Royal Caribbean, American Airlines price junk deals; Uniti trims premium; Lumen falls

By Paul A. Harris and Abigail W. Adams

Portland, Me., Feb. 8 – The junk bond primary market was host to drive-by issuers American Airlines, Inc. and Royal Caribbean Cruises Ltd. on Wednesday.

Meanwhile, it was another red day in the secondary space with the cash bond market off ¼ point.

The mini-rally following Federal Reserve chair Jerome Powell’s Tuesday comments did not have staying power with the market opening Wednesday soft and continuing to move lower throughout the session, a source said.

Exchange-traded funds were sellers with several bids-wanted-in-competition lists circulating the market.

While it was a soft day for the broader market, W.R. Grace Holdings LLC’s new 7 3/8% senior secured notes due 2031 (B1/B/BB+) were holding on to a decent premium in active trade although the notes were well off their highs.

However, the trend of new issues putting in strong performances in the secondary space was showing signs of waning with Nielsen Holdings plc’s 9.29% senior secured notes due 2029 (B2/B/BB) continuing to fall in heavy volume.

Uniti Group LP, Uniti Fiber Holdings Inc., Uniti Group Finance 2019 Inc., CSL Capital, LLC’s 10½% senior secured notes due 2028 (B2/B/BB+) also continued to come in with the notes trading below a 101-handle on Wednesday for the first time since breaking for trade.

However, it was Lumen Technologies’ senior notes that were the major laggards of Wednesday’s session with the communications company’s capital structure under pressure after a large earnings miss.

Lumen’s notes fell 1 to 8 points while subsidiary Level 3 Financing, Inc.’s senior notes were down 2 to 4 points.

Driving, flying, cruising by

Wednesday's primary market action came in a pair of highly oversubscribed drive-by deals, both from ultra-familiar issuers, that were very tightly executed.

American Airlines, Inc. priced a $750 million issue of five-year first-lien senior secured notes (Ba3/B-/B) at par to yield 7¼%, at the tight end talk.

And Royal Caribbean Cruises Ltd. priced a $700 million issue of seven-year priority guarantee notes due Jan. 15, 2030 (B2/B+) at par to yield 7¼%, inside of talk.

A big deal is on deck for Thursday from Ineos Finance plc.

The U.K.-based chemical company upsized its bond and bank loan package to €2.6 billion equivalent from €2 billion equivalent on Wednesday.

The final sizes of all tranches – two of bonds and two term loan tranches – remain to be determined.

The bond portion is comprised of dollar-denominated and euro-denominated 5.25-year senior secured notes (Ba2/BB/expected BBB-) both talked to yield 6¾% to 7%, versus earlier guidance in the low-7% area.

Books close at 10 a.m. ET Thursday.

W.R. Grace holds premium

While it was a soft day for the secondary space, W.R. Grace’s 7 3/8% senior secured notes due 2031 were holding on to a decent premium in active trade, although the notes were well off the heights reached after breaking for trade.

The 7 3/8% notes were changing hands in the par 3/8 to par 5/8 context on Wednesday, a source said.

There was $27 million in reported volume.

They shot as high as 101 after breaking for trade the previous session.

W.R. Grace priced an upsized $350 million, from $325 million, issue of the 7 3/8% notes at par in a Tuesday drive-by.

The yield printed tighter than the 7½% to 7¾% yield talk.

Downtrend

Nielsen’s 9.29% senior secured notes due 2029 weakened in a continued downtrend with the notes well-below the price of Monday’s add-on.

The 9.29% notes were off 1 point on Wednesday with the notes falling to a 96-handle.

The notes traded as low as 96 but pared those losses to trade in the 96 3/8 to 96 5/8 context heading into the market close, a source said.

The notes continued to see heavy volume with $46 million on the tape.

Nielsen’s notes have struggled since the media data and analytics company priced a $650 million add-on at 98 on Monday.

The notes have traded straight down since pricing and closed Tuesday’s session on a 97-handle.

Uniti weaker

Uniti’s 10½% senior secured notes due 2028 continued to weaken in the aftermarket with the notes trading below a 101-handle for the first time since breaking for trade.

The 10½% notes were down ¾ to 1 point on Wednesday with the notes moving in the par ½ to 101 context heading into the market close, a source said.

There was $45 million in reported volume.

The 10½% notes have put in a strong aftermarket performance since the $2.6 billion issue priced at par on Feb. 2.

The notes have largely traded in the 101½ to 102 context since breaking for trade.

Lumen falls

Lumen’s capital structure was under pressure on Wednesday after the communications company posted a large earnings disappointment.

Lumen’s 4% senior secured notes due 2027 (Ba3/BB+) suffered the least with a 1-point decline.

The notes closed Wednesday at 80 with a yield of 10 1/8%, a source said.

There was $40 million in reported volume.

Lumen’s 5 1/8% senior notes due 2026 (B2/B+) sank 5 points to close the day at 78¾ with a yield of 12¼%, a source said.

The tranche was the next most active in the capital structure with $38 million in reported volume.

Lumen’s 4½% senior notes due 2029 fell 3½ points to close the day at 61½ with a yield of 14 3/8%.

The 5 3/8% senior notes sank 7 points to close the day at 63½.

Lumen subsidiary Level 3’s 4 5/8% senior notes due 2027 (Ba3/BB-) were off 4 points to close the day at 80¾ with a yield of about 10%, according to a market source.

The 3 7/8% senior secured notes due 2029 (Ba1/BB+) were also down 4 points to close the day at 77¾ with the yield 8¼%, a source said.

Lumen’s capital structure plunged on Wednesday with its stock hitting its lowest level in decades, a source said.

While Lumen’s earnings were better-than-expected, its capital structure was taking a hit after the company released forward guidance with EBITDA that was 10% below analyst expectations.

Indexes

The KDP High Yield Daily index was down 9 points to close Wednesday at 53.36 with the yield 6.89%. The index was down 9 points on Tuesday and 39 points on Monday.

The ICE BofAML US High Yield index was down 15 basis points with the year-to-date return now 4.222%.

The index inched up 0.9 bp on Tuesday after falling 68.8 bps on Monday.

The CDX High Yield 30 index fell 36 bps to close Wednesday at 102.91.

The index gained 35 bps on Tuesday after falling 27 bps on Monday.

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