High yield posts $3.38 billion; NOVA weakens; Royal Caribbean, Realogy gain post-earnings

By Paul A. Harris and Abigail W. Adams

Portland, Me., April 29 – In a Thursday session which generated a lot of news in the new issue market, issuers raised a combined $3.38 billion.

Meanwhile, the secondary space was stronger on Thursday after a largely sideways week.

However, longer duration, lower coupon bonds remained under pressure with the 10-year Treasury yield climbing as high as 1.68% in intraday activity before falling back to 1.643% at the market close.

NOVA Chemicals Corp.’s new 4¼% senior notes due 2029 (Ba3/BB-) dropped below par in active trading with the notes among the casualties of investors shedding their duration risk.

With a packed pipeline, new issues remained the dominant focus of the secondary space.

However, several names were active and posting gains following their earnings reports.

Royal Caribbean Cruises Ltd.’s 5½% senior notes due 2028 (B2/B) and Realogy Holdings Corp.’s 5¾% senior notes due 2029 (Caa1/B-) were among the issues on the rise after better-than-expected earnings.

Thursday session

In the $3.38 billion Thursday primary, executions were a mixed bag.

A couple of familiar high-yield names had solid executions.

In a drive-by, Dana Inc. priced a $400 million issue of 4¼% senior green bonds due Sept. 1, 2030 (B2/BB/BB+) at par, at the tight end of talk.

The deal was heard to be playing to around $1.5 billion of demand

Meanwhile, at the conclusion of a roadshow Carriage Services, Inc. priced a $400 million issue of 4¼% eight-year senior notes (B2/B+) at par, also at the tight end talk.

However, Independence Energy Finance LLC priced a $500 million issue of 7¼% five-year senior notes (B1/B) at par, well wide of the 6½% to 6¾% talk.

Demand was around deal size on Thursday afternoon, according to a trader who had the new Independence Energy 7¼% notes straddling par at 99½ bid, par ½ offered, following Thursday's close.

The session's big issuer was Altice subsidiary CSC Holdings LLC which priced $2 billion of notes in two tranches.

The active new issue calendar ended Thursday at a hefty $8 billion, all of it expected to price by the end of the first week in May.

Allied Universal started a roadshow on Thursday for a $2.96 billion three-part offering of high-yield notes backing its acquisition of London-based security services provider G4S.

The Friday session will get underway with five tranches from four issuers on deck (see related stories in this issue).

However, don't be too surprised if there is some drive-by activity on the last day of April, as dealers jockey for league table position, market sources say.

NOVA below par

NOVA Chemicals’ 4¼% senior notes due 2029 dropped below par in active trading on Thursday, a byproduct of investors shedding their duration risk amid rising Treasury yields.

The 4¼% notes were wrapped around par early in the session.

However, they sank to a 99-handle in intraday activity as Treasury yields rose.

The notes were changing hands in the 99¾ to 99 7/8 context heading into the market close, a source said.

“It’s a tough secondary for anyone who prices 4% area coupons with 8+ years of maturity,” a source said. “Duration is not loved at the moment.”

The notes remained active with more than $34 million in reported volume.

The 4¼% notes had been stuck at par since breaking for trade.

The Calgary, Alta.-based chemical company priced a $575 million issue of the 4¼% notes at par on Tuesday.

Royal Caribbean rises

Royal Caribbean’s 5½% senior notes due 2028 were on the rise in active trading on Thursday.

The notes climbed to a 105-handle and were changing hands in the 105 3/8 to 105 5/8 context heading into the market close.

There was more than $14 million in reported volume.

The notes were posting gains after the cruise line operator reported first-quarter earnings.

Royal Caribbean beat analyst expectations with revenue of $42 million versus the $41 million expected.

The company also gave an update on its liquidity position and debt management plan, which, the company reported, has improved through a series of capital raises and debt refinancings. (See related article in this issue.)

Realogy gains

Realogy’s 5¾% senior notes due 2029 were posting gains in active trading.

The notes rose almost 2 points to close the day at 103¼, a source said.

They were previously changing hands in the 101½ to 101¾ context.

The off-the-run name was active with more than $7 million in reported volume

The real estate brokerage operator trounced analyst expectations with revenue of $1.55 billion versus analyst expectations for revenue of $1.5 billion.

EBITDA was $162 million which beat expectations for revenue of $80.8 million.

The company’s fundamentals were attractive with a total leverage ratio at 3.4x, according to a market source.

Indexes mixed

Indexes were again mixed on Thursday with some flat while others posted gains.

The KDP High Yield Daily index was again unmoved and closed Thursday at 69.61 with the yield 3.9%.

The index was also unchanged on Wednesday after adding 6 points on Tuesday and 1 point on Monday.

The ICE BofAML US High Yield index gained 5.6 bps with the year-to-date return now 1.961%.

The index shaved off 1.1 bps on Wednesday after climbing 1.6 bps on Tuesday and 9 bps on Monday.

The CDX High Yield 30 index gained 18 bps to close Thursday at 109.99.

The index gained 16 bps on Wednesday, shaved off 3 bps on Tuesday and inched up 3 bps on Monday.

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