BBB inks $240 million; Norwegian firm; Carnival, Pattern Energy rise

By Paul A. Harris and James McCandless

Portland, Ore., July 17 – An otherwise quiet summer Friday in the new-issue market featured one small deal from a high beta credit.

GC EOS Buyer, Inc., doing business as BBB Industries, priced a $240 million issue of 9¼% five-year senior secured notes (Caa1/CCC+) at 95.229 to yield 10½%, the yield coming at the wide end of the 10¼% to 10½% yield talk.

Rounding out the week, the high-yield secondary space continued to focus on travel names.

Newer notes priced from Norwegian Cruise Line Holdings Ltd., Carnival Corp. & plc and Pattern Energy Operations LP all trended higher.

Entertainment name Netflix, Inc.’s paper was lifted on the back of a lukewarm second-quarter earnings report.

Unusual summer

The market is apt to remain on the quiet side in the week ahead, with numerous issuers engulfed in an earnings blackout, a syndicate banker said, adding that there should be at least a modest amount of new issue activity during the July 20 week.

Late summer, and especially August, are typically slow months for issuance, the banker said.

Whether that tradition holds during the pandemic summer of 2020 remains to be seen, the source remarked.

There is evidence that the buyside has cash to put to work on a calendar.

And issuers in need of cash will want to get deals done before volatility generated by uncertainties related to contentious election year politics can roil the markets, as summer gives way to fall.

The quest for yield continues to drive cash into the junk market, a trader said on Friday, noting that the composite junk yield was 6.97% at Thursday's close, whereas the composite yield for investment-grade bonds, which are being supported by the Fed, ended Thursday at a record low 2.54%.

Recent notes better

Newer notes priced in the last week, namely in the travel space, remained in focus, traders said.

Miami-based cruise name Norwegian’s latest issue ended the session on firm ground.

The 10¼% senior notes due 2026 pushed past par to close at 100¼ bid.

At the close, about $136 million of the notes were on the tape.

Carnival, another Miami-based cruise liner, saw its issues join the prevailing trend.

The 10½% senior secured notes due 2026 tacked on ¼ point to close at 102 bid.

About $25 million of the notes changed hands.

San Francisco-based wind and solar utility Pattern Energy’s paper was positivite.

The 4½% senior secured notes due 2028 added ½ point to close at 103½ bid.

$13 million of the paper was exchanged.

AA varies

Elsewhere, in the travel space, American Airlines’ notes moved along separate paths, market sources said.

The 5% senior notes due 2022 gained 1½ points to close at 58 bid. The 3¾% senior notes due 2025 dropped 1 point to close at 45¼ bid.

This week, the Fort Worth-based air carrier sent out 25,000 potential furlough notices to its frontline workers.

The furloughs would take effect in October, when the U.S. government’s payroll assistance is set to end.

The name has projected a 25% reduction in its international capacity through 2021.

“I think the paper is going to stay under pressure for the next month or so,” a trader said. “They may not get back to normal levels for the rest of the year.”

Netflix lifted

Entertainment name Netflix’s issues were lifted by the end of the session, trader said.

The 4 7/8% senior notes due 2030 garnered 2 points to close at 113 bid.

About $11 million of the notes were on the tape.

After the close on Thursday, the Los Gatos, Calif.-based subscription streaming company released its lukewarm earnings report for the second quarter.

The name showed an earnings per share profit of $1.59, weaker than what analyst were estimating to be a $1.84 per share profit.

Revenues, however, surpassed expectations at $6.15 billion.

Also in the quarter, 10.1 million subscribers were added.

In Netflix’s third-quarter guidance, it expects to add 2.5 million subscribers, lower than consensus estimates for more than 5 million.

$766 million Thursday inflows

The dedicated high-yield bond funds had $766 million of net inflows on Thursday, according to a market source.

High-yield ETFs had $598 million of inflows on the day.

Actively managed high-yield funds had $168 million of inflows on Thursday, the source said.

News of Thursday's daily fund flows follows a Thursday afternoon report that the dedicated high-yield bond funds had $834 million of net inflows in the week to Wednesday's close, according to Refinitiv Lipper Fund Flow Report Newsline.

That's well below the $2.8 billion average weekly inflow seen in the past 16 weeks, during which the dedicated high-yield bond funds saw six of the seven largest weekly inflows on record, the market source noted.

Indexes up

Two high-yield indexes topped off the week in better positions.

The KDP High Yield Daily index gained 9 basis points on Friday to finish the week at 65.83 with the yield slipping to 6.33%.

The index improved by 10 basis points on Thursday, jumped up 19 bps on Wednesday and went unchanged on Tuesday.

This week, the index gained a cumulative 46 bps.

The ICE BofAML US High Yield index tacked on 15.8 bps with the year-to-date return closing at negative 2.581%.

The index rose 13 bps on Thursday, improved by 62 bps on Wednesday and declined by 11.1 bps on Tuesday.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.