Junk: Cetera trades to premium; Ardagh drags down Trivium; Hawaiian Airlines lower

By Paul A. Harris and Abigail W. Adams

Portland, Me., Oct. 27 – The high-yield bond new issue market remained idle on Friday after three dollar-denominated, speculative-grade tranches priced for a $2.44 billion weekly total.

The week ahead figures to be a light one in the junk new issue market, sources say.

The Federal Open Market Committee will exert an inhibiting force in the early part of the October-November crossover week ahead, as it mulls interest rates during its meetings on Tuesday and Wednesday, a high-yield syndicate banker noted.

Friday’s sole primary market news nugget came in the form of a telegraphed €800 million equivalent amount of dollar- and euro-denominated secured notes deal from Ineos Quattro.

Away from that, the only deal that may still be in the market is the Global Aircraft Leasing Co., Ltd./Global Sea Containers II Ltd. $1.95 billion offering of five-year senior PIK toggle notes (Ba2//BB-).

Meanwhile, the secondary space remained indecisive following the latest Personal Consumption Expenditure report.

The report came largely in line with expectations with the Fed’s preferred inflation gauge rising 0.3%.

While the report came in as expected, inflation continued to “move in the wrong direction,” a source said, with the August PCE report reflecting a 0.1% increase.

The secondary space was largely unchanged following the report with equity indexes mixed and Treasuries flat.

However, selling set in as the session progressed with the market striking a risk-off tone heading into the close.

“It is slowly but surely going down,” a source said.

The cash bond market closed the day down another 1/8 point, and while the market held on to some gains on the week, it remains near its March lows.

New issues and earnings-related news continued to drive volume and price movements in the space.

Cetera Financial Group Inc.’s 10% senior secured notes due 2030 (B2/B) were trading with a strong premium in heavy volume.

Ardagh Holdings USA Inc.’s senior notes leveled off on Friday after the post-earnings sell-off of the previous session.

However, the sell-off spread to Ardagh’s affiliates which were under pressure on Friday.

ARD Finance SA’s 6.5% senior secured toggle notes due 2027 (Caa3/B-) plunged more than 6 points in active trade.

Trivium Packaging Finance BV’s 8½% senior notes due 2027 (Caa2/CCC+) were dragged down 2 to 3 points in heavy selling.

Post-earnings selling also continued in Hawaiian Airlines’ 5¾% first-lien senior secured notes due 2026 (Ba3) which sank another 2 points in heavy volume.

Primary eyed

The high-yield new issue market remained idle on Friday.

The Oct. 23 week had three dollar-denominated, speculative-grade tranches price for a $2.44 billion issuance total, an appreciable increase over the previous week’s $1.5 billion, but a far cry from the robust weekly issuance totals that the market was putting up when the decade was new.

In the record-setting year of 2021 ($476.7 billion) average weekly issuance during the customarily busy October-November timeframe was $13.7 billion, according to Prospect News data.

In the upcoming week, the market anticipates that the Fed will elect to leave rates unchanged, a high-yield syndicate banker said.

Although that, in itself, might seem conducive to a regeneration of the new issue calendar, a greater inhibiting force is a risk-free rate that has spent the better part of October undergoing big gyrations, making it difficult to set a yield on a fixed-rate junk bond, the source said.

Calendar

Timing on the recently telegraphed possible new notes from Ineos Quattro remains to be determined, however the company’s debt refinancing and acquisition-related capital raise also includes $2 billion equivalent of syndicated term loans set to kick off on a Monday lender call.

Away from that, the only deal that may still be in the market is the Global Aircraft/Global Sea Containers $1.95 billion offering of five-year senior PIK toggle notes (Ba2//BB-), which ran a roadshow during the middle part of the month.

For more than a week it has been radio silence on Global Aircraft, sources say.

Although market sources have begun to see the deal’s demise as a foregone conclusion, a sellside source who has been following it closely said Friday that it would be premature to call the priest, just yet.

Morgan Stanley, the lead, is still working on the Global Aircraft deal, and will continue to work on it during the week ahead, the source said.

The proposed notes have a novel 200 basis points coupon step-up for PIK payments (the customary step-up has been 75 bps) reflecting the issuer’s understanding that investors want to be paid in cash.

Early in the week conversations on pricing had Global Aircraft coming with an 11½% cash coupon and a 13½% PIK coupon, replacing earlier guidance that had a cash coupon coming in the 11% area.

More recent conversations have widened significantly (possibly a 13%-handle coupon), the sellsider said.

Meanwhile investors looking at the offer seek more guarantees and pledges of assets, and have suggested document changes that might assuage such concerns.

The company seems open to most of those changes, according to the sellside source.

“There still seems to be a doable deal,” the sellsider said.

Cetera trades to a premium

Cetera’s 10% senior secured notes due 2030 were trading with a strong premium in heavy volume on Friday with the chunky yield supporting its secondary market performance, a source said.

The 10% notes were trading in the par ¾ to 101¼ context during the session with the notes wrapped around 101 in the late afternoon, a source said.

There was $30 million in reported volume.

In the latest leveraged buyout financing deal to clear the market, Cetera priced a $700 million issue of the 10% senior secured notes at par on Thursday.

Pricing came in the middle of yield talk in the 10% area.

Ardagh affiliates fall

Ardagh’s senior notes leveled off on Friday after the post-earnings sell-off of the previous session.

While Ardagh’s 5¼% senior secured notes due 2025 (B1/BB-) remained active, they were largely unchanged with the notes trading in the 94 to 94½ context with the yield about 9½%, a source said.

There was $11 million in reported volume.

However, notes from Ardagh’s affiliates had heavy selling on Friday on the heels of the earnings results.

ARD Finance SA’s 6.5% senior secured toggle notes due 2027 plunged 6½ points.

The notes were wrapped around 58½ with the yield 24 1/8% in the late afternoon, a source said.

There was $12 million in reported volume.

ARD Finance is a holding company whose primary asset is its direct and indirect interest in Ardagh Group.

Trivium Packaging’s 8½% senior notes due 2027 were also dragged lower by Ardagh’s results with the notes undergoing heavy selling on Friday.

The 8½% notes sank 2 to 3 points.

They were trading in the 83¾ to 84¼ context in heavy volume, a source said.

The yield jumped to 14%.

There was $19 million in reported volume.

Ardagh owns a 42% interest in Trivium, a source said.

Hawaiian Airlines lower

Hawaiian Airlines’ 5¾% first-lien senior secured notes due 2026 continued their downfall on Friday after heavy selling the previous session.

The 5¾% notes were down another 2 to 3 points in heavy volume.

They were wrapped around 76 in the late afternoon with the yield 19¼%, a source said.

There was $19 million in reported volume.

The notes have fallen 4 to 5 points over the last two sessions after the airline reported disappointing numbers.

Indexes

The KDP High Yield Daily index inched up 5 bps to close Friday at 48 with the yield 8.28%.

The index was up 1 bp on Thursday, down 13 bps on Wednesday and 35 bps on Tuesday and up 13 bps on Monday.

The index posted a cumulative loss of 29 bps on the week.

© 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.