Four junk issuers price against volatility; Carnival gains; rate-sensitive names lower

By Paul A. Harris and Abigail W. Adams

Portland, Me., April 5 – Although a volatile session in the stock market provided a less-than-supportive backdrop, four junk issuers nevertheless priced five dollar-denominated tranches during Tuesday's session.

Meanwhile, the rally in the secondary space on Monday was again short-lived as more hawkish comments from Federal Reserve officials sparked a sell-off in Treasuries.

The secondary space was down ½ to ¾ point on Tuesday with rate-sensitive names again leading losses as Treasury yields spiked.

The 10-year Treasury yield climbed to its highest level in three years to settle at 2.554% on Tuesday; the five-year Treasury yield climbed to 2.704%.

Rate-sensitive notes were again under pressure with Charter subsidiary CCO Holdings LLC’s junk bonds and Seagate Technology plc’s 3 1/8% senior notes due 2029 down as much as 1 point in active trading.

Bausch Health Americas Inc.’s 8½% senior notes due 2027 (B3/B) remained active on Tuesday with the notes continuing to trade on a 99-handle.

While the overall market was weak, Tuesday marked a strong session for Carnival Corp.’s junk bonds with the notes on the rise as the company reported record bookings after the C.D.C. lifted its travel warning for cruises.

Leaning tight

Executions in the junk bond primary market on Tuesday tended to be tight.

Hilcorp Energy I, LP and Hilcorp Energy Finance Co. priced an upsized $1 billion amount (from $800 million) of senior notes (Ba3/BB+) in two tranches: $500 million of 6% eight-year notes and $500 million of 6¼% 10-year notes, both coming at par, at the tight ends of talk.

There was $3 billion plus of demand across both tranches, according to a sellside source who had both tranches going out par ¼ bid, par ¾% offered.

Sealed Air Corp. priced a $425 million issue of seven-year senior notes (Ba2/BB+) at par to yield 5%, at the tight end of talk.

A well-known issuer, Sealed Air has an enthusiastic following among high-yield investors, according to a sellside source who added that the issue attracted “real money accounts” that bought the deal to own it.

There were limit orders at 5%, the source added, noting that the notes were par 1/8 bid, par 5/8 offered, going out on Tuesday.

Hess Midstream Partners LP priced a $400 million issue of 8.5-year senior notes (Ba2/BB+/BB+) at par to yield 5½%, at the tight end of talk.

The issuer telegraphed that it would not increase the deal size. And it ultimately played to $1.5 billion of demand, with some investors expressing the belief that at 5½% it was still reasonable – even a touch cheap – for a high-quality midstream name, a sellside source recounted.

The bonds were going out par ¼, par ½ offered, the sellsider added.

Hilcorp, Sealed Air and Hess came with drive-bys.

Meanwhile, at the conclusion of a brief roadshow Global Infrastructure Solutions Inc. priced a $300 million issue of 7½% 10-year senior notes (B1/BB-) at par.

The yield came at the wide end of both yield talk and initial guidance.

The issuer faced headwinds as it attempted to build an order book, the sellside source said, adding that early Tuesday the market heard that there were just $130 million of orders.

However, by coming at the wide end of talk the engineering and construction management company managed to successfully place its bonds.

The deal priced late, according to the sellsider who saw no trades ahead of Tuesday's close.

Tuesday's action left an $850 million active forward calendar, with that amount spread across two unsecured deals expected to clear before the end of the week.

Burford Capital Global Finance LLC is in the market with $350 million of eight-year notes (Ba2/BB-). Initial talk is in the 7% area, and the deal is set to price Wednesday.

And Perrigo Investments, LLC plans to price a $500 million offering of eight-year notes (Ba2/BB-/BB+) with initial guidance in the high 5% to 6% area.

Rate-sensitive

Rate-sensitive notes again led losses on Tuesday as spiking Treasury yields drove down the secondary space.

CCO Holdings’ 4¼% senior notes due 2034 were down more than 1 point.

The notes opened the day on an 86-handle but were changing hands in the 85½ to 85¾ context heading into the market close, according to a market source.

The yield on the notes was just shy of 6%.

There was $17 million in reported volume.

CCO Holdings’ 4¼% senior notes due 2031 were down ½ point to close Tuesday at 90¾.

The yield on the notes was 5½%. There was $17 million in reported volume.

Seagate Technology’s 3 1/8% senior notes due 2029 fell more than 1 point to an 89-handle.

The notes were changing hands in the 89 to 89½ context heading into the market close.

The notes were yielding about 4.85%.

There was $6 million in reported volume.

After a period of stability, Treasuries again nosedived on Tuesday following hawkish comments from Federal Reserve governor and vice chair nominee Lael Brainard.

The 10-year Treasury yield rose 15 basis points in a single session to a three-year high of 2.554% while the five-year Treasury yield also climbed 15 bps to settle at 2.704%.

Bausch Health active

Bausch Health’s 8½% senior notes due 2027 remained active on Tuesday with the notes shaving off another ¼ point while remaining on a 99-handle.

The 8½% notes closed Tuesday at 99¼, according to a market source.

There was $18 million in reported volume.

The notes were also active during Monday’s session with the notes wrapped around 99½.

The specialty pharmaceuticals company is facing litigation over plans to spin off its eye health business unit, Bausch & Lomb.

Investors claim in the suit that the spin-off is a fraudulent transfer meant to protect the company’s assets from securities litigation it is facing over Bausch’s 2016 stock plunge, Bloomberg reported.

While the case is pending, Bausch & Lomb filed for its initial public offering late last week.

Carnival gains

While the overall market was weak on Tuesday, Carnival’s senior notes were on the rise after the company reported on Tuesday its best booking week on record after the C.D.C. lifted travel warnings about the cruise industry.

Carnival’s 7 5/8% senior notes due 2026 rose 5/8 point to close Tuesday at 101 1/8.

There was $25 million in reported volume.

The 6% senior notes due 2029 gained 1 point to close the day at 95.

There was $14 million in reported volume.

$911 million Monday inflows

The dedicated high-yield bond funds saw $911 million of net daily inflows on Monday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs had $811 million of inflows on the day.

Actively managed high-yield funds had $100 million of inflows on Monday, the source said.

Indexes

The KDP High Yield Daily index dropped 20 points to close Tuesday at 61.17 with the yield now 5.55%. The index was up 13 points on Monday.

The CDX High Yield 30 index dropped 60 bps to close Tuesday at 105.37. The index rose 52 bps on Monday.

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