Travel names under pressure; Carnival, Royal Caribbean paper eyed; Talen, Staples down

By Cristal Cody

Tupelo, Miss., June 9 – Names in the travel sectors saw their paper soften along with their credit default swap spreads this week, sources said Thursday.

CDS spreads from American Airlines Group Inc., Royal Caribbean Group, Carnival Corp., United Airlines Holdings, Inc., United Airlines, Inc. and Delta Air Lines, Inc. all widened in the past week ended Wednesday, a source said.

American Airlines’ CDS spreads eased 186 basis points, United Airlines Holdings and United Airlines widened 39 bps to 57 bps, and Delta’s CDS spreads softened 41 bps during the week.

Junk bonds from the issuers also were mostly weaker in the secondary market.

Carnival’s paper traded Thursday down about 1 point to 1¾ points.

Carnival’s 6% senior notes due 2029 (B2/B) dropped about 1 point over the session after losing 1¾ points in the prior day.

The 3.7% senior notes due 2027 (B2/B) from Royal Caribbean Group, formerly known as Royal Caribbean Cruises Ltd., rose about ¾ point on Thursday but were trading over 2 points lower on the week.

In other distressed issues, Talen Energy Supply LLC’s bonds remained strongly traded after the issuer was one of the most active names seen in the junk market on Wednesday, a source said.

Talen’s notes were mixed but mostly weaker with the senior notes quoted down 2½ points to 6 points after moving down 1¼ points to 3 points on Wednesday.

Summer crude oil prices pulled back over the session.

West Texas Intermediate crude oil benchmark futures for July deliveries fell 60 cents to settle at $121.51 a barrel.

A heavy round of earnings releases weighed on markets on Thursday with volatility rising nearly 10% and stock indices closing lower. The Nasdaq was down 2.75%.

The Chicago Board Options Exchange’s CBOE Volatility index jumped 9% to 26.08.

The iShares iBoxx High Yield Corporate Bond ETF closed down 64 cents at $76.92.

In the distressed retail space, Staples, Inc.’s senior notes were trading about 3 points lower and its CDS spreads nearly 100 bps wider on the week.

Carnival weaker

Carnival’s paper has softened about 4 points so far in June, while its CDS spreads have eased nearly 75 bps, sources said Thursday.

Carnival’s 6% senior notes due 2029 (B2/B) dropped about 1 point to the 80 bid area over the day.

The notes were down 1¾ points on Wednesday.

Carnival’s 10½% senior notes due 2030 (B2/B) also shed a point on Thursday to head out at 97¼ bid.

The longer issue dropped 1½ points in the prior session.

The Miami-based cruise operator’s bonds were trading about 4 points weaker so far in June.

Carnival’s CDS spreads also widened 72 bps to 794 bps over the past week ended Wednesday.

Royal Caribbean eyed

Royal Caribbean’s 3.7% senior notes due 2027 (B2/B) rose about ¾ point to the 74¾ bid area in light trading activity on Thursday, a source said.

The notes have dropped over 2 points since last week and about 3¼ points since May.

The Miami-based cruise operator’s CDS spreads eased 90 bps to 763 bps over the past week ended Wednesday, a source said.

Talen moves lower

Meanwhile, Talen Energy’s 10½% senior notes due 2026 (/D/C) sank 6 points to 64 bid by the close on Thursday, a market source said.

Trading was active on $9 million of volume.

The notes were quoted Wednesday down 1¼ points at 63¾ bid on $22 million of paper traded before the paper jumped to 70 bid in the last trade of the day.

Talen’s 6½% senior notes due 2025 (/D/C) also were quoted off 2½ points on Thursday at 67½ bid on $13 million of bonds changing hands.

The notes were down 3 points on Wednesday.

The Woodlands, Tex., and Allentown, Pa.-based power generation and infrastructure company’s paper has climbed from the low 40s bid range since the company filed for Chapter 11 bankruptcy in May.

Staples notes slip

Elsewhere, Staples’ 10¾% senior notes due 2027 (Caa2/CCC+) fell about 1¾ points to 78 bid in thin secondary action on Thursday, according to a market source.

The Framingham, Mass.-based office supply chain’s bonds have dropped about 3 points over the week and 5 points since the end of May.

Also, Staples’ CDS spreads eased 98 bps to 1,591 bps for the week ended Wednesday, according to a market source.

Distressed returns improve

The S&P U.S. High Yield Corporate Distressed Bond index retreated slightly on Wednesday from Tuesday’s losses.

One-day total returns were minus 0.03%, compared to minus 0.53% on Tuesday and 0.27% on Monday.

Month-to-date total returns decreased to minus 0.08% on Wednesday versus minus 0.04% on Tuesday and 0.49% at the start of the week.

Year-to-date index returns declined to minus 14.58% in the prior session from minus 14.55% on Tuesday and minus 14.1% on Monday.

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