Taylor Morrison, Alcoa, Studio City price; TripAdvisor soars; Avantor gains; AA sinks

By Paul A. Harris and Abigail W. Adams

Portland, Me., July 8 – The high-yield primary market had another active session on Wednesday with two drive-by deals and a crossover trade pricing.

Macau's Studio City Finance Ltd. priced $1 billion of senior notes (B1/BB-) in two tranches.

While the deal will trade off the emerging market desk, it will be closely followed by high-yield investors.

In drive-by action, Taylor Morrison Communities Inc. priced an upsized $500 million issue of 10-year senior bullet notes (Ba3/BB) and Alcoa Corp. priced an upsized $750 million issue of 7.5-year senior notes (Ba1/BB+).

The European primary market was also active with Autodis pricing its €300 million issue of five-year senior secured notes (Caa1/B-).

Meanwhile, the secondary space was firm on Wednesday with buyers driving the market higher, a source said.

New paper was in focus with the deals to price during Tuesday’s session trading with steep premiums in high-volume activity.

Avantor Funding Inc.’s 4 5/8% senior notes due 2028 (B3/B-/BB) continued to gain in active trading after a strong break.

TripAdvisor Inc.’s 7% senior notes due 2025 (B1/BB-) were in demand with the notes jumping to a 102-handle.

Outside of recent issues, American Airlines, Inc.’s senior notes continued to sink as rumors circulated the market about a potential bankruptcy filing.

Wednesday’s primary session

A busy Wednesday session in the primary market saw Macau's Studio City Finance Ltd. price $1 billion of senior notes in two tranches.

A $500 million tranche of five-year notes priced at par to yield 6%, at the tight end of the 6% to 6 1/8% yield talk.

A $500 million tranche of 7.5-year notes priced at par to yield 6½%, at the tight end of the 6½% to 6 5/8% yield talk.

The deal, was heard to have been oversubscribed.

However, within hours of the allocations both tranches were trading slightly below their issue prices at 99½ bid, par offered, according to a New York-based bond trader.

Studio City joins Wynn Macau Ltd. and Macau-based MGM China Holdings Ltd., both of which raised cash in the dollar-denominated junk bond market in June.

The Macau deals tend to trade on emerging markets desks, traders say.

However, they are closely followed by traditional high-yield investors, the sources add.

Elsewhere, Alcoa Corp. priced an upsized $750 million issue of 7.5-year senior notes at par to yield 5½% in a drive-by.

The yield printed 12.5 basis points through price talk in the 5¾% area.

And Taylor Morrison Communities priced an upsized $500 million issue of 10-year senior bullet notes at par to yield 5 1/8% in a Wednesday drive-by.

The issue size increased from $400 million.

The yield printed 12.5 basis points beneath the tight end of yield talk in the 5¼% area. Initial price talk was in the mid-5% area.

Rattler sets talk

Looking to Thursday's session, Rattler Midstream LP talked its $500 million offering of five-year senior notes (Ba3/BBB-/BB+) to yield in the 5¾% area.

Official talk comes inside of initial guidance in the 6% area.

Books close at 8:30 a.m. ET Thursday and the deal is set to price thereafter.

Autodis prices tight

In the euro-denominated junk new issue market, Paris-based automotive parts supplier Autodis priced a €300 million issue of five-year senior secured notes (Caa1/B-) at par to yield 6½%.

The yield printed at the tight end of the 6½% to 6 5/8% yield talk. Initial guidance was in the 6¾% area.

$30 billion to $40 billion July?

The post-Independence Day high yield primary market is hitting on all cylinders, leading market watchers to speculate that July will be another mega-month for issuance, following June's all-time record issuance of $58.24 billion in 84 deals junk-rated, dollar-denominated tranches.

Numbers making the rounds on Wednesday were $30 billion to $40 billion for the month of July.

The high end of that range is possible, a trader said, but noted that as of the July 8 close, month-to-date issuance has yet to clear the $5 billion mark, meaning that average daily issuance to the end of the month would need to be greater than $2 billion.

That's a lot of wood to chop, said the trader, noting that the coronavirus pandemic disrupted mergers and acquisitions activity which is not expected to get up to full throttle until early 2021.

