Primary quiet; Carnival, Hertz pare losses; Callon gain

By Paul A. Harris and Abigail W. Adams

Portland, Me., Nov. 29 – The domestic high-yield primary market was dormant on Monday with new issue activity expected to be light for the remainder of the week.

However, if market conditions remain strong, some deals are expected to surface.

Meanwhile, it was a strong day in the secondary space with the cash bond market up about ½ point with travel and energy names leading the recovery from last Friday’s sell-off.

After tumbling in thin trading on Black Friday, Carnival Corp.’s senior notes pared their losses although the notes remained will below their previous levels.

Hertz Corp.’s recently priced 4 5/8% senior notes due 2026 and the 5% senior notes due 2029 (Caa1/B) were also on the rise after hitting their lowest outright level since pricing last Friday.

Energy names were also among the day’s gainers with Callon Petroleum Co.’s recently priced 8% senior notes due 2028 (Caa2/CCC+) on the rise as crude oil futures once again broke $70 a barrel.

Primary eyed

While the stock market posted solid gains on Monday, in the dollar-denominated high-yield market — where many players were returning from an extended holiday weekend — dealers rested on their oars.

A couple of the big investment banks were telegraphing that they had no new deals for the week, a trader said.

However, with stocks rallying it's likely that the new-issue market will reopen sooner than later, and likely before the end of the week, the source added.

The markets may have overreacted to news of the new coronavirus omicron mutation, an investment banker remarked, speaking on background.

New Covid concerns sparked a massive selloff in the stock market ahead of the holiday weekend in the United States, and may have caused a couple of junk bond deals to be pushed back, but not postponed indefinitely, the source added.

The European high-yield new issue market, less impacted by the long holiday weekend in the United States, generated a modicum of new-issue news.

The Reno de Medici SpA (Rimini BidCo SpA) €445 million offering five-year senior secured floating-rate notes (B2/B/BB-) was pushed back into the present week but remains in the market, sources say.

The deal, initially guided with a 500 basis points to 525 bps spread over Euribor, with no Euribor floor, at an issue price of 99.5, had been slated to price last week.

Meanwhile a euro-denominated acquisition financing deal from Phoenix Pharmahandel GmbH & Co. KG has been postponed, according to a market source.

Carnival in focus

After taking a hit last Friday as concern over the omicron Covid-19 variant sparked a sell-off in travel names, Carnival’s junk bonds were paring their losses during Monday’s session.

The cruise line operator’s most recently priced 6% senior notes due 2029 (B3/BB-/B+) were on the rise in high-volume activity after hitting their lowest level since pricing last Friday.

The 6% notes rose about 2 points. They were changing hands in the 97¾ to 98½ context throughout Monday’s session, according to a market source.

The notes were the most actively traded name in the space with $50 million in reported volume.

The notes tumbled 4 points on Friday to a 96-handle. Prior to Friday’s session, the notes were wrapped around par.

Carnival priced a $2 billion issue of the notes at par in mid-October.

The company’s 5¾% senior notes due 2027 (B2/B) rose 1½ points to 98½. There was about $20 million in reported volume.

The 5¾% notes were also trading around par heading into last Friday’s session.

Hertz pares losses

Hertz’s recently priced tranches of senior notes also pared their losses after last Friday’s sell-off.

The rental car company’s 5% senior notes due 2029 were marked at 98 bid, 98½ offered early in the session.

They continued to gain strength as the session progressed and were trading in the 98½ to 99 context heading into the market close.

There was about $20 million in reported volume.

The notes traded as low as 96¾ during Friday’s session.

The 4 5/8% senior notes due 2026 were also on the rise on Monday and trading in the 98½ to 99 context heading into the market close.

They traded as low as 97 during last Friday’s session.

Hertz priced a $500 million tranche of the 4 5/8% notes and a $1 billion tranche of the 5% notes at par on Nov. 17.

The notes traded as high as 101 bid after breaking for trade but have slowly come in since.

Both tranches were trading just below par heading into last Friday’s session.

Energy gains

Energy names were also on the rise on Monday as WTI crude oil futures again settled above $70 a barrel.

Callon Petroleum’s 8% senior notes due 2028 rose about 1¾ point.

The notes were changing hands in the 98½ to 99¼ context heading into the market close. There was more than $10 million in reported volume.

The notes were trading at 102 heading into last Friday’s session when they tumbled to a 97-handle.

Fund flows

The dedicated high-yield bond funds saw $339 million of net outflows on Friday, the most recent session for which data was available at press time, according market sources.

Actively managed high yield funds sustained $345 million of outflows on the day.

High-yield ETFs were flat to slightly positive, posting $6 million of inflows on Friday, a source said.

The combined funds saw $1.03 billion of net outflows last Wednesday (Nov. 24), the source added.

For those returning from the long holiday weekend, the big news on the fund flow front surfaced late last week when Refinitiv Lipper reported that the combined high-yield funds sustained a whopping $3.32 billion of net outflows in the week to the Wednesday, Nov. 24 close.

That's the biggest weekly outflow since the week to last March 10, when the funds posted $5.33 billion of outflows, a source said.

Indexes

The KDP High Yield Daily index gained 10 points to close Monday at 67.08 with the yield now 4.28%.

The CDX High Yield 30 index closed Monday at 108.12.

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