Norwegian Cruise, Avis price with discounts; Compass adds-on; Kraft Heinz in focus; Occidental gains

By Paul A. Harris and Abigail W. Adams

Portland, Me., May 5 – The high-yield new issue market remained active on Tuesday with three deals pricing and one more joining the forward calendar.

Norwegian Cruise Line (NCL Corp. Ltd.) priced an upsized $675 million issue, and Avis Budget Car Rental, LLC priced an upsized $500 million issue at discounts.

Compass Group Diversified Holdings LLC priced a $200 million add-on to its 8% senior notes due May 1, 2026 (B1/B).

And PowerTeam Services, LLC joined the forward calendar with a $587 million offering of senior secured notes due December 2025.

Meanwhile, it was a strong day for the secondary space with equities rallying for the second straight session and crude oil futures surging.

Kraft Heinz Foods Co.’s three tranches of senior notes (Baa3/BB+) were in focus. While each tranche was trading at a premium, the 30-year tranche outperformed.

NFP Corp.’s newly priced 7% senior notes due 2025 (B2/B) were also putting in a strong performance in the aftermarket.

Meanwhile, Occidental Petroleum Corp.’s capital structure was making gains on Tuesday in the run up to the company’s first quarter earnings report.

NCL tight and rich

Norwegian Cruise Line (NCL Corp. Ltd.) priced an upsized $675 million issue of 12¼% four-year senior secured bullet notes (Ba2/BB) at 99 to yield 12.575% in a drive-by.

The issue size increased from $600 million.

The coupon came at the tight end of the 12¼% to 12½% coupon talk. The issue price came at the rich end of the 98.5 to 99 price talk.

Notwithstanding the disastrous fortunes of the cruise industry during the coronavirus pandemic, the market's apparent receptivity to Tuesday's NCL deal likely had to do with the fact that the Miami-based cruise company's competitor, Carnival Corp., came on April 1 with an upsized $4 billion high-grade issue of 11½% first-priority senior secured notes due April 2023 (Baa2/BBB-) that has done just fine, a bond trader said.

Avis prices, trades higher

Elsewhere on Tuesday, Avis Budget Car Rental priced an upsized $500 million issue of 10½% five-year senior secured notes (Ba2/BB-) at 97 to yield 11.297%.

The issue size increased from $400 million.

The coupon came on top of coupon talk. The discount came at the cheap end of the 97 to 98 price talk.

The deal popped to 98½ bid, 98¾ offered shortly before Tuesday's close, according to a trader who noted that Avis' existing term loans are trading in the 70s.

The trader also noted a similarity between the Avis deal and the AMC Entertainment Holdings, Inc. 10½% first lien notes due April 2025 (Ba3/CCC+) that priced at a two-point discount in a $500 million issue on April 17.

Portions of both deals are subject to special call provisions during the first 120 days with proceeds from the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the trader noted.

Since pricing at 98 in mid-April, the AMC 10½% first-lien notes due 2025 have fallen 15 points and are lately trading in the low 80s, the trader said.

Meanwhile, Compass Group Diversified Holdings priced a $200 million add-on to its 8% senior notes due May 1, 2026 (B1/B) at 101.00, with a 7.787% yield to maturity, in a Tuesday drive-by.

The issue price came at the rich end of the 100.5 to 101 price talk.

And PowerTeam Services was set to kick off a $587 million offering of senior secured notes due December 2025 on an investor conference call on Tuesday.

The deal will roadshow through Friday, according to an informed source.

There were people in the market expressing curiosity, on Tuesday, about how a roadshow might be conducted during a global pandemic.

A late Tuesday afternoon email to the dealer, seeking clarification, did not garner an immediate response.

Finally, Cheniere Energy Partners, LP subsidiary Sabine Pass Liquefaction, LLC priced $2 billion of investment grade 4½% 10-year senior secured notes (Baa3/BBB-/BBB-) at a spread of 387.5 basis points over Treasuries.

Some high-yield accounts expressed interest in the deal during Tuesday's session, a trader said.

Kraft Heinz in focus

Kraft Heinz’s newly priced senior notes dominated activity in the secondary space.

