Venture prices in junkland, existing notes widen; Global Aircraft expected before weekend

By Paul A. Harris and Abigail W. Adams

Portland, Me., Oct. 19 – Venture Global LNG Inc.’s offering in the junk bond space moved through pricing on Thursday while the deal from co-issuers Global Aircraft Leasing Co., Ltd. and Global Sea Containers II Ltd. is holding in the market at least overnight.

Meanwhile, the secondary space remained heavy as Treasury yields continued to climb with the full curve almost on a 5-handle.

The 10-year Treasury yield jumped 8.8 basis points to close the day at 4.99%.

There was a temporary reprieve in the market midsession with buyers coming in as Federal Reserve chair Jerome Powell addressed the Economic Club of New York.

His speech gave rise to hope that high bond yields would negate the need for further tightening with buyers emerging surrounding his remarks.

However, Powell also left opened the possibility of future rate hikes and supported a higher-for-longer rate narrative.

The bounce midsession proved fleeting with the market quickly returning gains and closing the session down ¼ point.

The deals in the pipeline continued to spark movement in the secondary space with Venture Global’s outstanding 8 1/8% senior secured notes due 2028 and 8 3/8% senior secured notes due 2031 (B1/BB/BB-) falling further as talk on its latest offering widened.

Carnival Corp.’s senior notes were succumbing to some selling pressure on Thursday with large outflows hitting ETFs and investors steering clear of companies with high refinancing risk.

Meanwhile, high-yield mutual and exchange-traded funds continued to have chunky outflows with $1.92 billion leaving the space in the week through Wednesday’s close, according to a market source.

New bonds

Venture Global LNG priced $4 billion of senior secured notes (BB/BB) in two tranches on Thursday.

A $2.5 billion tranche of 5.25-year bullet notes priced at par to yield 9½%.

The yield came at the wide end of the 9¼% to 9½% price talk. Early guidance was 8¾% to 9%.

A $1.5 billion tranche of callable 9 7/8% 8.25-year notes priced at 99.214 to yield 10%. The yield printed at the wide end of the 9¾% to 10% yield talk. Early guidance was 9¼% to 9½%.

Demand was heard to be $4.75 billion across both tranches, but was also heard to have been heavily tiered, a bond trader said.

The notes in both tranches traded below their issue prices ahead of the Thursday close, the source added, spotting the new 9½% notes due 2029 at 99½ bid, 99¾ offered, versus the par issue price, while the 9 7/8% notes due 2032 were 98¼ bid, 98¾ offered, versus the 99.214 issue price.

In the wake of the massive Venture Global deal the active forward calendar slims to a single offer.

Global Aircraft Leasing Co., Ltd. and Global Sea Containers II Ltd. are shopping a $1.95 billion offering of five-year senior PIK toggle notes (Ba2//BB-).

The co-issuers are in the market in order to raise cash to pay off the Leasing 6½% senior PIK toggle notes due September 2024.

Early price talk recently widened, specifying an 11½% cash coupon and a 13½% PIK coupon, replacing earlier guidance that had a cash coupon coming in the 11% area, with a 200 bps step-up for a PIK coupon payment.

That novel 200 bps PIK step-up (the customary step-up has been 75 bps) is part of the deal’s announced structure.

It reflects the issuer’s appreciation of the fact that investors are determined to have coupons paid in cash, sources say.

Recent price moves in the 2024 bonds that would be taken out by the new issue suggest the new offer remains viable, a trader remarked on Thursday.

Amid a general downdraft in the junk bond market on Thursday those 6½% notes due 2024 underwent a price improvement to 96 bid, up 1½ points on the morning, the trader said.

They traded as high as 98 after the new deal was announced last week, then slipped to as low as 95 bid, 95¼ offered early in the current week, as the ice appeared to be thinning beneath the $1.95 billion new offer, sources say.

The market is hearing that there is an anchor order that would take the book over deal size, a sellside source said on Thursday afternoon.

That order comes with a set of specifications about the covenant package, and is understood to be a take-it-or-leave-it offer on the part of the investor who brought the anchor order.

The deal remains on a timeline to price before the end of the week, the sellsider said.

Venture Global widens

As talk widened on Venture Global’s latest pass at the junk market, so too widened the company’s outstanding notes.

Venture Global’s 8 1/8% senior secured notes due 2028 and 8 3/8% senior secured notes due 2031 continued to fall on the heels of the latest offering with both tranches off another 1½ to 2 points in heavy volume.

The 8 1/8% notes were off 1½ points to trade in the 96 to 96¼ context for the majority of the session with a yield of about 9¼%.

However, some late-day prints drove the notes even lower with the 8 1/8% notes closing the day at 95¼ with the yield about 9 3/8%, a source said.

There was $15 million in reported volume.

The 8 3/8% notes sank 2 points to trade on a 94-handle for the majority of the session.

However, the notes continued to weaken as the session progressed.

They were trading in the 93 to 94 context heading into the market close with the yield about 9½%.

There was $12 million in reported volume.

Venture Global’s 8 1/8% and 8 3/8% notes, which priced at par in May, have fallen 4½ to 5 points over the past week as the LNG producer readied its latest offering.

The new deal caused a repricing of its outstanding notes, a source said.

Carnival lower

Carnival’s senior notes were lower in active trade with ETFs sellers amid continued outflows and investors shedding companies with high refinancing risk.

Carnival’s 5¾% senior notes due 2027 (B3/B) were the most active in the debt pile.

The notes fell ½ to ¾ point to close the day on an 89-handle.

The notes were trading in the 89 3/8 to 89 5/8 context heading into the market close with the yield about 9½%, according to a market source.

There was $31 million in reported volume.

Carnival’s 10 3/8% senior priority notes due 2028 (B2/B+) were off ½ point with the notes trading on a 105-handle.

They were wrapped around 105½ heading into the market close with the yield 8½%.

There was $20 million in reported volume.

Carnival’s 6% senior notes due 2029 were off ¼ to ½ point with the notes closing the day on an 82-handle.

The notes were trading in the 82 3/8 to 82 5/8 context heading into the market close.

There was $17 million in reported volume.

Carnival’s notes have steadily declined alongside the broader market over the past week and a half as the market reassessed its rate expectations.

The higher-for-longer rate narrative has reawakened concerns about refinancing risks, a source said.

Indexes

The KDP High Yield Daily index fell 15 bps to close Thursday at 48.39 with the yield 8.34%.

The index was down 17 bps on Wednesday, 18 bps on Tuesday and 14 bps on Monday.

The ICE BofAML US High Yield index was down 21.9 bps with the year-to-date return now 4.154%.

The index was down 36.9 bps on Wednesday, 38.2 bps on Tuesday, and 12.2 bps on Monday.

The CDX High Yield 30 index was down 55 bps to close Thursday at 99.08.

The index fell 62 bps on Wednesday, 14 bps on Tuesday and 32 bps on Monday.

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