Earthstone drives by with $500 million; junk bond cruise names better; OneMain improves

By Paul A. Harris and Abigail W. Adams

Portland, Me., June 27 – Earthstone Energy Holdings, LLC priced Tuesday’s domestic junk bond issue, a drive-by for $500 million.

Meanwhile, the secondary space was quiet yet firm on Tuesday with the cash bond market closing the day with a ¼ point gain after a flat open.

Market sentiment improved with buyers returning to the space as rate and recession concerns faded.

While new issues and earnings-related news drove trading volume on Tuesday, the broader market was slow with activity expected to continue to dwindle with many taking a long weekend for July 4, sources said.

It was a cruise-centric day in the secondary space.

Viking Cruises Ltd.’s new 9 1/8% senior notes due 2031 (Caa1/B-) were a touch stronger after making nominal gains on the break.

Carnival Corp.’s senior notes continued to move post-earnings with the notes lifted ¼ to ½ point in active trade on Tuesday.

OneMain Finance Corp.’s recently priced 9% senior notes due 2029 (Ba2/BB) improved alongside the broader market with the notes trading with a premium after largely trading flat since hitting the secondary space the previous week.

Earthstone

In Tuesday’s primary market Earthstone Energy Holdings priced a $500 million issue of 9 7/8% eight-year senior notes (B3/B+/B+) at 97.968 to yield 10¼% in a drive-by.

The yield came at the wide end of the 10% to 10¼% yield talk. That official talk came on top of initial guidance.

The deal underwent document changes, with investors focusing on restricted payments covenants, a sellside source said.

A significant number of investors in Tuesday’s deal were existing holders of Earthstone debt looking for a covenant package mirroring that of the company’s 8% senior notes due April 2027, sources said.

With the document changes the company accommodated these investors, according to the sellsider.

Viking Cruises adds

Viking Cruises’ new 9 1/8% senior notes due 2031 were a touch stronger after making nominal gains after breaking for trade the previous session.

The 9 1/8% notes were trading in the par ¼ to par 3/8 context heading into the market close, a source said.

They closed the previous session wrapped around par ¼.

Viking Cruises priced a $720 million issue of the 9 1/8% notes in a Monday drive-by.

The yield printed at the tight end of yield talk in the 9¼% area.

However, official talk came wide of early guidance for a yield of 9%.

While Viking Cruises’ deal ended up heavily oversubscribed with books growing to more than 2x deal size, orders were sluggish with a 9% yield, a source previously said.

Carnival adds

Carnival’s senior notes were well bid on Tuesday with the company’s capital structure rebounding after a post-earnings dip on Monday.

The notes added ¼ to ½ point across the board with the notes closing the day well bid, a source said.

Carnival’s 5¾% senior notes due 2027 (B3/B) were up ½ point to close the day at 90¼.

The yield was 8 7/8%.

The 6% senior notes due 2029 added ½ to ¾ point to close the day in the 87½ to 87¾ context.

The yield was about 8¾%.

Carnival’s stock eliminated losses from Monday’s session with stock up 8.84% after falling 7.6% on Monday.

Carnival’s stock had some selling pressure on Monday despite reporting strong earnings and forward guidance.

The company reported record revenue of $4.91 billion for the second quarter and record customer deposits of $7.2 billion.

The company expects to return to profitability in the second half of 2023 and expects adjusted EBITDA for the year between $4.1 billion and $4.25 billion.

The company also outlined its deleveraging goals with the cruise line operator eliminating $1.4 billion of its variable-rate debt.

OneMain improves

OneMain’s recently priced 9% senior notes due 2029 improved in active trade on Tuesday after largely trading flat since hitting the secondary space.

The notes added ¼ to 3/8 point.

They were changing hands in the par ¼ to par ½ context heading into the market close, a source said.

The notes were gaining alongside the broader market.

The notes have largely traded in the par to par ¼ context since the $500 million issue priced at par on June 21.

Fund flows

High-yield ETFs sustained $127 million of daily cash outflows on Monday, the most recent session for which data was available at press time, according to a market source.

Actively managed high-yield funds had positive flows on the day, posting $30 million of inflows on Monday, the source said.

The combined funds are tracking $676 million of net outflows for the week that will conclude with Wednesday’s close, according to the market source.

Indexes

The KDP High Yield Daily index added 10 points to close Tuesday at 50.44 with the yield 7.4%.

The index was up 6 points on Monday.

The CDX High Yield 30 index closed Tuesday up 49 basis points at 101.64.

The index was down 29 bps on Monday.

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