space with the notes from the embattled retailer reaching head-scratching levels.

L Brands’ 6 7/8% senior notes due 2025 (Ba2/BB) traded up to a 105-handle on Friday, a market source said.

They were changing hands at 105¼ in the late afternoon with the yield about 5.4%, according to a market source.

There was more than $74 million in reported volume on the tape in the late afternoon.

The 6 7/8% notes were secured and had a good credit rating, a source said.

The secured notes had L Brands’ real estate, intellectual property and equipment as collateral with the expectation for recovery high in the event of a default.

The notes also played to massive demand during bookbuilding, which followed the notes into the secondary space.

L Brands’ 9 3/8% senior notes due 2025 (B2/B+) traded up to a 107-handle on Friday.

The 9 3/8% notes were changing hands at 107½ in the late afternoon with the yield about 6 7/8%.

The bonds had more than $50 million in reported volume.

The unsecured notes also played to massive demand during bookbuilding, which was driving the level of the notes, a source said.

L Brands priced a $750 million issue of the 6 7/8% notes and a $500 million issue of the 9 3/8% notes at par on Thursday.

The 6 7/8% notes priced on the tight end of talk in the 7% area. Initial guidance was in the 8% area.

The 9 3/8% notes priced at the tight end of talk in the 9½% area. Initial guidance was 10½% to 10¾%.

The secured tranche was heard to be playing to $7.9 billion in demand and the unsecured tranche to $4.4 billion in demand.

The struggling parent company of the Bath & Body Works and Victoria’s Secret brands has been on an upswing in recent weeks after a sell-off following a failed attempt to sell a portion of its stake in Victoria’s Secret.

However, the credit was on the rise following its latest earnings report when the company disclosed plans to shutter hundreds of Victoria’s Secret stores and continue to focus on the more profitable Bath & Body Works brand.

Royal Caribbean gains

Royal Caribbean’s 9 1/8% senior notes due 2023 continued to gain in high-volume activity on Friday after a strong break.

The notes were up another 1½ points to a 104-handle. They were changing hands in the 104 to 104 3/8 context Friday afternoon.

The bonds had more than $73 million in reported volume late Friday afternoon.

The 9 1/8% notes jumped to a 102-handle shortly after pricing on Thursday.

Royal Caribbean priced a $1 billion issue of the 9 1/8% notes at par in a Thursday drive-by.

The yield printed at the tight end of yield talk in the 9¼% to 9½% area. Initial guidance was in the high 9% area to 10%.

The notes are the cruise line operator’s first unsecured offering.

The deal priced with a tighter coupon and yield than the secured notes the company priced in May.

The travel and leisure sectors have seen a dramatic rebound in recent weeks that has been fueled by optimism over the reopening of the economy.

Univision at a premium

Univision’s 6 5/8% senior notes due 2027 were also trading at a premium to their issue price in the aftermarket.

The 6 5/8% notes traded up to a 101-handle on Friday. They were changing hands in the 101 to 101¼ context by the late afternoon.

While the notes were up, they were trading poorly compared to the other deals to hit the aftermarket on Thursday and considering the general market conditions on Friday, a source said.

The relatively poor performance was attributed to their tight pricing with the coupon low for a single-B credit, the source said.

Univision priced a massively upsized $1.5 billion issue of the 6 5/8% notes at par on Thursday.

The yield printed at the tight end of yield talk in the 6¾% area. Initial talk was 6¾% to 7%.

The initial size of the deal was $750 million.

$1.39 billion Thursday inflows

The dedicated high-yield bond funds had $1.39 billion of daily net inflows on Thursday, the most recent session for which data was available at press time, according to a market source.

Actively managed high yield funds had $780 million of inflows on the day.

High-yield ETFs had $613 million of inflows on Thursday, the source said.

News of Thursday's daily flows follows a Thursday report that the combined funds had $5.746 billion of net inflows in the week to the Wednesday, June 3 close, according to Lipper US Fund Flows.

That is the fourth largest weekly inflow on record, the source said, and noted that six of the largest weekly inflows on record have come in the past 11 weeks, the biggest of all being the $7.66 billion inflow seen in the week to April 15.

In the past 10 weeks the combined high-yield funds have had a colossal $41.3 billion of net inflows, a figure that exceeds any full calendar year, according to the market source.

Indexes gain

Indexes closed out a strong week with substantial gains.

The KDP High Yield Daily index gained 51 basis points to close Friday at 66.75 with the yield now 6%.

The index was up 28 bps on Thursday, 60 bps on Wednesday, 41 bps on Tuesday and 11 bps on Monday.

The index posted a cumulative gain of 191 bps on the week.

The ICE BofAML US High Yield index jumped 103.3 bps with the year-to-date return now negative 2.578%.

The index gained 10.4 bps on Thursday, 96.7 bps on Wednesday, 73.7 bps on Tuesday and 29.4 bps on Monday.

The index saw a cumulative gain of 313.5 bps on the week.

The CDX High Yield 30 index jumped 226 bps to close Friday at 103.81. The index was down 13 bps on Thursday, gained 94 bps on Wednesday, 139 bps on Tuesday and 106 bps on Monday.

The index posted a cumulative gain of 552 bps on the week.

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