SeaWorld prices; Cenovus at a premium; Graham Packaging in demand; Tupperware skyrockets

By Paul A. Harris and Abigail W. Adams

Portland, Me., July 29 – The domestic high-yield primary market was relatively quiet on Wednesday with one deal pricing and one more joining the forward calendar.

SeaWorld Entertainment, Inc. priced an upsized $500 million issue of five-year second-priority senior secured notes (Caa2/CCC) in an oversubscribed offer.

And Western Global Airlines LLC began a virtual roadshow for a $420 million offering of five-year senior notes (expected ratings B3/B-/B+) with pricing expected in the Aug. 2 week.

Leviathan Bond Ltd. set initial price talk in its $2.25 billion four-part offering of senior secured bullet notes (Ba3/BB-/BB), which is also expected for next week.

Meanwhile, the secondary space continued its slow grind tighter on Wednesday.

However, it was little changed by the Federal Reserve’s widely anticipated announcement about continued support.

New paper and earnings-related news were the driving forces of trading activity.

Cenovus Energy Inc.’s 5 3/8% senior notes due 2025 (Ba2/BBB-/BB+) dominated activity in the secondary space with the notes seen at a slight premium to their issue price.

While Graham Packaging Co. Inc.’s 7 1/8% senior notes due 2028 (Caa1/CCC+) were slightly weaker on Wednesday, they remained sought after and continued to trade with a large premium.

Outside of the new paper, Tupperware Brands Corp.’s 4¾% senior notes due 2021 skyrocketed in active trading as the company detailed plans to address the notes’ looming maturity in a better-than-expected earnings report.

SeaWorld oversubscribed

Amid a light Wednesday news flow in the primary market, SeaWorld Entertainment priced an upsized $500 million issue of five-year second-priority senior secured notes (Caa2/CCC) at par to yield 9½%.

The issue size was increased from $400 million.

Demand for the deal came to $2.1 billion across 150 accounts, enabling SeaWorld to force pricing into full retreat, according to a bond trader.

The print came at the tight end of final revised talk of 9½% to 9¾%, tightened from earlier official talk of 9¾% to 10%. Initial guidance was in the 10¼% area, the trader recounted.

The calendar

There was a slight buildup in the active forward calendar.

Western Global Airlines began a virtual roadshow for a $420 million offering of five-year senior notes (expected ratings B3/B-/B+).

Initial talk has the deal coming to yield 8¼% to 8½%, a trader said.

It is expected to price early in the Aug. 2 week.

PaymentSense switches currencies

In Europe, PaymentSense Ltd. shifted the currency of its five-year senior secured notes offering to British pounds from euros.

The revamped deal features £290 million of the notes, with initial guidance in the 8¾% area.

Prior to the change the London-based merchant services provider was offering €320 million of the notes which had been guided in the 8% area.

The changes are leverage-neutral, sources say.

Leviathan sets talk

And Leviathan Bond set initial price talk in its $2.25 billion four-part offering of senior secured bullet notes (Ba3/BB-/BB).

The deal is coming in tranches of three-year notes with initial talk in the 5 7/8% area, five-year notes with initial talk in the 6 3/8% area, seven-year notes with initial talk in the 6¾% area, and 10-year notes with initial talk in the 7¼% area.

Minimum tranche sizes of $500 million are expected.

The deal is secured by Israel's Delek Drilling LP which has a 45.34% working interest in the Leviathan gas project in the Mediterranean off the coast of Israel, and tends to be seen as an emerging markets trade. However, a significant number of high-yield accounts are having a close look, according to sources in Europe and the United States.

Cenovus in focus

Cenovus Energy’s split-rated 5 3/8% senior notes due 2025 dominated trading activity in the secondary space on Wednesday.

While trading at a premium to their issue price, there was not substantial movement in the notes in the aftermarket.

The 5 3/8% notes were marked at par ½ bid, par ¾ offered on Wednesday, a level they have largely held since breaking for trade the previous session.

“There’s not too much appreciation there,” a source said.

With more than $245 million in reported volume, the notes were the most actively traded during the session.

Cenovus Energy priced an upsized $1 billion issue of the 5 3/8% notes in a Tuesday drive-by.

The yield printed in the middle of the 5¼% to 5½% yield talk.

The initial size of the offering was $750 million.

The deal was heard to be playing to more than $2.5 billion in orders.

Graham in demand

While the notes were trading off their highs on Wednesday, Graham Packaging’s 7 1/8% notes due 2028 continued to trade with a large premium.

The 7 1/8% notes were marked at 103¾ bid in active trading.

More than $36.5 million was on the tape heading into the market close.

While the notes “calmed down a bit,” on Wednesday, they still saw a pretty aggressive break, a source said.

The notes briefly touched 105 after freeing for trade on Tuesday before closing at 104.

Graham Packaging’s deal was heavily oversubscribed with accounts hungry for yield.

While rated CCC, the company has a decent product line in a relatively stable market, a source said.

The sector is also sought after by certain accounts.

“Packaging has a niche following,” the source said.

Graham Packaging priced a $510 million issue of the 7 1/8% note at par on Tuesday.

The yield printed at the tight end of yield talk in the 7¼% area.

Tupperware skyrockets

Tupperware’s 4¾% senior notes due 2021 skyrocketed on Wednesday after the company announced plans to address the soon-to-mature debt in a better-than-expected earnings report.

The 4¾% notes shot up 8½ points to close the day at 90½, a market source said.

It was their highest level since February.

The notes were active with more than $25 million in reported volume.

The 4¾% notes soared despite the company issuing a “going concern” in its earnings report.

The company announced that it was evaluating options to address the roughly $500 million outstanding of the 4¾% notes before their maturity next June.

The company recently repurchased about $100 million in principal of the 4¾% notes in tender offers and has also engaged in open market purchases, a source said.

While the company attempted a debt exchange with certain holders, those efforts were unsuccessful.

$44 million Tuesday inflows

The dedicated high-yield bond funds had $44 million of net daily 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 $135 million of inflows on the day.

However high-yield ETFs sustained $91 million of outflows on Tuesday, the source said.

With only Wednesday's daily total remaining to go in the tally the combined funds are tracking $590 million of net inflows for the week to Wednesday's close, the market source said.

Indexes gain

Indexes were on the rise on Wednesday.

The KDP High Yield Daily index was up 13 basis points to close the day at 66.76 with the yield 5.76%.

The index was up 6 bps on Tuesday and 2 bps on Monday.

The ICE BofAML US High Yield index rose 32.9 bps with the year-to-date return now negative 0.626%.

The index gained 1.9 bps on Tuesday and was up 12.8 bps on Monday.

The CDX High Yield 30 index jumped 78 bps to close Wednesday at 102.7. The index shaved off 13 bps on Tuesday after gaining 43 bps on Monday.

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