Patagonia to wrap up roadshow; T-Mobile active on upgrade; cruise lines dip; IEA spikes on acquisition

By Paul A. Harris and Abigail W. Adams


 Portland, Me., July 25 – The high-yield new-issue market failed to generate any news on Monday, and the session ended with just one deal on the active forward calendar.

Patagonia HoldCo LLC is scheduled to be wrapping up the roadshow for its $500 million offering of seven-year senior secured first lien notes (B1/B+) supporting the buyout of Lumen Technologies' Latin American operations by Stonepeak.

Pending official price talk initial guidance specifies a 7½% coupon at OID 86.

Books are scheduled to close Tuesday.


 Away from that deal there is a shadow calendar.

However at least some of it is heard to be delayed until the post-Labor Day period.

That appears to be the case with an expected $5.4 billion of debt offerings backing the LBO of Tenneco Inc. by Apollo Global Management Inc., according to market sources.

Meanwhile, it was a strong open but a weak close in the high-yield secondary space as the previous week’s rally paused with the Federal Reserve’s rate hike looming.

While the cash bond market was up as much as ¼ point early in the session, the market closed the day largely unchanged as ETF buying following strong inflows subsided.

However, volume remained thin with large, liquid issues and topical news the driving force of trading activity in the space.

T-Mobile US, Inc.’s senior notes (Baa3/BB+/BBB-) remained active as the notes continue to switch hands after achieving rising star status late last week.

While the overall market was flat on Monday, cruise line operators were again taking a hit.

Carnival Corp.’s and Royal Caribbean Cruises Ltd.’s senior notes were again lower with recession fears alive and well among market players despite last week’s strong rally.

Infrastructure and Energy Alternatives Inc.’s 6 5/8% senior notes due 2029 (B3/B+/B), a small, illiquid issue that rarely trades, spiked double digits following news the company would be acquired in a $1.1 billion transaction.

T-Mobile’s upgrade

T-Mobile’s senior notes remained active with the notes resuming their upward momentum as the company achieves rising star status.

T-Mobile’s 3½% senior notes due 2031 continued to trade on a 90-handle.

They rose about ¼ point and were changing hands in the 90 3/8 to 90 5/8 context heading into the market close, a source said.

The yield on the notes was about 4 7/8%.

There was $20 million in reported volume.

T-Mobile’s 3 3/8% senior notes due 2029 were changing hands on a 91-handle with the notes trading in the 91 3/8 to 91 5/8 context heading into the market close.

The notes were also trading with a yield of about 4 7/8%.

T-Mobile’s notes have been active since Moody’s Investors Service lifted the company’s unsecured debt to Baa3 from Ba2 late last week.

While active as the notes switch into high grade hands, they have not undergone that much spread compression as a result of the upgrade.

The notes were already trading inline with the BBB index, which currently has a yield to worst of about 4 7/8%, a source said.

Cruise lines dip

Cruise lines were again underperforming the broader market on Monday with recession fears still alive and well despite last week’s strong rally.

Carnival’s 7 5/8% senior notes due 2026 (B2/B) were the most active in the capital structure.

The notes were down 1 3/8 points to close Monday at 84 5/8 with a yield of 13%.

There was $20 million in reported volume.

Carnival’s 10½% senior notes due 2030 (B2/B) sank 1½ points.

The notes returned to an 88-handle after brushing up against 90 on Friday.

They were changing hands in the 88 to 88½ context heading into the market close with the yield just shy of 13%.

Carnival’s 6% senior notes due 2029 fell 1 point.

They were changing hands in the 75¾ to 76¼ context heading into the market close with the yield north of 11%.

Royal Caribbean’s 5½% senior notes due 2028 (B2/B) were also under pressure in active trading.

The notes sank 1¼ points to close the day at 72 with the yield about 12½%, according to a market source.

Recession fears and concerns about refinancing costs have been a drag on cruise line operators in recent weeks.

IEA spikes

IEA’s 6 5/8% senior notes due 2029 (B3/B+) spiked in active trading following news the energy infrastructure company would be acquired in a deal valued at $1.1 billion.

The small, illiquid issue that rarely trades jumped double digits following the news.

The notes rose 18 points to trade in the 98½ to 99 context on Monday.

There was $13 million in reported volume.

The notes were on a 79-handle the previous week.

News broke prior to the market open that MasTec will acquire the company in a cash-and-stock deal valued at $1.1 billion.

The deal is expected to close late in the 4th quarter.

The 6 5/8% notes carry a poison put of 101 and a make-whole call if they are to be redeemed prior to August 15, 2024.

Indexes

The KDP High Yield Daily index rose 2 points to close Monday at 56.62 with the yield now 6.75%.

The index posted a cumulative gain of 31 points on the week last week.

The ICE BofAML US High Yield index gained 3.6 basis points with the year-to-date return now negative 10.138%.

The index posted a cumulative gain of 225 bps on the week last week.

The CDX High Yield 30 index gained 13 points to close Monday at 100.13.

The index posted a cumulative gain of 118 bps on the week last week.

Friday inflows


 The dedicated high-yield bond funds are currently seeing their largest inflows since late May, according to a market source.

On Friday the funds saw $1.104 billion of net daily inflows.


 High-yield ETFs saw $614 million on the day.

Actively managed high-yield funds saw $490 million of inflows on Friday, the source said.

The Friday inflows follow the $1.82 billion of net daily inflows, which the combined funds saw on Thursday, according to the market source.

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