Morning Commentary: Junk weaker; Carnival to cruise by with $1 billion unsecured notes

By Paul A. Harris

Portland, Ore., May 18 – The high-yield bond market was down ¼ point at the Wednesday open, according to a trader in New York.

With the S&P 500 stock index 1.7% lower at mid-morning, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was down 0.75%, or 57 cents, at $76.06.

Making its eighth appearance in the high-yield primary market since the onset of the coronavirus pandemic just over two years ago, Carnival Corp. announced plans to price a $1 billion offering of eight-year senior notes (B2/B) in a Wednesday drive-by.

Initial talk has the offering coming to yield 10¼% to 10½%.

The Miami-based cruise line plans to use the proceeds to make scheduled payments on debt maturing in 2023 and for general corporate purposes.

Following the news of the new unsecured offering, the Carnival 6% senior notes due May 2029 were down a couple of points, according to a sellside source. Prior to Wednesday’s offer, that was Carnival's most recent deal, coming at par in a $2 billion issue last October.

Most of Carnival's stack of bonds was off 1 point or so, according to another trader, who specified that durations and price drops were highly correlated.

Carnival's previous seven deals of the pandemic era, dating back to April 2020, have generated just over $15 billion of proceeds.

Meanwhile the most recent deal to clear the speculative-grade new issue market, the Elis SA 4 1/8% senior bullet notes due May 2027, traded higher on Wednesday.

The Elis notes, which priced at 99.447 to yield 4¼% in a €300 million issue on Tuesday, were 100.15 bid, 100.65 offered on Wednesday morning, London time, after breaking to 99¾ bid, 100.65 offered on Tuesday afternoon.

The Elis deal was heard to have played to €3.3 billion of orders at close of books.

Away from recent issues, bonds in the high-yield retail sector were getting clobbered after Target Corp. blamed higher costs and supply chain disruptions as it reported a stunning 52% drop in profit for the first quarter, badly missing analysts' forecasts, a trader said.

The Macy's Inc. 5 7/8% notes due March 2030 traded at 87¼ on Wednesday, down from 90¼ on Tuesday, according to the trader, who noted that activity in the name was light.

Elsewhere, bonds of aerospace and defense aftermarket parts manufacturer Triumph Group, Inc. were down 5 points to 6 points in active trading after the company reported a loss of 16 cents per share for the fourth quarter of 2021, the trader said.

The company's shares (NYSE: TGI) were down 20%.

Tuesday outflows

The dedicated high-yield bond funds sustained $449 million of net daily outflows on Tuesday, according to a market source.

Actively managed high-yield funds saw $240 million of outflows on the day.

High-yield ETFs sustained $209 million of outflows on Tuesday, the source said.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.