Spirit Airlines on tap; cruise lines in focus; Genworth trades up on buyout rumor; Golden Nugget gains

By Paul A. Harris and Abigail W. Adams

Portland, Me., Aug. 31 – The domestic high-yield primary market proved it was still open for business in the run up to the Labor Day holiday and announced a new deal.

Spirit Airlines, Inc. launched a brief roadshow for a $600 million offering of five-year first-lien senior secured notes (Fitch: BB+) backed by its customer loyalty program.

There is speculation that in the return from Labor Day Delta Airlines will tap the market with a secured deal backed by its frequent flyer program.

Meanwhile, the secondary space was flat on Monday with trading volume light as accounts focused on end-of-month cleanup, sources said.

Cruise lines again dominated the tape with many of Carnival Corp.’s and Royal Caribbean Cruises Ltd.’s issues continuing their upward momentum.

Carnival Corp.’s 9 7/8% senior secured second-priority notes due 2027 (Ba1/BB+), which were struggling below par as recently as last week, were trading with a premium during Monday’s session.

Genworth Mortgage Holdings, Inc.’s 6½% senior notes due 2025 (Ba3/BB-) were on the rise in active trading on speculation the long-planned acquisition of the company will soon be completed.

Golden Nugget Inc.’s 8¾% senior notes due 2025 were also on the rise in above average trading volume.

Spirit Airlines on tap

A surprise late-summer visit by Spirit Airlines generated Monday's headline news in the high-yield primary market.

The Florida-based low fare carrier began a brief virtual roadshow for a $600 million offering of five-year first lien senior secured notes (Fitch: BB+), secured in part by its customer loyalty program, is in the market with initial price talk in the 8¾% area, and set to price Wednesday (see related story in this issue).

United Airlines, Inc. created a template for speculative grade airline bond deals secured by assets related to customer loyalty program when it sold $3.8 billion 6½% seven-year secured paper backed by a first priority lien on the assets of is Mileage Plus Intellectual Property Assets Ltd. in late June.

Recall that United's frequent flyer program came into the deal when the Chicago-based air carrier failed to persuade investors to accept earlier proposed collateral packages said to include some of the older vintages of aircraft in its portfolio, augmented by some routes and gates.

Delta Airlines is expected make a similar approach, post-Labor Day, with a first lien bond deal backed by its SkyMiles frequent flyer program, sources say.

The cruisers

Cruise lines remained the focus of an otherwise slow day in the secondary space with many issues continuing their upward momentum.

Carnival’s 9 7/8% senior notes due 2027, which had been on a 98-handle as recently as last week, were seen trading at a premium on Monday.

The notes rose about ½ point to trade in the par to par ½ context on Monday, a market source said.

The notes were among the most actively traded issues in the secondary space with more than $22 million in reported volume.

Carnival’s 11½% senior notes due 2023 were up about ½ point to trade on a 111-handle with more than $11 million in reported volume.

Royal Caribbean’s 11½% senior notes due 2025 continued to shoot higher.

After a more than 4 point gain the previous week, the 11½% notes were up another ¾ point to close Monday at 116 1/8.

The notes remained active with more than $16 million in reported volume.

Royal Caribbean’s 10 7/8% senior notes due 2023 were also up about ¾ point to a 110-handle.

With Royal Caribbean a recent fallen angel, its issues are eligible for purchase by the Federal Reserve’s secondary market corporate credit facility, a market source said.

However, the facility had no individual Royal Caribbean bonds as of the end of July, according to the SMCCF’s transaction-specific disclosures.

Genworth’s buyout

Genworth Mortgage’s recently priced 6½% senior notes due 2025 were on the rise in active trading on Monday on speculation the company would soon be bought out.

Genworth’s 6½% notes were up about 2 points in the high-volume activity.

They started the session on a 104-handle and closed the day at 105½, a source said.

More than $15 million of the bonds were on the tape.

Genworth’s capital structure was soaring on Monday following reports that Beijing-based investment company China Oceanwide had secured the funding to acquire Genworth.

The deadline for the long-planned acquisition was extended to Sept. 30 earlier in the summer as China Oceanwide shored up financing, according to a company news release at the time.

Genworth priced a $750 million issue of the 6½% notes at par on Aug. 19.

Golden Nugget gains

Golden Nugget’s 8¾% senior notes due 2025 were posting gains in above average trading volume on Monday.

The notes were up 1¾ point to close the day at 74¾, a source said.

The 8¾% notes saw more than $11 million in reported volume.

The notes are typically slow to trade with Golden Nugget’s junk bonds practically frozen in the aftermath of the March sell-off, a source previously said.

Indexes mixed

Indexes were mixed on Monday with some posting nominal gains and others losses after all saw cumulative gains on the week last week.

The KDP High Yield Daily index shaved off 2 basis points to close the day at 67.23 with the yield now 5.29%.

The index posted a cumulative gain of 50 bps on the week.

The CDX High Yield 30 index rose 10 bps to close Monday at 105.72.

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