While all three tranches were trading well above their issue price, the longest duration tranche outperformed.

Kraft Heinz 3 7/8% senior notes due 2027 were trading in a range of par ¼ to par 7/8 during Tuesday’s session.

They were trading in the par 3/8 to par ½ context heading into the market close, a source said.

The bond saw more than $76.85 million in reported volume during Tuesday’s session.

The 4¼% senior notes due 2031 traded in a range of par ½ to 101 5/8 during Tuesday’s session with the notes changing hands between 101¼ to 101½ heading into the market close.

Kraft Heinz 5½% senior notes due 2050 was the outperformer of the three tranches with the notes closing the day on a 102-handle.

The 5½% senior notes were changing hands in a range of 101¼ to just shy of 103 during Tuesday’s session with the final prints between 102 1/8 to 102½, a market source said.

While the megadeal from the fallen angel was heavily oversubscribed and saw a massive upsizing, some sources were not interested in the offering.

With the pricing tight the offering “doesn’t seem that interesting,” a source said.

Kraft Heinz priced a massively upsized $3.5 billion three tranche offering which included a $1.35 billion tranche of the 3 7/8% notes; a $1.35 billion tranche of the 4¼% notes and a $800 million tranche of the 5½% notes at par in Monday drive-by.

The 3 7/8% notes priced tight to talk in the 4% area, and the 4¼% notes priced in the middle of talk in the 4¼% area.

The 30-year tranche was added mid-bookbuilding.

The initial size of the offering was $1.5 billion. The deal was heard to be playing to $9 billion of orders.

NFP trades up

While volume in the small issue was light, NFP’s recently priced 7% senior notes due 2025 were also putting in a strong performance in the secondary space.

The 7% notes traded in a range of par ½ to 101 5/8 on Tuesday with the final prints between 101 1/8 to 101 3/8, a source said.

There was more than $13 million in reported volume.

NFP priced a $300 million issue of the 7% notes at par in a Monday drive-by.

Occidental gains

Occidental Petroleum’s capital structure was making large gains in the run up to the fallen angel’s first quarter earnings report.

The notes were up about 4 to 6 points in active trading, according to a market source.

Occidental’s 2.9% senior notes due 2024 and 2.7% senior notes due 2022 were the most active tranches.

The 2.9% notes were up almost 4 points to 80 with more than $24.5 million in reported volume.

The 2.7% notes were up 4¼ points to 91½ with more than $24 million in reported volume.

The 3½% senior notes due 2029 were up 5¾ points to 75¼.

The 4.4% senior notes due 2049 were up 6 points to 66.

Occidental reported a net loss of $2.2 billion in the first quarter.

The company also announced a variety of cost reduction measures that would reduce operating expenses by $1.2 billion and reduced its capital budget to between $2.4 billion to $2.6 billion, according to a company news release.

The Wall Street Journal also reported Occidental had hired advisers to help it figure out how to reduce its $40 billion debt load.

The earnings report and news came on the heels of a surge in crude oil futures.

The barrel price of WTI crude oil for June delivery settled at $24.56, an increase of $4.17, or 20.45%, on Tuesday.

$282 million Monday inflows

The dedicated high-yield bond funds saw $282 million of net inflows on Monday, the most recent session for which data was available at press time, according to a market source.

Actively managed high-yield funds saw $315 million of inflows on the day.

However high-yield ETFS were negative, sustaining $33 million of outflows on Monday, the source said.

The combined funds are tracking $3.2 billion of net inflows for the week that will conclude with Wednesday's close, the market source said.

Indexes gain

Indexes were on the rise on Tuesday after a soft start to the week.

The KDP High Yield Daily index gained 20 bps to close Tuesday at 62.69 with the yield now 7.47%.

The index was down 13 bps on Monday.

The ICE BofAML US High Yield index gained 53.6 bps with the year-to-date return now negative 9.676%.

The index slid 13.9 bps on Monday.

The CDX High Yield 30 index gained 22 bps to close Tuesday at 93.68.

The index was down 35 bps on Monday.

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