Advisor Group, Global Aircraft on tap; Citgo, Midcontinent Communications gain; funds add $1.3 billion

By Paul A. Harris and Abigail W. Adams

Portland, Me., July 25 – While new issue activity is expected to peter out as the market moves further into earnings season, Friday promised to be a busy session with three deals expected to clear the forward calendar.

Global Aircraft Leasing Co., Ltd. began marketing a $1.5 billion offering of five-year cash contingent PIK toggle notes (expected Ba2) with pricing expected on Friday.

Advisor Group Inc.’s $400 million offering of eight-year notes (Caa1/B-) and Nesco Holdings I, Inc./Capital Investment Corp. IV $475 million offering of five-year second-lien notes are also expected to price on Friday.

Meanwhile, new paper remained in focus in the secondary space with the deals to price during Thursday’s session putting in strong performances.

Citgo Holding, Inc.’s 9¼% senior notes due 2024 (Caa1/B/B+) skyrocketed in the aftermarket with the notes more than 3 points above their issue price.

Midcontinent Communications and Midcontinent Finance Corp.’s 5 3/8% senior notes due 2027 (B3/B) also continued to gain on Thursday after a strong start out of the gate.

While not as strong as the other deals to price during Wednesday’s session, Global Partners LP’s 7% senior notes due 2027 (B2/B+) held onto their premium in active trading on Thursday.

While new paper continued to dominate trading activity in the secondary space, Tesla Inc.’s 5.3% senior notes due 2025 were active and losing ground after a disappointing earnings report.

Meanwhile, high-yield mutual funds and exchange-traded funds saw their seventh consecutive week of inflows with $1.305 billion entering the space for the week ended Wednesday, according to fund-flow statistics generated by AMG Data Services Inc.

Global Aircraft Leasing PIK toggle

As the new issue market moves into the umbra of a seasonal earnings blackout, in which some potential issuers need to post new earnings numbers before making a pass at the capital markets, primary market activity was muted on Thursday morning.

However, a modest active forward calendar took aboard one conspicuous offering.

Global Aircraft Leasing, a holding company which has a 70% ownership stake in Dublin-based aircraft leasing firm Avolon, began marketing a $1.5 billion offering of five-year cash contingent PIK toggle notes (expected Ba2).

Initial guidance has the deal coming with a yield in the mid 6% area.

Morgan Stanley is the sole bookrunner.

Global Aircraft Leasing is expected to clear the market ahead of the approaching weekend, as are Advisor Group, with $400 million of eight-year notes (Caa1/B-) guided in the 10% area, and Nesco Holdings I, Inc./Capital Investment Corp. IV, with $475 million of five-year second-lien notes guided in the 9% area.

Citgo skyrockets

Citgo Holdings’ newly priced 9¼% senior notes due 2024 skyrocketed in the aftermarket.

The bonds were quoted at 103 5/8 bid, 103¾ offered early Thursday and were changing hands at 103 5/8 in the late afternoon, sources said.

The bonds saw more than $69 million in reported volume by the late afternoon.

The bonds put in a strong performance in the secondary space despite pricing through talk.

Citgo priced $1.37 billion of the 9¼% notes at par on Wednesday.

Pricing came 12.5 basis points beneath the tight end of yield talk in the 9½% area.

Midcontinent gains

Midcontinent Communications’ newly priced 5 3/8% senior notes due 2027 were also putting in a strong performance in the secondary space.

After a strong start out of the gate, the 5 3/8% notes continued to gain on Thursday.

The notes rose another 5/8 point to trade up to 102¼, according to a market source.

However, trading of the small issue was light on Thursday with the notes seeing $14 million in reported volume by the late afternoon.

Midcontinent priced an upsized $350 million issue of the 5 3/8% notes at par on Thursday.

The issue size was increased from $300 million.

The yield printed at the tight end of yield talk in the 5½% area and inside of initial 5½% to 5¾% guidance.

Global Partners holds

Global Partners’ new 7% senior notes due 2027 held onto their premium in active trading on Thursday.

The 7% notes were quoted at par 1/8 bid, 101 1/8 offered, according to a market source.

The notes were changing hands at 101 in the late afternoon.

More than $17 million of the bonds were on the tape by the late afternoon.

Global Partners priced a $400 million issue of the 7% notes at par on Wednesday.

Pricing came at the tight end of the 7% to 7¼% yield talk and in line with initial talk in the low 7% area.

The notes skyrocketed out of the gate on Wednesday and quickly traded up to 101.

Tesla trades down

Tesla’s 5.3% senior notes due 2025 were active on Thursday with the notes losing ground after the embattled electric car manufacturer’s disappointing second quarter earnings report.

The 5.3% notes were down about 5/8 point to 87 5/8, according to a market source.

The notes saw $16 million in reported volume.

Tesla’s stocks and bonds were trading down on Thursday after an earnings miss.

Tesla reported a loss per share of $1.12 versus the loss of 40 cents expected by analysts.

Revenue was $6.35 billion versus the $6.41 billion expected.

Investors had been optimistic after Tesla reported sales and production figures for the second quarter that beat analyst expectations.

However, with the majority of sales coming from the lower end Model 3, as opposed to the more luxury Model S and X cars, the sales did not translate into the revenue investors were hoping for.

Wednesday inflows

The daily cash flows of the dedicated high-yield bond funds were positive on Wednesday, according to a market source.

High-yield ETFs saw $182 million of inflows on the day.

Actively managed high-yield funds saw $5 million of inflows on Wednesday.

News of the Wednesday daily flows preceded a Thursday afternoon report that the combined high-yield funds saw $1.305 billion of net inflows in the week to Wednesday's close, according to Lipper US Fund Flows.

Indexes mixed

Indexes were mixed on Thursday with some largely flat and others posting large gains.

The KDP High Yield Daily index shaved off 1 basis point to close Thursday at 71.69 with the yield 5.46%.

The index was up 10 bps on Wednesday and 5 bps on Tuesday after shaving off 1 bp on Monday.

The ICE BofAML US High Yield index was up 7 bps with the year-to-date return now 10.594%.

The index rose 13.7 bps on Wednesday, 15.4 bps on Tuesday and 9.4 bps on Monday.

The CDX High Yield 30 index gained 32 bps to close Thursday at 107.94.

The index was up 16 bps on Wednesday, 29 bps on Tuesday and 22 bps on Monday.

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