Carnival upsizes, jumps in aftermarket; Double Eagle, American Bath price; Frontier active

By Paul A. Harris and Abigail W. Adams

Portland, Me., Nov. 20 – The domestic high-yield primary market capped off a busy week with three issuers pricing four tranches.

Carnival Corp. priced an upsized dual-currency offering (B2/B) early Friday. The notes were in demand during bookbuilding and in the aftermarket with the dollar-denominated notes jumping after breaking for trade.

CP Atlas Buyer, Inc. (American Bath Group LLC) and Double Eagle also cleared the primary market on Friday.

Meanwhile, it was another sideways day in the secondary space with the overall market largely unchanged, sources said.

Frontier Communications Corp.’s recently priced two tranches of senior notes were in focus and trading at premiums to their issue prices.

However, the second-lien notes outperformed their first-lien counterpart with accounts chasing the higher yield.

Medical Properties Trust, Inc.’s split-rated 3½% senior notes due 2031 (Ba1/BBB-) gained momentum on Friday after a lackluster break.

In contrast, Sinclair Broadcast Group, Inc.’s new 4 1/8% senior secured notes due 2030 (Ba2/BB) were losing steam in the aftermarket after a strong break.

Carnival in demand

Carnival Corp., bringing its first unsecured tranches since the onset of the pandemic, priced upsized $1.45 billion and €500 million amounts of 7 5/8% 5.25-year of senior notes (B2/B) at the par.

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

The yield printed at the tight end of the 7 5/8% to 7¾% revised yield talk.

Earlier talk was in the 8% area.

When the deal was announced on Thursday, the whisper was in the mid-to-high 8% area.

The deal was heard to ultimately be playing to more than $11 billion of orders, sources said.

Prior to final terms being announced, the dollar-denominated Carnival 7 5/8% unsecured notes due 2026 were trading at 102½ bid, 103 offered, as investors realized allocations would come well shy of order sizes, a trader said.

The bonds just ran from there, the source added, spotting them at 103 5/8 bid, 103 7/8 offered, heading into the close.

Friday's unsecured issue represented the fifth and sixth tranches of corporate bonds issued by Carnival since the coronavirus pandemic drove it onto the beach last spring, as investors have embraced the “vaccine” story, believing that the world will start to get the upper hand on the pandemic early in 2021, sources told Prospect News.

Friday’s primary

American Bath Group drove pricing steadily lower on its $335 issue of 7% eight-year senior notes (Caa2/CCC+).

The deal priced Friday at par, at the tight end of the revised 7% to 7¼% talk, which had tightened from earlier talk in the 7½% area. Initial guidance was in the 8% area.

However, Double Eagle’s $650 million issue of 7¾% five-year senior notes (B3/B/BB-) took a few lumps, as it priced 12.5 basis points beyond the wide end of yield talk in the 7½% area, which was also the initial price talk.

The order book for Double Eagle was heard to be around deal size on Friday morning, a trader said.

The calendar

The Nov. 23 week will get underway with just one deal on the calendar.

Family history Internet service Ancestry is in the market with $1 billion of notes: $450 million 7.5-year senior first-lien notes (B1/B) with initial talk in the low-to-mid 5% area, and $550 million eight-year senior unsecured notes (Caa1/CCC+) initial talk in the mid-to-high 7% area.

The roadshow runs through Monday.

The deal is already heard to be a blowout, a trader said, adding that both tranches were heard to be at least three-times oversubscribed on Thursday.

Ancestry is almost certain to have plenty of company as the week ahead gets underway because the new issue market is looking for $8 billion to $10 billion of weekly issuance during the run-up to Christmas, market sources say.

Frontier in focus

Frontier’s two tranches of senior notes were in focus on Friday.

While both tranches were trading at a premium in the aftermarket, the second-lien notes were outperforming.

Frontier’s 5% DIP-to-exit first-lien notes due 2028 (B3/B+/BB+) traded in a range of par to par ½ during Friday’s session.

