Viper drives by; Newfold joins calendar; Norwegian under water; funds lose $2.45 billion

By Paul A. Harris and Abigail W. Adams

Portland, Me., Oct. 12 – Viper Energy Partners LP priced a $400 million issue of split-rated eight-year senior notes (Ba3/BBB-/BB-) at par to yield 7 3/8% in a Thursday drive-by.

The yield printed at the wide end of yield talk in the 7¼% area but tight to initial guidance in the 7½% area.

On the break a small amount of the deal traded on the high-yield desk at par 1/8 bid, par ½ offered, a trader said.

It was heard to have played to $1.1 billion of orders. The deal came in a high-yield execution, but a sizable portion of its audience came from crossover and investment-grade accounts, the trader said.

Also on Thursday Newfold Digital Holdings Group, Inc. began a roadshow for a $500 million offering of five-year senior secured notes (B2/B/BB-).

Initial guidance has the notes coming to yield in the high 11% to 12% area, with pricing set for the week ahead.

Newfold Digital takes a place on a slim active forward calendar that contained only one other deal at Thursday’s close.

Co-issuers Global Aircraft Leasing Co., Ltd. (GALC) and Global Sea Containers II Ltd. (GSCL II) are on the road with a $1.95 billion offering of five-year senior PIK toggle notes (Ba2//BB-).

Initial talk has the deal coming with a cash coupon in the 11% area, with a 200 basis points step-up for PIK coupons.

Pricing is set for the week ahead.

The GALC/GSCL II deal does not appear to be off to a roaring start, according to market sources.

Books are heard to be one-third done, a trader said on Thursday, adding that a substantial number of holders of the GALC 6½% senior PIK toggle notes due September 2024, which are being repaid with the proceeds from the new deal, profess a willingness to “roll” into the new deal.

However, the trader added, the 6½% notes due 2024, which initially popped to 97¾ bid, 98 offered from 94 bid, 95 offered when the new deal was announced, traded back down to 95¼ bid, 95 3/8 offered on Thursday, ostensibly the opposite way a bond might be expected to trade if it is about to be taken out at par with the proceeds of a new deal.

Volatile day in secondary

Meanwhile, the secondary space was volatile as the market digested the latest Consumer Price Index report.

While core CPI figures came largely in line with expectations, headline figures were hotter than expected.

The market appeared unfazed after the report’s release with the cash bond market up about 1/8 point.

“Then it flattened,” a source said.

The market gave back its early gains and swung to losses as heavy selling hit Treasuries with the 10-year yield rising 14 bps to 4.7%.

The cash bond market closed the day off ¼ to 3/8 point.

With inflation still creeping higher, bets were increasing for additional rate hikes, and the market pared its strong gains from Tuesday’s session when the market expressed exuberance the rate hike campaign had run its course.

“Who knows what’s going on the way this market is acting,” a source said.

While the broader market was weak, new issues and topical news were the drivers of trading activity in the space.

Norwegian Cruise Line Holdings Ltd. subsidiary NCL Corp. Ltd.’s new 8 1/8% senior secured notes due 2029 (B1/BB-) sank underwater in the heavy market conditions with the notes closing the session on a 99-handle.

The new issue caused a repricing in NCL’s 7¾% senior notes due 2029 (Caa1/CCC+) with the notes primed over and S&P downgrading NCL’s unsecured debt in the wake of the new offering.

DaVita Inc.’s senior notes (B1/B+) remained active with its tranches mixed after the heavy selling of the previous session.

Biotech Organon & Co.’s senior notes remained under pressure with the notes down another 1 point in heavy volume after heavy selling on Wednesday.

Meanwhile, high-yield mutual funds and exchange-traded funds continued to see outsized outflows with $2.45 billion leaving the space in the week through Wednesday’s close, a source said.

The outflows come after $2.6 billion left the space in the previous week.

There was another $2.4 billion outflow in the week prior to that.

Norwegian under water

NCL’s new 8 1/8% senior secured notes due 2029 gave up the nominal gains made on the break and sank below par.

The notes traded as high as par 3/8 early in the session but caved to selling pressure as the market turned negative.

The notes sank to a 99-handle and closed the day in the 99½ to 99 5/8 context, a source said.

There was $96 million in reported volume.

Norwegian’s latest offering put pressure on the company’s 7¾% senior notes due 2029, which sank more than 2 points in heavy selling.

The notes launched the day wrapped around 91, a source said.

By the afternoon the notes were trading on an 89-handle and closed the day in the 89½ to 89¾ context.

The yield rose to 10 3/8%.

NCL’s new secured notes pushed the 7¾% notes further down NCL’s capital structure with the unsecured notes maturing one month after the secured notes, a source said.

S&P also downgraded NCL’s unsecured debt to CCC+ from B- and lowered the recovery rating to 6 from 5 due to an increase in secured debt.

DaVita mixed

DaVita’s senior notes remained in focus on Thursday as the potential disruptive effects of weight-loss drug Ozempic continued to reverberate through the market and pressure diabetes and kidney disease treatment companies.

While active, the notes were mixed with signs the heavy selling from the previous session was abating.

DaVita’s 3¾% senior notes due 2031 were largely unchanged in active trade after a 4-point drop the previous session.

The 3¾% notes continued to trade in the 71½ to 72½ context with the yield about 9 1/8%, a source said.

There was $20 million in reported volume.

The 4 5/8% notes due 2030 were off another ½ point after also falling 4 points on Wednesday.

They closed the day on a 76-handle with the notes trading in the 76¼ to 76¾ context and the yield rising to about 9½%.

DaVita was hard hit on Wednesday amid a broad sell-off in the capital structures of kidney treatment, diabetes and medical device companies.

News Ozempic had shown promise as a treatment for kidney failure sparked the selloff, but several sources felt the reaction was overblown.

Organon weaker

Biotech Organon’s secured and unsecured notes continued to see heavy selling on Thursday with the notes falling another 1 point.

The 5 1/8% senior notes due 2031 (B1/BB-) closed the day at 77 1/8 with the yield now 9 3/8%.

There was $15 million in reported volume.

The notes were down 1½ points on Wednesday.

The 4 1/8% senior secured notes due 2028 (Ba2/BB) closed the day at 85¼ with the yield rising to 8%.

There was $11 million in reported volume.

The notes also sank 1½ points the previous session.

Indexes

The KDP High Yield Daily index was down 19 basis points to close Thursday at 48.99 with the yield 8.14%.

The index fell 8 bps on Wednesday after gaining 41 bps on Tuesday.

The ICE BofAML US High Yield index fell 33.1 bps with the year-to-date return now 5.203%.

The index added 5 bps on Wednesday after shooting up 95 bps on Tuesday.

The CDX High Yield 30 index fell 32 bps to close Thursday at 100.43.

The index gained 14 bps on Wednesday and 31 bps on Tuesday.

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