June pushes to nearly $50 billion with deals from AA, DISH and Minerals; travel sells off

By Paul A. Harris and Abigail W. Adams

Portland, Me., June 24 – As of Wednesday’s session, June 2020 now holds the record for high-yield issuance.

With $3.88 billion of new paper entering the primary, American Airlines, Inc., DISH Network Corp. and Minerals Technologies Inc. definitively pushed June past the previous record set in 2013.

As of press time, Mileage Plus Holding, LLC and Mileage Plus Intellectual Property Assets, Ltd., subsidiaries of United Airlines Holdings, Inc., had not released details on its $3 billion of seven-year amortizing notes, talked in the 7% area.

Meanwhile, it was a soft day for the secondary space with the sell-off in equities spilling over to credit.

The cash bond market was down ¾ to 1 point with the travel and gaming sectors again bearing the brunt of the sell-off.

Carnival Corp.’s 11½% first-priority senior secured notes due 2023 and Delta Air Lines Inc.’s recently priced 7 3/8% senior notes due 2026 took off several points in high-volume activity.

American Airlines’ junk bonds were also among the biggest losers of Wednesday’s session as the company prepped its new offering.

And Scientific Games Corp.’s recently priced 8 5/8% senior notes due 2025 (Caa2/B-) sank to a new low.

DISH’S 7¾% senior notes due 2026 were also losing ground on the heels of a new offering.

The Biggest Month Ever

A big Wednesday session in the new issue market, in which three Yankee issuers raised $3.88 billion, broke the record for monthly high-yield issuance.

With four market sessions left to run before the month concludes, June 2020 has had $49.87 billion price in 68 junk-rated, dollar-denominated tranches, topping the old monthly mark, $47.41 billion in 65 tranches, set in September 2013, according to Prospect News data.

Airlines megadeals

The spotlight belonged to the big air carriers on Wednesday.

American Airlines, Inc. priced an upsized $2.5 billion issue of 11¾% five-year senior secured bullet notes (Ba3/B+/BB-) at 99 to yield 12.013%.

The issue size was increased from $2 billion, after having previously been increased from $1.5 billion with the cancellation of the concurrent $500 million bank loan and the shift of its proceeds to the notes.

The coupon came at the wide end of the 11½% to 11¾% coupon talk. The price came on top of price talk. The yield printed at the wide end of the 11.76% to 12.01% yield talk. Initial guidance had the deal coming to yield in the 12% area.

The deal was heard to be playing to $3.2 billion of orders on Thursday, according to a bond trader who spotted the new American Airlines 11¾% notes due July 2025 trading above their issue price at 99½ bid, par ½ offered, late Thursday afternoon.

Elsewhere on Wednesday Mileage Plus/United Airlines was expected to price its $3 billion offering of seven-year senior secured amortizing notes, which were in the market with initial talk in the 7% area.

No terms were available at press time.

Earlier on Wednesday Moody’s assigned its investment-grade Baa3 rating to the notes, as well as the new loan.

Before the Wednesday lunch hour there was $9 billion of combined demand for the notes and loan – $6 billion for the notes, $3 billion for the loan – according to a New York-based junk bond trader.

DISH, Minerals, VTR

In another Wednesday megadeal DISH Network Corp. priced a $1 billion of issue eight-year senior notes (B1/B-) at par to yield 7 3/8% in a drive-by.

The yield printed at the tight end of yield talk in the 7½% area. That talk came in line with initial guidance in the mid-7% area.

The deal had been expected to upsize, a trader said.

Although that upsize did not materialize, the DISH deal was heard to be playing to $2.3 billion of demand from 105 accounts, the trader said.

And Minerals Technologies Inc. priced a $400 million issue of eight-year senior notes (Ba3/BB-) at par to yield 5% on Wednesday.

The yield printed in the middle of yield talk in the 5% area, and 12.5 basis points inside of the initial guidance in the 5¼% area.

The bonds traded to 101 3/8 bid, 101 7/8 offered late Wednesday afternoon, a trader said.

Away from the middle range of speculative-grade debt securities, in a deal on the radar screens of a significant number of high-yield investors in the United States, VTR, Liberty Global's Chilean telecommunications unit, priced a $1.15 billion amount of high-yield notes in two tranches.

The deal included $600 million of secured notes due Jan. 15, 2028 (Ba3/B+/BB+) which priced at par to yield 5 1/8%, 12.5 basis points inside of the 5¼% to 5½% yield talk. Early guidance was in the high 5% area.

They traded to par ¾ bid, 101¼ offered, the trader said.

