United Rentals prices; TransAlta jumps in junkland; DISH hits new heights; Carnival surges

By Paul A. Harris and Abigail W. Adams

Portland, Me., Nov. 15 – United Rentals (North America), Inc. captured the primary market spotlight on Tuesday as it priced a $1.5 billion issue of seven-year first-lien senior secured notes (Baa3/BBB-) backing the buyout of Ahern Rentals Inc.

While the notes carry an investment-grade rating, they priced off the high-yield syndicate desk, a source said.

Meanwhile, the calendar continued to grow with Tokyo-based Rakuten Group, Inc. announcing a $500 million offering of two-year senior notes (BB+).

And market players await further word on the Pegasus Merger Co./Tenneco Inc. $1 billion offering of six-year senior secured notes (B2/B-) which has sat on the forward calendar since early November.

The deal was heard to be experiencing headwinds and covenant changes are expected.

Meanwhile, the secondary space resumed its rally on Tuesday following the latest Producer Price Index report which also indicated cooling inflation, giving fuel to the Federal Reserve dovish pivot scenario the market has long hoped for.

While the market “deflated a little into the close,” it remained firmly in the green with the cash bond market closing up 3/8 to ½ point, a source said.

Buying interest was strong on Tuesday with offers-wanted-in-competition lists outnumbering bids-wanted-in-competition nearly two-to-one.

TransAlta Corp.’s new 7¾% senior green notes due 2029 (Ba1/BB+) outperformed in the aftermarket with the notes jumping to a 102-handle in active trading.

DISH Network Corp.’s recently priced 11¾% senior secured notes due 2027 (Ba3/B+) continued to gain alongside the broader market with the notes hitting their highest level on Tuesday since pricing.

Carnival Corp.’s capital structure made strong gains during Tuesday’s session with its notes up 1 to 4 points in heavy volume with the cruise line operator launching another capital raise, this time in the form of convertible notes, after the close of equity markets.

Tuesday’s primary

United Rentals priced a $1.5 billion issue of 6% seven-year-first lien senior secured notes at par to yield 5.999%, tight to talk, on Tuesday.

The deal, which priced on the high-yield syndicate desk, played to $4.5 billion of demand including $500 million of reverse inquiry, a sellside source said.

The bonds were going out at par ¼ bid, par ½ offered, a bond trader said.

United Rentals came on an accelerated timeline. When announced on Tuesday morning it was scheduled to remain in the market until Wednesday.

Elsewhere Tuesday Tokyo-based Rakuten Group announced a $500 million offering of two-year senior notes which it plans to price early in the week ahead, with the participation of the U.S. high-yield syndicate desk.

Meantime the market anticipated word on covenant changes in the Pegasus Merger Co./Tenneco Inc. $1 billion offering of six-year senior secured notes, which have been in the market since the beginning of November.

However, no updates materialized as of the Tuesday close, traders said.

The deal, backing the buyout of Tenneco by Apollo, has been facing headwinds, according to market sources.

And an acquisition deal telegraphed in a Monday press release from Open Text, which merely mentioned a pending offering of senior secured notes, could end up on the investment-grade desk, according to a trader who added that it is heard to be coming with a BBB- profile.

The size of the secured notes offer is expected to be $1.5 billion, the trader said, adding that Barclays is expected to lead.

TransAlta outperforms

TransAlta’s new 7¾% senior green notes due 2029 outperformed in the aftermarket with the notes continuing to gain after a strong break.

The 7¾% notes rose another 5/8 point to a 102-handle on Tuesday.

The notes traded as high as 102 7/8 and were wrapped around 102 3/8 heading into the market close, a source said.

There was $22.5 million in reported volume.

The notes played to heavy demand during bookbuilding which followed them into the secondary space.

The Calgary, Alta.-based electricity supplier priced a $400 million issue of the 7¾% notes at par in a Monday drive-by.

The yield printed at the tight end of the 7¾% to 8% yield talk.

The deal came to the market as a result of reverse inquiry which was twice the offer size of the deal, a source said.

DISH’s new heights

DISH’s recently priced 11¾% senior secured notes due 2027 continued to gain alongside the broader market with the notes hitting a fresh high on Tuesday.

The 11¾% notes rose 1 point to a 101-handle.

They were changing hands in the 101¼ to 101¾ context throughout Tuesday’s session., a source said.

There was $14 million in reported volume.

Tuesday marked the highest level for the notes since the $2 billion issue, which priced at 98.171, broke for trade on Nov. 7.

Carnival rises

Carnival’s capital structure made strong gains during Tuesday’s session with its junk bonds rising 1 to 4 points in heavy volume.

Carnival’s 6% senior notes due 2029 (B3/B) were the most active of the capital structure with the notes rising 2 points to close the day at 71¾ with the yield now 12½%.

There was $34.5 million in reported volume.

The cruise line operator’s 5¾% senior notes due 2027 also rose 2 points to close the day at 76 with the yield 13¼%.

There was $28 million in reported volume.

Carnival’s 7 5/8% senior notes due 2026 rose 1¾ points to close the day at 83 with the yield 14¼%.

Carnival’s most recently priced 10 3/8% senior priority notes due 2028 (B2/B+) continued their strong uptrend with the notes breaking above a 103-handle.

The notes were changing hands in the 103¾ to 104¼ context heading into the close, a source said.

The $2 billion issue priced at 98.465 on Oct. 18.

Carnival’s 10½% senior notes due 2030 also continued to post strong gains with the notes rising another 2 to 3 points.

While the majority of trades were on an 85-handle on Tuesday, the notes surged after the close of equity markets and closed the day at 86 bid, 87 offered, a source said.

The 10½% notes have climbed 10 points in the past week, the source said.

Carnival is a high-beta name that surges or falls based on ETF buying or selling activity.

However, market players may have caught wind of Carnival’s latest pass at the capital markets.

As part of its 2024 refinancing plan, Carnival launched a $1 billion offering of five-year convertible notes after the close of equity markets with proceeds to be used to make principal payments on debt.

Books on the offering closed at 6:30 p.m. ET with pricing expected thereafter.

Price talk is for a coupon of 5.25% to 5.75% and an initial conversion premium of 20% to 25%.

Fund flows

High-yield ETFs sustained $377 million of daily cash outflows on Monday, the most recent session for which data was available at press time, according to a market source.

Actively managed high-yield funds saw $20 million of inflows on the day.

The combined funds are tracking $2.6 billion of net inflows for the week that will conclude with Wednesday's close, according to the market source.

Indexes

The KDP High Yield Daily index rose 23 points to close Tuesday at 51.99 with the yield now 7.44%.

The index gained 26 points on Monday.

The ICE BofAML US High Yield index rose 43.7 basis points with the year-to-date return now negative 11.177%.

The index gained 33.6 bps on Monday.

The CDX High Yield 30 index gained 20 bps to close Tuesday at 100.52.

The index fell 23 bps on Monday.

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