Junk calendar balloons; Carnival, DISH come in; R.R. Donnelley gains on buyout offer

By Paul A. Harris and Abigail W. Adams

Portland, Me., Oct. 12 – The post-holiday Tuesday session began the abbreviated Oct. 11 week with a blast of new issue news that loaded up the active deal calendar with $7.3 billion of business, most if not all of it expected to clear before Friday's close.

However none of those announcements involved drive-bys, so no deals priced on Tuesday.

It was a slow return from the long holiday weekend in the secondary space with the market soft and volume light as market players awaited the latest Consumer Price Index report on Wednesday, sources said.

Carnival Corp.’s 5¾% senior notes due 2027 (B2/B) were down about ¼ point in high-volume activity.

DISH DBS Corp.’s already struggling 5 1/8% senior notes due 2029 (B2/B-) were also trending lower in active trading.

However, R.R. Donnelley & Sons Co.’s 6 1/8% senior secured notes due 2026 (B1/B+) jumped almost 3 points following news of a buyout offer.

Stage is set

Dealers set the stage for an active Wednesday session when the biggest deal on the calendar, Iliad Holdings SAS's €3.6 billion four-part secured offer (B2/B+) – with a pair of $1 billion dollar-denominated tranches, heads for the block.

The Iliad deal, which had been held over in the market from last week, waiting for order books to build, was teed up on Tuesday with tranche sizes and wide-to-guidance official price talk (see related story in this issue).

It also underwent covenant changes, a trader said.

The was no shortage of fresh European telecom paper in the market when Iliad rolled out its deal in early October, the trader noted, recounting that in late September Altice France SA priced $2 billion and €800 million of secured notes (B2/B).

The Altice dollar-denominated 5½% senior secured notes due October 2029 were 97½ bid on Tuesday, the trader said, noting the significant discount to the issue price: $2 billion came at par on Sept. 24.

Nevertheless, the Iliad books were heard to be growing on Tuesday, as investors warmed to the wider pricing and covenant concessions.

It should get done, the trader said.

Meanwhile Monitronics International, Inc., which does business as Brinks Home, may attempt to price its $1.1 billion offering of seven-year senior secured first-lien notes (Caa1/B-) on Wednesday, sources say.

Pending official talk, the deal is in the market with initial guidance in the 10% area.

The offer was heard to have been propelled by some reverse inquiry, however the order book was not quite done on Tuesday morning, the trader said.

Elsewhere, amid a generous helping of new high-yield offers that started roadshows on Monday, Weatherford International Ltd., from the badly battered oil field services sector, began marketing a $1.5 billion offering of 8.5-year senior notes (B3/CCC+).

Basking in the glow of robust oil prices – the barrel price of West Texas Intermediate crude closed at $80.64 on Tuesday (it ended 2020 at $48.52) – the Weatherford offer is in the market with initial guidance in the high 8% area, and is set to price later this week.

There are also a pair of deals out of Europe that feature dollar-denominated junk: Albion HoldCo Ltd. (Aggreko) with £1.055 billion equivalent in three tranches, including $485 million of unsecured paper and a to-be-determined amount of dollar-denominated secured notes, and Polynt-Reichhold with €1.3 billion equivalent of secured paper (B1/BB-), including a $750 million five-year fixed-rate tranche.

All of it comes as the high-yield market has begun to labor, in earnest, against the tide of rising Treasury rates, the trader said.

Dollar-denominated junk finished Tuesday ¼ point to ½ point lower, and euro-denominated paper was generally down ½ point, sources said.

Carnival weakens

Carnival’s 5¾% senior notes due 2027 were weak on Tuesday with the notes moving lower alongside the broader market.

The 5¾% notes were off about ¼ point, a source said.

They traded in a range of 102 7/8 to 103¼ throughout Tuesday’s session.

With more than $22 million in reported volume, the notes were among the most actively traded during Tuesday’s session.

The 5¾% notes are a large, liquid issue with $3.5 billion outstanding. They initially struggled after pricing at par in February with the notes trading as low as 99.

However, they traded as high as 106½ in June. Then, they dropped back down to par before again catching a bid and trading up to a 103-handle on renewed optimism surrounding the reopening trade.

DISH down again

DISH’s 5 1/8% senior notes due 2029 sank further below par in active trading on Tuesday.

The 5 1/8% notes were off ¼ to ½ point.

They were changing hands in the 97¾ to 98 context throughout Tuesday’s session.

There was about $18 million in reported volume.

The 5 1/8% notes have struggled since the satellite broadcaster priced the $1.5 billion issue at par in May.

The notes have traded below their issue price since hitting the secondary space.

R.R. Donnelley pops

R.R. Donnelley’s 6 1/8% senior secured notes due 2026 were on the rise following news of a buyout offer for the company.

The 6 1/8% notes were up almost 3 points.

They were changing hands in a range of 106¼ to 107¼ throughout Thursday’s session, according to a market source.

There was about $18 million in reported volume.

R.R. Donnelley’s stock also surged following news that its largest shareholder, Chatham Asset Management, had offered to buyout the company for $7.50 a share, representing a 52% premium from Monday’s closing price.

Chatham Asset Management has also offered to equitize the $575 million that it owns of the company’s debt and provide $250 million in either equity or subordinated capital, according to a schedule 13D filing with the Securities and Exchange Commission.

Chatham owns approximately $47 million of the 6 1/8% notes.

Fund flows

Updating the recent cash flows of the dedicated high-yield bond funds, last Friday the funds sustained a hefty $779 million of net outflows.

High-yield ETFs sustained $789 million of outflows on the day.

Actively managed high yield funds were modestly in the green, posting $10 million of inflows on Friday.

For Monday, high-yield ETFs were absolutely flat, while the actively managed funds sustained $75 million of outflows, the source said.

Indexes

The KDP High Yield Daily index fell 23 points to close Tuesday at 69.45 with the yield now 3.9%.

The CDX High Yield 30 index dropped 34 bps to close Tuesday at 108.51.

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