Marriott, William Carter, O-I Glass, Wolverine price; United Airlines on deck; Norwegian Cruise, Avis above issue price

By Paul A. Harris and Abigail W. Adams

Portland, Me., May 6 – The domestic high-yield primary market was in high gear on Wednesday with four issuers pricing a cumulative $2 billion in single tranche offerings and the forward calendar growing.

O-I Glass, Inc. priced an upsized $700 million issue, Marriott Vacations Worldwide Corp. priced an upsized $500 million issue, William Carter Co. priced an upsized $500 million issue, and Wolverine World Wide, Inc. priced a $300 million issue.

All eyes will be on United Airlines Inc. on Thursday when it is expected to price its $2.25 billion two-tranche of senior secured notes (Ba2/BB-/BB+).

Azek Building Products, Inc. also joined the forward calendar with a $320 million offering of five-year senior notes.

Meanwhile, the secondary space remained quiet on Wednesday with trading volume light as market players eyed the new deals in the pipeline.

Norwegian Cruise Line’s 12¼% senior notes due 2024 (Ba2/BB) were in focus with the notes well above their issue price.

While volume was light, Avis Budget Car Rental, LLC’s recently priced 10½% senior notes due 2025 (Ba2/BB-) were also trading above their deeply discounted issue price.

Hot market executions

The parade of post-Fed junk deals continued on Wednesday with four speculative grade issuers, each bringing a single, raising a combined total of $2 billion.

Wednesday's deals came in hot market executions.

All four came as a.m.-to-p.m. drive-bys.

All four priced tight to- or inside of price talk.

Three of the four upsized.

O-I Glass, Inc. priced an upsized $700 million issue of seven-year senior notes (B1/B) at par to yield 6 5/8%.

The issue size increased from $500 million.

The yield printed at the tight end of yield talk in the 6¾% area. Initial guidance was in the 7% area.

Marriott Vacations Worldwide priced an upsized $500 million issue of senior secured notes due Sept. 15, 2025 (Ba1/BB) at par to yield 6 1/8%.

The issue size increased from $400 million.

The yield printed at the tight end of yield talk in the 6¼% area. Initial talk was in the mid-6% area.

William Carter Co. priced an upsized $500 million issue of five-year senior notes (Ba2/BB+) at par to yield 5½%.

The issue size increased from $400 million

The yield printed at the tight end of yield talk in the 5 5/8% area. Initial talk was in the high 5% area to 6%.

And Wolverine World Wide priced a $300 million issue of five-year senior notes (Ba2/BB) at par to yield 6 3/8%.

The yield printed 25 basis points inside the tight end of yield talk in the 6¾% area, which was also initial price talk.

The calendar

With Covid-19 rendering physical roadshows cumbersome, to say the least, the preponderance of new issue action in the junk bond market has been coming as drive-by business.

However a small calendar – nearly all of it to be shopped by means of investor calls – continued to take shape on Wednesday.

United Airlines is expected to price $2.25 billion of senior secured notes (Ba2/BB-/BB+) in two bullet tranches on Thursday.

The Chicago-based air carrier is hoping to realize a blended interest rate in the low 9% area.

The short-maturity tranche features $1 billion of three-year notes with initial talk in the 9% area.

The long-maturity tranche features $1.25 billion of five-year notes with initial talk in the 9½% area.

And Azek Building Products, Inc. expects to price $320 million of five-year senior notes on Friday.

Norwegian Cruise Line in focus

Norwegian Cruise Line’s 12¼% senior notes due 2024 were active with the notes trading well above their discounted issue price.

The 12¼% notes traded as high as 101 3/8 during Wednesday’s session but were tightly wrapped around 101 heading into the market close, a source said.

The notes were among the most actively traded issue during a quiet day in the secondary space with more than $90 million in reported volume.

While the coupon was hefty and the notes were secured, the cruise line was “a tough name,” a market source said.

Norwegian Cruise Line announced a “going concern” prior to the pricing of the offering.

However, the notes were in demand during bookbuilding and performed well in the aftermarket – a product of the demand for new issuance.

Norwegian Cruise Line priced an upsized $675 million issue of 12¼% notes at 99 to yield 12.575% in a Tuesday drive-by.

The coupon came at the tight end of the 12¼% to 12½% coupon talk. The issue price came at the rich end of the 98.5 to 99 price talk.

The issue size increased from $600 million.

Avis Budget above issue

While volume was light, Avis Budget’s newly priced 10½% senior notes due 2025 were trading above their deeply discounted issue price.

The 10½% notes were trading in a range of 98 7/8 to 99½ during Wednesday’s session with the final prints around 99, a source said.

While the notes were above their issue price, volume was light with $10 million on the tape.

The offering was a lifeline for the company, which had been getting crushed, sources said.

“Who knows what’s going to happen with the company in the coming months,” a source said.

While it was a big coupon, the rest of the company’s capital structure was firmly in distressed territory.

Avis’ new notes were at parity to their term loan, which was trading with an 8½% to 9% yield, another source said.

The term loan seemed like a better play. “It takes out the downside,” a source said.

However, the company now has $1.6 billion of first-lien debt and barely 1 billion of vehicle collateral, the source said.

While the car rental company was distressed, the notes were still in demand during bookbuilding.

Avis priced an upsized $500 million issue of the 10½% notes at 97 to yield 11.297%.

The coupon came on top of coupon talk. The discount came at the cheap end of the 97 to 98 price talk.

The issue size increased from $400 million.

$582 million Tuesday inflows

The dedicated high-yield bond funds saw $582 million of net inflows on Tuesday, according to a market source.

High-yield ETFs saw $522 million of inflows on the day.

Actively managed high-yield funds saw $60 million of inflows on Tuesday, the source said.

With Wednesday's fund flows numbers remaining to go into the tally, the combined funds were tracking $3.75 billion of net inflows for the week to Wednesday's close, according to the market source.

Indexes mixed

Indexes were mixed on Wednesday.

The KDP High Yield Daily index gained 4 bps to close Wednesday at 62.73 with the yield now 7.51%.

The index was up 20 bps on Tuesday after sinking 13 bps on Monday.

The ICE BofAML US High Yield index gained 10.6 bps with the year-to-date return now negative 9.57%.

The index was up 53.6 bps on Tuesday after sliding 13.9 bps on Monday.

The CDX High Yield 30 index sank 87 bps to close Wednesday at 92.81. The index was up 22 bps on Tuesday after dropping 35 bps on Monday.

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