Four issuers bring new junk bonds; TransDigm on deck; AAL, RCL hold premiums, but fall

By Paul A. Harris and Abigail W. Adams

Portland, Me., Feb. 9 – A big Thursday in the new issue market had four issuers price a combined $1.97 billion of junk-rated, dollar-denominated notes.

Meanwhile, it was another volatile day in the secondary space with the market still indecisive.

While the cash bond market was strong for the majority of the session, late-day selling set in for no clear reason, a source said.

Market players have looked to the two-year Treasury yield as a harbinger of future pain and the yield pushed past 4.5% in intraday activity.

However, it was strange for selling pressure to have set into the cash bond market so quickly based on that move, a source said.

New paper remained in focus in secondary market activity although the trend of strong performances further waned.

Royal Caribbean Cruises Ltd.’s new 7¼% priority guarantee notes due 2030 (B2/B+) and American Airlines, Inc.’s 7¼% first-lien senior secured notes due 2028 (Ba3/B-) followed the trajectory of the broader market.

Both issues were strong early in the session before selling pressure set in.

While they managed to hold on to some premium, the notes closed Thursday’s session well off the highs of the day.

Uniti Group LP, Uniti Fiber Holdings Inc., Uniti Group Finance 2019 Inc., CSL Capital, LLC’s 10½% senior secured notes due 2028 (B2/B/BB+) continued to move lower alongside the broader market with the notes giving back nearly all gains since hitting the secondary space.

On the break

While executions all appeared solid in the Thursday primary market, the session's three big issues were turning in unspectacular performances in the secondary market, late in the afternoon, suggesting that issuers may be overplaying their hands, a trader said.

Rand Parent, LLC priced an upsized $850 million issue (from $800 million) of seven-year first-lien senior secured notes (Ba1/BB/BB+) at par to yield 8½%.

The deal, backing the buyout of Atlas Air by Apollo, was hanging around par in the secondary market, the trader said.

In the session's only drive-by Wynn Resorts, Ltd. priced a $600 million unsecured eight-year bullet (B2/B+) at par to yield 7 1/8%.

At the close those notes were straddling their new issue price at 99 5/8 bid, par 1/8 offered, according to the trader.

And in a mammoth, upsized €2.6 billion equivalent bond and bank refinancing deal (from €2 billion equivalent), which had commandeered the lion's share of the market's attention throughout the week, Ineos Finance plc priced a $425 million tranche of 5.25-year senior secured notes (Ba2/BB/BBB-) at par to yield 6¾%.

Those bonds were Thursday's underperformers in the secondary market, the trader said, spotting them at 99 bid, 99¼ offered at the close.

The €795 million equivalent bond portion of the Ineos deal also featured an identically structured €400 million tranche which priced at par to yield 6 5/8%.

On deck for Friday is TransDigm Inc. with up to $750 million of first-lien senior secured notes due August 2028, in the market with initial price talk in the high-6% to 7% area.

Off the highs

Royal Caribbean’s 7¼% priority guarantee notes due 2030 and American Airlines’ 7¼% first-lien senior secured notes due 2028 launched Thursday’s session strong but gave back much of their gains as selling pressure took hold of the market.

Royal Caribbean’s 7¼% notes traded as high as 101 bid early in the session when the market was at its strongest, a source said.

The notes gave back ½ point of gains to close the session in the par to par ½ context.

There was $135 million in reported volume.

Royal Caribbean priced a $700 million issue of the 7¼% notes at par in a Wednesday drive-by.

The yield printed tighter than talk in the 7½% area.

American Airlines’ 7¼% first-lien senior secured notes due 2028 followed the same trajectory.

The notes were changing hands in the par ¾ to 101 context early in the session.

By the market close the notes had fallen to the par to par ¼ context, a source said.

There was $196 million in reported volume.

American Airlines priced $750 million of the 7¼% notes at par in a Wednesday drive-by.

The deal priced tight to the 7½% to 7¾% yield talk.

The offering was well oversubscribed and heard to be playing to $2 billion in orders.

The late-day weakness in the new paper was just a product of the market.

“They’re just trading where everything else is,” a source said.

Uniti back to par

Uniti’s 10½% senior secured notes due 2028 continued to come in alongside the broader market on Thursday.

The notes fell another ½ point to give back nearly all gains made since breaking for trade on Feb. 2.

The 10½% notes were changing hands in the par to par ¼ context heading into the market close, a source said.

There was $38 million in reported volume.

The notes broke below a 101-handle the previous session for the first time since pricing.

Heading into Wednesday’s session, the notes have largely traded in the 101½ to 102 context.

Indexes

The KDP High Yield Daily index fell 4 points to close Thursday at 53.32 with the yield now 6.91%.

The index was down 9 points on Wednesday, 9 points on Tuesday and 39 points on Monday.

The ICE BofAML US High Yield index fell 19.3 basis points with the year-to-date return now 4.029%.

The index was down 15 bps on Wednesday, inched up 0.9 bp on Tuesday after falling 68.8 bps on Monday.

The CDX High Yield 30 index was down 25 bps to close Thursday at 102.66.

The index fell 36 bps on Wednesday, gained 35 bps on Tuesday and fell 27 bps on Monday.

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