Morning Commentary: Venture Global notes hover below issue prices; Jazz up on sale news

By Paul A. Harris

Portland, Ore., Oct. 20 – High-yield bonds opened the Friday session 1/8 of a point lower, market sources said.

Sellers outnumbered buyers, according to a bond trader in New York, who noted that traders were plowing through $2.84 billion of bids-wanted-competition (BWICs) versus $1.79 billion of offers-wanted-in-competition.

The newly printed Venture Global LNG Inc. senior secured notes (B1/BB/BB) were hovering slightly below their issue prices at mid-morning, the trader said.

The Venture Global 9½% notes due February 2029 were 99 7/8 bid, par 1/8 offered. The $2.5 billion tranche priced at par on Thursday.

The longer-dated Venture Global paper, the 9 7/8% notes due February 2032, were 98¾ bid, 99 1/8 offered. The $1.5 billion tranche priced at 99.214 to yield 10%, also on Thursday.

The notes in both tranches of the mammoth $4 billion deal were slightly above Thursday’s closing levels, the source noted.

Among topical names, the Jazz Pharmaceuticals plc (Jazz Securities DAC) 4 3/8% senior secured notes due January 2029 – a dollar-denominated issue – were up 2 points-plus, changing hands Friday morning at 87½, the trader said.

With the major U.S. stock indexes all mired in red ink, the Ireland-based biopharmaceutical company’s shares (Nasdaq: JAZZ) were up 1.5%.

The company is reported to be pondering strategic options, including a potential sale of certain segments of its business, the trader said.

The primary market sat idle on Friday morning, with one deal on the active forward calendar that has been marketed on a timeline that had it pricing ahead of the weekend.

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

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

Although there were no announcements on Friday morning, the deal remains on the table, sources say.

A “back-to-the-drawing-board” scenario has arisen, the bond trader said on Friday morning, noting that investors are looking for additional guarantees and pledges of equity interests.

GALC holds 70% of the outstanding ordinary shares of global aircraft leasing company Avolon Holdings Ltd.

Noting that GALC made three PIK payments on its 6½% senior PIK toggle notes due 2024, during the height of the Covid shutdown, investors are keen to incentivize the company to make interest payments on the new notes in cash.

The issuers addressed that concern in the new deal’s structure, with a novel 200 basis points PIK step-up (the customary PIK step-up has been 75 bps).

However, investors want additional guarantees, sources say.

The 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 the 200 bps PIK step-up.

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