Morning Commentary: NCL brings $790 million secured notes; Ozempic slims Davita bonds

By Paul A. Harris

Portland, Ore., Oct. 11 – The lights came up in the high-yield new issue market on Wednesday as Norwegian Cruise Line Holdings Ltd. subsidiary NCL Corp. Ltd. disclosed plans to price $790 million of senior secured notes due 2029 (B1/BB-) in a drive-by.

Price talk is in the 8¼% area, inside of guidance in the 8½% area, according to a bond trader in New York, who noted that although there appeared to be no reverse inquiry in NCL’s newly proposed notes, the deal should go well because cruise lines have been the hot sector in the junk bond market for the past six months.

Away from new issues, the junk bond market was 1/8 of a point better at mid-morning, according to the trader’s reckoning.

With the Dow Jones industrial average and the S&P 500 stock indexes both up a modest 0.18% at mid-morning, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was up 0.11%, or 8 cents, at $73.29.

The Civitas Resources, Inc. 8 5/8% senior notes due November 2030 (B1/BB-/BB), the most recent issue to clear the market, were up ½ point or more on the morning at par ¾ bid, 101¼ offered in active trading, the trader said.

The paper was seen going out Tuesday night at par ½ bid, par ¾ offered.

The $1 billion issue priced at par on Tuesday in a drive-by deal that was heard to be five-times oversubscribed.

Away from new issues, the bonds of kidney dialysis services provider DaVita were under pressure amid news reports that early tests of Danish drug-maker Novo Nordisk’s hit diabetes and weight loss drug Ozempic on patients with chronic kidney disease have shown positive results, possibly eroding demand for dialysis services, the trader said.

The DaVita Inc. 4 5/8% senior notes due June 2030, which ended the Tuesday session a point better at 81 3/8 bid, fell 2½ points on Wednesday to 78½ bid in super-active trading.

Early positive perceptions of Ozempic’s efficacy in treating kidney disease will likely impact bonds across the entire dialysis services sector, including Fresenius Medical Care AG & Co., which is now an investment-grade credit, as well as high-yield issuer U.S. Renal Care, Inc., the trader remarked.

Fund flows

The daily cash flows of the dedicated high-yield bond funds were mixed on Tuesday, according to a market source.

High-yield ETFs saw a healthy $386 million of inflows on the day.

However actively managed high-yield funds sustained $108 million of outflows on Tuesday, the source said.

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