AAdvantage prices, rips on the break; Avis at 102; Synaptics, Crocs, Mattel on par-handles

By Paul A. Harris and Abigail W. Adams

Portland, Ore., March 10 – American Airlines, Inc. and its AAdvantage Loyalty IP Ltd. frequent flyer program stole the show in the new issue market on Wednesday with an upsized $6.5 billion amount of amortizing senior secured bullet notes (Ba2//BB) in two tranches.

Meanwhile, it was a quiet day in the secondary space on Wednesday with the overall market largely unchanged.

While some sectors and names saw support and were bid up about ½ point, the dip buying that catapulted the Nasdaq out of correction territory on Tuesday has not yet taken hold in the high-yield market.

“It seems like dealers are still anticipating some volatility to come as most haven’t stepped in on names,” a source said.

Exchange-traded funds continued to be the primary movers of prices in the secondary space and new paper continued to be the driving force of trading volume.

While several recent deals were in demand during bookbuilding, they remained on par-handles in the secondary.

Mattel, Inc.’s two tranches of senior notes (Ba2/BB/BB), Synaptics Inc.’s 4% senior notes due 2029 (Ba3/BB-/BB), and Crocs, Inc.’s 4¼% senior notes due 2029 (B1/BB-) were among the recent deals to remain on par handles in the secondary.

However, Avis Budget Group, Inc.’s 4¾% senior notes due 2028 (B3/B) outperformed with the notes jumping to a 102-handle.

American takes off, soars

One massive deal, American Airlines, had the junk market’s attention on Wednesday.

The frequent flyer program for the airline sold an upsized $6.5 billion of amortizing senior secured bullet notes in two tranches.

It was a blowout deal that played to massive demand and, once allocated, turned in a stratospheric performance in the secondary market, sources said.

Upsized from $5 billion, it included an upsized $3.5 billion tranche (from $2.5 billion) of 5½% five-year notes that priced at par, 12.5 basis points inside of talk, and an upsized $3 billion tranche (from $2.5 billion) of 5¾% eight-year notes that also priced at par, also 12.5 bps inside of talk (see related story in this issue).

That package, including both tranches of notes and the loan, was heard to be playing $30 billion of demand when the books closed, an investor said.

Ninety minutes before the close of books the term loan, itself, was heard to be playing to $11 billion of demand, according to a trader.

The bonds in both tranches went screaming into the secondary market, sources said.

Shortly after the Wednesday close the 5½% notes due 2026 were 103 bid, yielding approximately 4.6%, and the 5¾% notes due 2029 were 105 bid, yielding around 4.85%, a trader said.

Mattel’s tranches

In the secondary, Mattel’s two tranches of senior notes were on a par-handle, although the notes improved as the session progressed.

The 3 3/8% senior notes due 2026 and the 3¾% senior notes due 2029 were roughly at the same level.

They were wrapped around par on the break but rose to trade in the par 3/8 to par 5/8 context during Wednesday’s session.

In a heavily oversubscribed offering, Mattel priced a $600 million tranche of the 3 3/8% notes and a $600 million tranche of the 3¾% notes at par on Tuesday.

The 3 3/8% notes priced tighter than the 3½% to 3 5/8% yield talk; the 3¾% notes priced tighter than the 3 7/8% to 4% yield talk.

Par handle

Several other deals to clear the primary market on Tuesday were also trading with par handles on Wednesday.

Synaptics’ 4% senior notes due 2029 were marked at par ½ bid, par ¾ offered heading into the market close.

However, volume in the name was relatively light.

Synaptics priced a $400 million issue of the 4% notes at par on Tuesday.

Pricing came in the middle of talk for a yield in the 4% area.

Crocs’ 4¼% senior notes due 2029 saw a strong break with the notes hitting as high as 101.

However, they faded on Wednesday and were marked at par bid, par ¼ offered headed into the close.

Crocs priced an upsized $350 million, from $300 million, issue of the 4¼% notes on Tuesday.

Pricing came at the tight end of the 4¼% to 4½% yield talk.

Avis outperforms

While several recent deals were stuck on par-handles, Avis’ 4¾% senior notes due 2028 outperformed with the notes jumping to a 102-handle.

The notes were marked at 102 bid, 102¼ offered heading into Wednesday’s close.

Avis priced an upsized $500 million, from $350 million, issue of the 4¾% notes at par on Tuesday.

Pricing came at the tight end of yield talk in the 4 7/8% area.

Big outflows continue

The dedicated high-yield bond funds sustained approximately $1.09 billion of net daily outflows on Tuesday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs had $922 million of outflows on the day.

Actively managed high-yield funds sustained $165 million outflows on Tuesday, the source said.

Tuesday's big outflows follow outflows of $1.3 billion on Monday, $1.2 billion on Friday and $1.2 billion last Thursday, encompassing four of the five sessions in the present weekly reporting period, which concluded with Wednesday's close, and expected to be reported on Thursday.

At Tuesday's close the combined funds were tracking $4.9 billion of net outflows on the week, according to the market source who added that the high-yield asset class is presently undergoing its largest outflows since September 2020.

Indexes mixed

Indexes were again mixed on Wednesday.

The KDP High Yield Daily index was down 4 points to close Wednesday at 69.15 with the yield now 4.16%.

The index was down 5 points on Tuesday and 7 points on Monday.

The ICE BofAML US High Yield index was down 2 bps with the year-to-date return now 0.377%.

The index was down 8.8 bps on Tuesday and 4.5 bps on Monday.

The CDX High Yield 30 index gained 47 bps to close Wednesday at 108.67.

The index gained 16 bps on Tuesday after dropping 61 bps on Monday.

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