Year-to-date issuance was $217.38 billion to Tuesday's close, according to Prospect News data.

With nearly half of 2020 remaining, the all-time yearly issuance record of $325.2 billion, set in 2012, could be in trouble, pending the amount of disruption set in train when the U.S. presidential election takes place in November, the trader said.

Avantor gains

Following a strong break, Avantor’s newly priced 4 5/8% senior notes due 2028 continued to gain in active trading on Wednesday with the notes climbing to a 101-handle by the late afternoon.

The 4 5/8% notes were changing hands in the 101 1/8 to 101½ context heading into the market close, a market source said.

The notes were among the most actively traded during Wednesday’s session with more than $63 million on the tape by the late afternoon.

The 4 5/8% senior notes were putting in a strong performance in the secondary space despite upsizing and pricing tight, sources said.

They were marked at par ½ bid, 101 offered after freeing for trade on Tuesday.

Avantor priced an upsized $1.55 billion tranche of the 4 5/8% notes at par on Tuesday as part of a dual-currency offering that also included a €400 million tranche.

The 4 5/8% notes priced tighter than talk for a yield of 4¾% to 5% and well inside of initial guidance for a yield of 5% to 5¼%.

The tranche was upsized from $1 billion.

TripAdvisor jumps

TripAdvisor’s 7% senior notes due 2025 jumped in active trading on Wednesday with the strong demand for the notes seen during bookbuilding following them into the secondary space.

The 7% notes traded up to a 102-handle with the notes changing hands in the 102½ to 102 7/8 context heading into the market close, a source said.

TripAdvisor priced a $500 million issue of the 7% notes at par in a Tuesday drive-by.

Pricing came tighter than talk for a yield in the 7½% area.

The deal was heard to be as much as 5x oversubscribed during bookbuilding.

While the travel industry as a whole has taken a hit due to the Covid-19 pandemic, the online travel platform is a solid company with healthy fundamentals, a source previously said.

It is well positioned for a comeback as the broader travel industry recovers.

TripAdvisor’s senior notes priced on the same day industry peer Expedia Group Inc. priced a $1.25 billion two-tranche offering of investment grade paper.

With a higher yield and good prospects, TripAdvisor’s junk bonds were a better value than Expedia’s notes, the source said.

American Airlines sinks

American Airlines’ junk bonds sank further under water on Wednesday as rumors circulated the market about a potential bankruptcy filing.

American’s recently priced 11¾% senior notes due 2025 traded down more than 3 points to close the day at 91, according to a market source.

The notes were active with more than $34 million in reported volume during Wednesday’s session.

American priced a $2.5 billion issue of the 11¾% notes at 99 on June 24.

American’s 5% senior notes due 2022 were also trading off in high-volume activity.

The 5% notes traded down 1¾ points to close Wednesday at 52½ with more than $30 million on the tape, a source said.

“All airlines are in trouble,” a market source said.

However, American Airlines is one of the worst credits in the sector.

The company’s already struggling capital structure was under extra pressure on Wednesday as rumors circulated about a potential bankruptcy filing, a source said.

$521 million Tuesday inflows

The dedicated high-yield bond funds saw $521 million of net daily inflows on Tuesday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs saw $311 million of inflows on the day.

Actively managed high-yield funds saw $210 million of inflows on Tuesday, the source added.

With only Wednesday's daily fund flows numbers remaining to go into the tally the combined high-yield funds are tracking $1.69 billion of net inflows for the week to Wednesday's close, the market source added.

Indexes mixed

Indexes were again mixed on Wednesday.

The KDP High Yield Daily index was up 2 basis points to close Wednesday at 65.46 with the yield now 6.46%.

The index gained 12 bps on Tuesday and was up 26 bps on Monday.

The ICE BofAML US High Yield index slid 5.6 bps with the year-to-date return now negative 3.515%. The index gained 4.9 bps on Tuesday and was up 50.1 bps on Monday.

The CDX High Yield 30 index gained 113 bps to close Wednesday at 100.73. The index dropped 89 bps on Tuesday after gaining 57 bps on Monday.

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