Trinity prices 7¾% notes; Howard Midstream on HY deck; Viking, Carnival gain steam

By Paul A. Harris and Abigail W. Adams

Portland, Me., June 28 – Trinity Industries, Inc. stepped forward as issuer of the day in junkland with an offering of 7¾% five-year notes.

Meanwhile, it was a strong day in the secondary space with buyers active in the market as the end of the quarter approaches, a source said.

The cash bond market was lifted 1/8 to ¼ point with recession concerns receding in the wake of strong economic data.

New paper continued to dominate the tape although with muted aftermarket performances.

The Earthstone Energy Holdings, LLC 9 7/8% senior notes due 2031 (B3/B+/B+) fell flat with the notes hovering around their discounted issue price in heavy volume.

Viking Cruises Ltd.’s 9 1/8% senior notes due 2031 (Caa1/B-) continued to gain steam after a soft open with the notes closing the day with a ¼ point gain.

Carnival Corp.’s senior notes remained well bid with the notes adding another ¼ to ½ point in active trade.

Primary

Trinity Industries, Inc. priced Wednesday’s sole new high-yield deal, a $400 million issue of five-year senior notes (Ba2/BB+/BB) that came at par to yield 7¾%.

The yield printed at the wide end of yield talk in the 7 5/8% area. Early guidance was in the mid-to-high 7% area.

Meanwhile Howard Midstream Energy Partners, LLC began marketing a $500 million offering of senior notes due July 2028 (B3/B-) on Wednesday.

Pricing is set for Thursday afternoon.

Initial guidance has the notes coming to yield in the 9% area, a sellside source said.

Earthstone flat

Earthstone’s 9 7/8% senior notes due 2031 fell flat on Wednesday with the notes straddling their discounted issue price.

The 9 7/8% notes traded in a range of 97 5/8 to 98¼ with the notes posed to close the day at 98 1/8, a source said.

There was $136 million in reported volume.

Earthstone priced a $500 million issue of the 9 7/8% notes at 97.968 to yield 10¼% in a Tuesday drive-by.

The yield came at the wide end of the 10% to 10¼% yield talk.

The deal also underwent covenant changes with investors focused on the restricted payments covenant.

The majority of investors involved in the new offering were holders of the oil and gas company’s outstanding issues, a source previously said.

Viking Cruises gains steam

After a soft open, Viking Cruises’ 9 1/8% senior notes due 2031 gained steam with the notes closing the day with a ¼ point gain.

The notes dipped to par bid at the open.

However, they closed the day in the par 3/8 to par 5/8 context, a source said.

There was $35 million in reported volume.

The notes had a lackluster start in the aftermarket with the notes trading in the par to par ¼ context on the break.

However, they have slowly gained strength over the past two sessions with Carnival’s strong earnings reflecting demand trends that have lifted the sector.

Carnival rises

Carnival’s senior notes continued to add to the gains made the previous session with the market turning more bullish on a company that entered 2023 as a speculative credit.

Carnival’s 7 5/8% senior notes due 2026 (B3/B) rose 3/8 to ½ point to close the day at 97 7/8 with the yield about 8½%, according to a market source.

The 6% senior notes due 2029 gained ½ to ¾ point to close the day in the 88 to 88 3/8 context with the yield just north of 8½%.

However, the 10 3/8% notes due 2028 (B2/B+) were largely flat at 109¼ with the yield 7½%.

Each tranche had about $11 million in reported volume.

While there was some selling in the capital structure after Carnival posted earnings on Monday, the company’s senior notes have been well bid over the past two sessions.

Carnival posted record revenue and said it expects to return to profitability in the second half of 2023.

The company also outlined its plan to continue its deleveraging campaign.

Carnival entered 2023 as a speculative credit with market players focused on refinancing and recession risks, sources said.

However, with the economy resilient and demand for cruises strong, the market has become increasingly bullish on the name.

Fund flows

The daily cash flows of the dedicated high-yield bond funds were mixed on Tuesday, according to a market source.

High-yield ETFs had $109 million of inflows on the day.

However actively managed high-yield funds sustained $59 million of outflows on Tuesday, the market source said.

Indexes

The KDP High Yield Daily index added 13 points to close Wednesday at 50.57 with the yield now 7.33%.

The index was up 10 points on Tuesday and 6 points on Monday.

The ICE BofAML US High Yield index gained 28.7 basis points with the year-to-date return now 5.142%.

The index added 24.7 bps on Tuesday and 4 bps on Monday.

The CDX High Yield 30 index closed Wednesday up 17 bps at 101.81.

The index was up 49 bps on Tuesday after falling 29 bps on Monday.

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