Norwegian prices junk drive-by; Civitas at a premium; DaVita heavy, WW better on drug news

By Paul A. Harris and Abigail W. Adams

Portland, Me., Oct. 11 – Cruise line NCL Corp. brought a drive-by junk bond deal on Wednesday, constituting new business for the primary market.

Meanwhile, the secondary space was again showing indecision regarding the Federal Reserve’s path forward following the release of minute notes from the Federal Open Market Committee’s September meeting and on the eve of the latest Consumer Price Index report.

The market was up about ¼ point early in the session, adding to strong gains from the previous session.

However, it started to come in after a hotter-than-expected Producer Price Index report and further deflated after the meeting minute notes were released, a source said.

While soft midsession, the market was lifted into the close to end the day largely unchanged.

While the market had heavy selling last week as the market priced in an additional rate increase, it made strong gains the previous session following comments from Fed officials that indicated the rate hike campaign had run its course.

“The market still doesn’t know what it’s doing,” a source said.

All eyes will be on the Consumer Price Index report on Thursday as market players attempt to gauge the Fed’s next move.

While the broader market remained focused on the macro trade, new paper and topical news were the drivers of junk trading activity during Wednesday’s session.

Civitas Resources, Inc.’s new 8 5/8% senior notes due 2030 (B1/BB-/BB) were in focus with the notes adding to gains following a strong break the previous session.

DaVita Inc.’s senior notes (B1/B+) plunged to their lowest level of the year with the dialysis provider heavy as analysts predict weight loss drug Ozempic showed promise as a treatment for kidney failure.

While the news dragged down DaVita, it lifted WW International Inc.’s 4½% senior secured notes due 2029 (B1/B) which have made strong gains since the company’s acquisition of weight management telehealth platform Sequence, which prescribes Ozempic.

Biotech Organon & Co.’s senior notes were also under pressure in heavy volume on Wednesday.

Norwegian sails by

Wednesday’s primary market session had a single, well-known issuer come with a drive-by deal.

Norwegian Cruise Line Holdings Ltd. subsidiary NCL Corp. Ltd. priced a $790 million issue of 5.25-year senior secured notes (B1/BB-) at par to yield 8 1/8%, at the tight end of talk in the 8¼% area.

A trader, noting that initial guidance was in the 8½% area, said there appeared to be no reverse inquiry in NCL’s deal, but added that cruise lines have been the hot sector in the junk bond market for the past six months.

Civitas gains

Civitas’ new 8 5/8% senior notes due 2030 added to gains after a strong break the previous session.

The notes were up as much as ½ point early in the session to trade in the 101 to 101¼ context, a source said.

However, they dipped back to a par-handle as the broader market weakened in intraday activity.

While the notes gave back much of their early gains in intraday activity, they were lifted into the close.

The 8 5/8% notes ended the day up ¼ point to trade in the par ¾ to 101 context, a source said.

There was $78 million in reported volume.

The notes broke strong with demand for the paper heavy. They closed the previous session in the par 3/8 to par 5/8 context.

Civitas priced a $1 billion issue of the 8 5/8% notes at par in a Tuesday drive-by.

The yield printed at the tight end of yield talk in the 8¾% area.

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

Davita heavy/WW gains

DaVita’s senior notes suffered large losses and WW International’s notes had large gains after weight loss drug Ozempic showed promise as a treatment for kidney failure.

DaVita’s 3¾% senior notes due 2031 dropped 4 points to close the day in the 71½ to 72½ context, according to a market source.

The yield rose to about 9%.

There was $18 million in reported volume.

The dialysis operator’s 4 5/8% senior notes due 2030 were also off about 4 points to close the day wrapped around 77.

The yield climbed to about 9 3/8%.

There was $55 million in reported volume.

News that Ozempic showed promise as a treatment for kidney disease clocked the capital structures of medical device and kidney disease treatment providers across the board, a source said.

However, the news was a boon to WW International, which recently acquired the telehealth platform Sequence, which prescribes Ozempic and other weight loss drugs.

WW International’s 4½% senior secured notes due 2029 jumped 2½ points on the news to close the day at 72½, a source said.

The yield narrowed to 11 3/8%.

There was $13 million in reported volume.

WW International’s 4½% senior secured notes due 2029 have been on a steady uptrend since the March acquisition of Sequence.

The notes were trading near all-time lows of 48 in the run up to WW’s announced acquisition.

Organon

Biotech Organon’s senior notes were under pressure in heavy volume on Wednesday.

The 5 1/8% senior notes due 2031 (B1/BB-) fell 1½ points to close the day at 78¼, according to a market source.

The yield was 9 1/8%.

The 4 1/8% senior secured notes due 2028 (Ba2/BB) were also off about 1½ points.

They closed the day at 86 with the yield about 7 7/8%.

There was $22 million in reported volume.

Fund flows

The daily cash flows of the dedicated high-yield bond funds were mixed on Tuesday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs had a healthy $386 million of inflows on the day.

However actively managed high-yield funds sustained $108 million of outflows on Tuesday, the source said.

The combined funds are tracking $2.1 billion of net outflows on the week that was set to conclude with Wednesday’s close, according to the market source.

Indexes

The KDP High Yield Daily index fell 8 basis points to close Wednesday at 49.18 with the yield 8.05%.

The index gained 41 bps on Tuesday.

The ICE BofAML US High Yield index added 5 bps with the year-to-date return now 5.534%.

The index was up 95 bps on Tuesday.

The CDX High Yield 30 index gained 14 bps to close Wednesday at 100.75.

The index gained 31 bps on Tuesday.

© 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.