Morning Commentary: Venture Global LNG brings $4 billion of notes; bankrupt Rite Aid active

By Paul A. Harris

Portland, Ore., Oct. 17 – The lights came up in the high-yield primary market on Tuesday as Venture Global LNG Inc. (B1/BB/BB-) announced plans to sell $4 billion of senior secured notes, according to market sources.

The deal includes a tranche of 5.25-year bullet notes, initial guidance 8¾% to 9%, and a tranche of 8.25-year notes with 3.25 years of call protection, initial talk 9¼% to 9½%.

Tranche sizes remain to be determined.

The deal was scheduled to launch on a Tuesday morning call with investors and could price ahead of Tuesday’s close, sources say.

Elsewhere on the new issue bourse, co-issuers Global Aircraft Leasing Co., Ltd. (GALC) and Global Sea Containers II Ltd. (GSCL II) continue to shop their $1.95 billion offering of five-year senior PIK toggle notes (Ba2//BB-), in order to raise cash to pay off the GALC 6½% senior PIK toggle notes due September 2024.

The 2024 bonds, which have been gyrating on perceived deal risk, were generally inactive on the morning, according to a trader in New York, who marked them slightly lower at 97½ bid.

They went out Monday at 97¾ bid, the trader said.

When the new GALC/GSCL II deal was announced last week, the GALC 2024 bonds traded to as high as 98 from the low-to-mid 90s, then retreated to as low as 95 bid, 95¼ offered amid investor wariness that the new deal might not get done, sources say.

In the interim, price conversations have gone higher, envisioning an 11½% cash coupon and a 13½% PIK coupon, the trader said.

Earlier guidance envisioned a cash coupon in the 11% area with a 200 basis points step-up for PIK coupon payments, sources say.

Noting that interest payments on the 2024 bonds were PIKed three times – generally coinciding with the coronavirus pandemic – potential buyers of the new bonds are keen to incentivize the company to make its coupon payments in cash, sources say.

To that end, the issuers have expressed a willingness to discuss document changes, the trader said.

For the deal to go forward investors need to have confidence that the company will have the ability to service the debt with cash, the source remarked.

Demand for the new bonds is heard to be around one-third deal size, where it began the week, the source added.

Away from the announced deals the market awaits word on a $700 million offering of secured notes from Cetera Financial Group (Aretec Group Inc.) backing its acquisition of Avantax Inc.

The bonds were telegraphed to the market on Monday when dealers set a Tuesday bank meeting to launch a $1.689 billion term loan and a $300 million revolver, which are also part of the acquisition financing.

The bonds might surface before the end of the week, the trader said.

Away from new issues the junk bond market opened 1/8 of point lower on Tuesday.

With the S&P 500 stock index down 0.27% at mid-morning, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was down 0.44%, or 32 cents, at $72.41.

Among topical names the bonds of Rite Aid Corp., which improved following Monday’s news that the pharmacy retailer filed for Chapter 11 bankruptcy and subsequently secured $3.45 billion in debtor-in-possession financing, came off from their post-filing highs, the trader said.

The Rite Aid 8% senior secured notes due 2026, which went to the high-60s from the low-60s after the company filed, retreated to 67½ bid, down a point on the morning, the source said.

Fund flows

The dedicated high-yield bond funds sustained $228 million of net daily cash outflows on Monday, according to a market source.

High-yield ETFs saw $223 million of outflows on the day.

Actively managed high-yield funds were generally flat on the day, posting $5 million of outflows on Monday, the source said.

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