It also included $550 million of unsecured notes due July 15, 2028 (B1/B/BB-) which priced at par to yield 6 3/8%, 12.5 bps inside of the 6½% to 6¾% yield talk. Early guidance was in the low 7% area.

The unsecured notes traded to 101 7/8 bid, 102 3/8 offered, according to the trader.

The calendar

The active forward calendar grew on Wednesday.

Germany-based elevator technology company thyssenkrupp Elevator kicked off a €4.05 billion equivalent five-part offering of high-yield notes.

A roadshow for the deal starts Thursday and runs through Wednesday, July 1.

The offer comes in tranches of dollar-denominated and euro-denominated notes.

And Meredith Corp. came into the market with $300 million of five-year senior secured notes (Ba3/BB-).

Looking to Thursday's session in Europe, Austrian sensor manufacturer ams AG circulated initial price talk on its €1 billion equivalent offering of five-year senior notes (Ba3/BB-/BB-).

The offer is coming in tranches of dollar-denominated notes with initial price talk of 6¾% to 7%, and euro-denominated notes with initial price talk of 5¾% to 6%.

And Ardonagh Midco 2 plc talked its $500 million offering of 6.5-year senior PIK toggle notes (//CCC) with an 11½% cash coupon which would step up by 100 to 125 basis points for PIK coupon payments, at a reoffer price of 99.

Both issuers have their offers teed up for Thursday.

The sell-off

Several names in the travel and gaming sectors were taking a hit on Wednesday as investor concern over a resurgence of Covid-19 cases sparked a sell-off in risk assets.

Carnival’s 11½% senior notes due 2023 gave back some of their gains.

The 11½% notes were down 1¾ points to 105½ late Wednesday afternoon, according to a market source.

There was more than $68 million in reported volume.

Delta’s 7 3/8% senior notes due 2026 sank below par on Wednesday for the first time since pricing.

The 7 3/8% notes dropped 2¾ points to close the day at 97½, a source said.

The bonds saw about $20 million in reported volume.

Delta’s 7 3/8% notes traded as high as 104 late last week.

Like most of the airlines, Delta’s 7 3/8% notes have whipsawed between large gains and losses based on Covid-19 headlines and investor sentiment about the economic recovery.

However, despite the volatility, the notes have held at par or above.

Delta priced a $1.25 billion issue of the 7 3/8% notes at 99.986 on June 10.

Scientific Games’ 8 5/8% notes due 2025 sank further below par in Wednesday’s sell-off.

The 8 5/8% notes were down 3 points to 95 late Wednesday afternoon, according to a market source.

The notes were active with more than $13 million in reported volume.

Scientific Games priced a $550 million issue of the 8 5/8% notes at par on June 17.

The notes have largely traded below par since pricing with the credit weak.

The notes priced with an 828 credit spread. They were trading with a credit spread of 962 on Wednesday, a source said.

The travel and gaming sectors have been among the hardest hit on concern over a resurgence of Covid-19 cases.

However, those sectors have also seen the most dramatic rebound on optimism over the economic recovery.

American crashes

American Airlines’ junk bonds crashed on Wednesday as the company prepped a new offering.

The airline’s 5% senior notes due 2022 were among the biggest losers of Wednesday’s session.

The notes dropped 6 points to 59½ in high-volume activity.

More than $25.5 million was on the tape in the late afternoon.

The yield on the 5% notes was 35.75%, according to a market source.

While volume was light, American Airlines’ 3¾% senior notes due 2025 also sank 6 points to change hands at 50.

The yield on the 3¾% notes was now more than 20%, according to a market source.

While the company’s outstanding notes had a much heartier yield than the issue that was just priced, both issues are unsecured.

DISH down

DISH’s 7¾% senior notes due 2026 were also trading off on Wednesday.

The notes dropped 1 5/8 points to 107½ in the late afternoon, according to a market source.

The notes were active with more than $26 million on the tape.

$135 million Tuesday inflows

The dedicated high-yield bond funds had $135 million of daily cash inflows on Tuesday, the most recent session for which data was available at press time, according to a market source.

Actively managed high-yield funds had $80 million of inflows on the day.

High-yield ETFs saw $55 million of inflows on Tuesday, the source said.

Indexes down

Indexes were down on Wednesday after a mixed start to the week.

The KDP High Yield Daily index dropped 25 points to 65.63 with the yield now 6.17%.

The index was down 10 points on Tuesday and 11 points on Monday.

The ICE BofAML US High Yield index dropped 60.4 bps with the year-to-date return now negative 3.805%. The index gained 6 bps on Tuesday after shaving off 4.5 bps on Monday.

The CDX High Yield 30 index dove 102 bps to close Wednesday at 99.28. The index was flat on Tuesday and gained 5 bps on Monday.

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