They were trading in the par ¼ to par ½ context in the late afternoon.

There was more than $137 million of the bonds on the tape during Friday’s session.

While the first lien notes were stuck on a par handle, Frontier’s 6¾% DIP-to-exit second-lien notes due 2029 (Caa2/CCC+/BB+) were changing hands in the 101 7/8 to 102¼ context in the late afternoon.

“In this case, it’s just about the yield,” a source said.

Frontier priced a downsized $2.55 billion, from $2.8 billion, two-tranche offering of senior notes in a Thursday drive-by as part of its bankruptcy exit financing.

The deal included a downsized $1.55 billion, from $1.8 billion, tranche of the 5% notes and a $1 billion tranche of the 6¾% both of which priced at par.

The 5% notes priced on the tight end of talk for a yield of 5% to 5¼%.

The 6¾% notes priced at the tight end of the 6¾% to 7% yield talk.

Frontier filed for Chapter 11 bankruptcy in April to cut nearly $10 billion in debt.

Proceeds from the latest notes offering will be used to pay off its pre-petition second-lien notes and the pre-petition credit agreement.

Frontier also priced a $1.15 billion issue of 5 7/8% first-lien senior secured notes due 2027 in September as part of its financing to exit bankruptcy.

The 5 7/8% senior notes due 2027 trade on a 104-handle, a source said.

Medical Properties gains

Medical Properties’ split-rated 3½% senior notes due 2031 (Ba1/BBB-) were gaining momentum on Friday after a lackluster break.

The notes were wrapped around 101 in active trading on Friday, a source said.

They were marked at par 1/8 bid, par 3/8 offered after breaking for trade the previous session.

Medical Properties priced an upsized $1.3 billion, from $1 billion, issue of the 3½% notes at par on Thursday.

Pricing came at the tight end of the 3½% to 3¾% yield talk.

Sinclair weakens

Sinclair’s new 4 1/8% senior secured notes due 2030 were trading off their highs in high-volume activity on Friday.

The notes were changing hands around par ¼ late Friday afternoon, a source said.

They were coming in after a strong break on Thursday that saw them at par ¾ bid, 101 offered.

Sinclair priced an upsized $750 million, from $550 million, issue of the 4 1/8% notes at par in a Thursday drive-by.

The yield printed at the tight end of yield talk in the 4¼% area.

$119 million Thursday inflows

The dedicated high-yield bond funds saw $119 million of net daily inflows on Thursday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs saw $129 million of inflows on the day.

However actively managed high-yield funds sustained $10 million of outflows on Thursday, the source said.

News of Thursday's daily flows trails a Thursday report that the combined funds saw $490 million of net inflows in the week to the Wednesday, Nov. 18 close, according to the Refinitiv Lipper Fund Flow Report Newsline.

The breakdown saw $312 million of that amount flow into the high-yield ETFs while $178 million flowed into the actively managed funds, according to the market source.

Year to date, the combined high-yield funds have had $44.3 billion of net inflows, the source added.

Indexes mixed

Indexes closed out Friday mixed. However, all posted gains on the week.

The KDP High Yield Daily index rose 2 points to close Friday at 67.67 with the yield now 4.95%.

The index was up 3 points on Thursday, 9 points on Wednesday, 2 points on Tuesday and 14 points on Monday.

The index posted a cumulative gain of 30 points on the week.

The ICE BofAML US High Yield index gained 2.6 bps with the year-to-date return now 3.403%.

The index shaved off 6.1 bps on Thursday, was up 19.3 bps on Wednesday, 11.5 bps on Tuesday and 36.6 bps on Monday.

The index was up 63.9 bps on the week.

The CDX High Yield 30 index shaved off 56 bps to close Friday at 107.23.

The index gained 27 bps on Thursday, dropped 26 bps on Wednesday and 9 bps on Tuesday, and gained 75 bps on Monday.

The index posted a cumulative gain of 11 bps on the week.

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