Blue Yonder, Fortress price; Surgery Center adds on; travel active; funds add $3.9 billion

By Paul A. Harris and Abigail W. Adams

Portland, Me., July 23 – The domestic high-yield primary market was active on Thursday with two new deals and one add-on clearing the market and one more joining the forward calendar.

Blue Yonder priced an upsized $750 million issue of 5.5-year senior secured notes (B1/B-).

Fortress Transportation and Infrastructure Investors LLC priced an upsized $400 million issue of seven-year senior notes (Ba3/B/BB-).

And Surgery Center Holdings, Inc. priced a $115 million fungible add-on to its 10% senior notes due April 15, 2027 (Caa2/CCC).

American Airlines Inc. priced $1.2 billion of secured notes in two tranches in a private placement.

And Graham Packaging Co. Inc. joined the forward calendar with a $510 million offering that is expected to price next week.

Diamond Resorts International Inc. was expected to price a $525 million offering of six-year senior secured notes (B3/B-) on Thursday.

However, the deal, which was initially slated for Wednesday’s business, may again be postponed, sources said.

Empire Resorts Inc.’s $475 million offering of senior secured notes (B+/B+) has also experienced some pushback with price talk widening.

Meanwhile, the secondary space was strong at the open but came in to close the day largely unchanged as equities sold off on an increase in jobless claims numbers and mounting tensions between the United States and China, sources said.

As the secondary space awaited the new deals in the pipeline, earnings-related news pushed several outstanding issues into focus.

United Airlines Holdings, Inc. subsidiaries Mileage Plus Holdings LLC and Mileage Plus Intellectual Property Assets, Ltd.’s 6.5% senior secured amortizing notes due 2027 (Baa3//BBB-) were making gains in high-volume activity following United’s second-quarter earnings report.

American Airlines’ 11¾% senior secured notes due 2025 (Ba3/B+/BB-) were also on the rise following its earnings report.

Navient Corp.’s 5% senior notes due 2027 were also posting gains following an earnings beat.

While little changed, Carnival Corp.’s senior notes saw renewed attention on Thursday as the company continues to downsize its fleet.

Meanwhile, cash continued to enter the secondary space with high-yield mutual and exchange-traded funds seeing inflows of $3.908 billion, according to the Refinitiv Lipper Fund Flow Report.

Thursday’s session

The pace of the primary market quickened during the Thursday session which saw three deals clear the market.

Blue Yonder priced an upsized $750 million issue of 5.5-year senior secured notes at par to yield 4¼%.

The issue size increased from $500 million.

The yield printed 12.5 basis points through yield talk in the 4½% area. Initial talk was 5% to 5¼%.

Fortress Transportation and Infrastructure priced an upsized $400 million issue of seven-year senior notes at par to yield 9¾%.

The issue size increased from $300 million.

The yield printed at the tight end of the 9¾% to 10% yield talk. Initial talk was in the 10% area.

The deal played to $475 million of orders, a trader said.

Surgery Center Holdings priced a $115 million fungible add-on to its 10% senior notes due April 15, 2027 at 100.75.

The execution renders a 9.745% yield to worst and a 9.839% yield to maturity.

The issue price came rich to the 100 to 100.5 price talk.

Meanwhile, American Airlines announced $1.2 billion of secured notes in two tranches which were expected to price Thursday, sources said.

The deal included $1 billion of 5.5-year Intellectual Property notes talked with a 10¾% coupon, including a PIK option, and $200 million of other secured notes.

West Street Strategic Solutions Fund I, LP and Broad Street Credit Holdings LLC, each a division of Goldman Sachs Group, Inc., are the investors.

The notes were not expected to be broadly syndicated, high-yield market sources said.

And terms were expected Thursday on Diamond Resorts International’s $525 million offering of six-year senior secured notes (B3/B-), however none were available at press time.

The deal, which was originally expected to price in a Wednesday drive-by, underwent an increase in price talk, which was revised to a 9¾% coupon at 98.889 to yield 10%. The new talk pushed the yield 50 basis points up from the midpoint of earlier yield talk in the 9½% area, which was also the initial guidance.

The deal was heard to be two-thirds done at revised talk, a trader said, late Thursday.

The calendar

UK-based Stonegate is on deck for Friday with a two-part offering of five-year senior secured notes (B3/B+) priced to move, market sources say.

The pub operator's deal includes £950 million of fixed-rate notes talked to yield 8% to 8¼%.

The deal also features €300 million of floating-rate notes that are also talked at a yield: 7¼% to 7½%.

Further out on the active calendar, Graham Packaging Co. began marketing a $510 million offering of eight-year senior notes on Thursday.

