Camelot clears junk bond primary, higher in secondary; market tone generally better

By Cristal Cody and Paul A. Harris

Tupelo, Miss., July 20 – Camelot Return Merger Sub Inc. priced the first dollar-denominated high-yield bond deal to clear the market in two weeks, on Wednesday.

Market tone was better overall throughout the day, though junk trading supply remains on the light side, sources said.

“There hasn’t really been much in high yield,” one source said, looking back on the last few weeks.

The junk secondary market has grappled with a “lack of new issuance,” another market source noted this week. “Also, there is risk. The market is up, down, up, down.”

Camelot prices!

Camelot’s new bond deal, which is part of the financing for the buyout of Cornerstone Building Brands, Inc. by Clayton, Dubilier & Rice (CD&R), came as an upsized $710 million issue (from $600 million) of 8¾% six-year senior secured notes (B2/B) that priced at 90.296 to yield 11%.

The coupon came on top of coupon talk. The issue price came in line with price talk of approximately 90.3. The yield came in the middle of yield talk in the 11% area, but wide to early guidance in the 10½% area.

Concurrent with the upsize of the bonds the term loan was downsized by the same amount, to $300 million from $410 million.

Total orders across the $1.01 billion of combined bond and term loan debt were heard to be slightly below deal size at $900 million, early Wednesday.

The Camelot Return Merger Sub 8¾% senior secured notes due August 2028 traded sharply higher on the break, 92 bid, 92¼ offered, according to a portfolio manager who was not involved in the deal.

“They were last trading around 92,” a different source marked them.

In the wake of the Camelot/Cornerstone deal there is only one other offer presently in the market.

Patagonia HoldCo LLC is on the road with a $500 million offering of seven-year senior secured first-lien notes (B+) supporting the buyout of Lumen Technologies' Latin American operations by Stonepeak.

Initial guidance specifies a 7½% coupon at a discount of 86.

Pricing is set for the week ahead.

However one deal took a place aboard the high-yield shadow calendar, on Wednesday.

Avient Corp. plans to sell $900 million of senior notes in a possible July transaction, according to a high-yield portfolio manager who added that initial guidance has the deal coming to yield in the high 7% area (see related stories in this issue).

Secondary tone

Stock indices ended Wednesday higher, while oil prices gave back about $2.

The Nasdaq was up 1.58%.

The iShares iBoxx High Yield Corporate Bond ETF went out 34 cents, or 0.45%, higher at $76.10.

“The CDX blasted through a hundred today,” a source noted.

Carnival notes stronger

In other secondary action, Carnival Corp.’s 10½% senior notes due 2030 (B2/B) shot up 3½ points in the secondary market Wednesday, going out at 90¼ bid, a market source said.

The notes are trading about 7¼ points better since Friday.

Carnival’s 7 5/8% senior notes due 2026 (B2/B) were quoted going out at 87¼ bid, up from 83 bid a day earlier.

Carnival Corp. & plc announced Wednesday that Carnival is offering $1 billion shares of common stock and a $150 million greenshoe.

Carnival said it expects to use the proceeds for general corporate purposes, which could include addressing its 2023 debt maturities.

Tuesday 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 saw $319 million of inflows on the day.

However actively managed high-yield funds were negative on the day, sustaining $111 million of outflows on Tuesday, the source said.

Indexes

The KDP High Yield Daily index dropped 31 points to 56.08 and a yield of 6.95% on Wednesday.

The CDX High Yield 30 index was up at 100.31 from 99.875 on Tuesday and 98.68 at the start of the week.

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