Initial talk has the deal coming to yield 7½% to 7¾%, with pricing expected on Wednesday, July 29.

Empire talk widens

Meanwhile market watchers have been tracking one other deal, the Empire Resorts Inc. $475 million offering of senior secured notes.

Early guidance had it coming to yield 8% to 8¼%, sources said.

However, the deal generated very little interest at that level, a trader said Thursday.

Accounts were canvassed as to what rate it might take to get the deal done, the trader said.

Also, feelers were put out on a reduced maturity that would have rejiggered the notes into a three-year non-call-two structure from the original five-year non-call-three.

There was also discussion of a guarantee on the part of the company's Malaysian parents, Kien Huat Realty III Ltd., which owns 51%, and Genting Malaysia Bhd., which owns 49%.

However, that proposal ran up against regulatory restrictions, the trader said.

The expectation is that if Empire Resorts is going to get a high-yield bond deal done it's looking at a double-digit coupon, the trader said.

Mileage Plus gains

Mileage Plus’ 6.5% senior amortizing notes due 2027 were on the rise in high-volume activity on Thursday after parent company United Airlines posted second-quarter earnings.

The 6.5% notes traded up ½ point to close Thursday at 103, according to a market source.

The Mileage Plus amortizing bond was called the “first of its kind debt financing,” for the company and contributed to the company’s increased liquidity position, Prospect News reported. (See related article in this issue)

While volume was light, United Airlines’ 5% senior notes due 2024 were also on the rise with the notes closing Thursday up ¾ point at 83¼.

United reported a narrower-than-expected second-quarter pre-tax loss of $2 billion compared to analyst expectations for a loss of $3.1 billion, Barron’s reported.

The company had $15.2 billion of liquidity as of July 20 and will continue to focus on maintaining its liquidity until travel demand increases, Prospect News reported.

American Airlines gains

American Airlines’ 11¾% senior notes due 2025 were also posting gains in active trading following its earnings report.

The 11¾% notes were up ½ point.

They were changing hands in the 91 to 91½ context throughout the session and stood poised to close the day at 91¼, sources said.

There was more than $21 million in reported volume heading into the market close.

While volume was light, American’s 5% senior notes due 2022 were up 1½ points to close the day at 61.

American reported second-quarter revenue of $1.62 billion which beat analyst expectations for revenue of $1.44 billion.

The airline also reported that it closed the second quarter with $10.2 billion in liquidity, reduced its daily cash burn to $30 million from $100 million, and raised another $1.2 billion in a private placement on Thursday, Prospect News reported. (See related article in this issue)

The company announced that its liquidity position should sustain it through a weak recovery and its goal is to be cash positive in 2021 as travel demand increases, Prospect News reported.

While there has been widespread speculation about the company filing for bankruptcy, the airline said it did not believe it would have an issue servicing its debt with the 5% notes due 2022 the first maturity it faces.

Navient’s earnings

Navient’s 5% senior notes due 2027 improved following the company’s second-quarter earnings report.

The 5% notes closed the day up ¾ point at 92½, according to a market source.

They were active with more than $18 million in reported volume.

The student loan servicing company reported core earnings of $146 million, an 11% increase year over year.

The company may issue additional unsecured debt to meet its liquidity needs, it said in a press release.

Carnival active

Carnival’s senior notes had high-volume activity on Thursday although the notes were little changed on the day.

Carnival’s recently priced 10½% senior notes due 2026 closed the session at 104, a level reached earlier in the week.

The cruise line’s 11½% senior notes due 2023 closed the day at 108¾, according to a market source.

Both tranches had more than $25 million in reported volume during Thursday’s session.

The notes were active as Carnival announced the sale of two ships in its fleet and two more that will be on long-term lay-up.

Carnival priced a $775 million tranche of the 10½% notes at par on July 15 as part of a dual-currency offering that also included a €425 million tranche.

Carnival priced a $4 billion issue of the 11½% notes at 99 to yield 11.901% in April.

Indexes mixed

Indexes were mixed on Thursday after posting gains for the majority of the week.

The KDP High Yield Daily index was up 13 points to close Thursday at 66.61 with the yield now 5.87%. The index rose 19 bps on Wednesday, 33 bps on Tuesday and 13 bps on Monday.

The ICE BofAML US High Yield index was up 11.3 bps with the year-to-date return now negative 1.114%.

The index gained 26 bps on Wednesday, 64.6 bps on Tuesday and was up 44.8 bps on Monday.

The CDX High Yield 30 index dropped 32 bps to close Thursday at 101.65. The index gained 17 bps on Wednesday and 22 bps on Tuesday.

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