Morning Commentary: EnQuest on deck; AMC brings $400 million; Latam Airlines up 2 points

By Paul A. Harris

Portland, Ore., Oct. 12 – Junk opened 1/8 of a point lower on Wednesday, according to a bond trader in New York.

A slightly tamer-than-expected Producer Price Index report did not appear to be moving the needle, another trader said, adding that the market was quiet at mid-morning, with the two most recent deals trading at premiums to their new issue prices.

The bonds in question include the Latam Airlines Group SA 13 3/8% senior secured notes due 2027 (S&P: B-), which were up 2 points at 96 bid, 96½ offered after pricing at 94.423 to yield 15% on Tuesday in a $450 million tranche.

The Latam Airlines 13 3/8% senior secured notes due 2029 (S&P: B-) were also up 2 points at 95½ bid, 96 offered after pricing at 93.103 to yield 15% in a $700 million tranche.

The handsome premiums seen Wednesday morning owe partly to the fact that the Latam Airlines paper came with hefty market concessions, the trader noted. Initial guidance had the five-year notes coming to yield in the low 13% area and the seven-year notes coming to yield in the low-to-mid 13% area.

Some high-yield desks will trade the bonds issued by the Chile-based air carrier, while some firms will handle trades on emerging markets desk, sources say.

However, half of the $1.15 billion of new Latam Airlines issuance was spoken for by U.S. distressed debt accounts that participated in the company's debtor-in-possession loan, said the trader, who focuses on distressed debt.

The airline exited bankruptcy during the past summer.

Also pricing a deal on Tuesday was RXO, Inc., which sold $355 million of 7½% split-rated senior notes due 2027 (Baa3/BB+) at 98.962 to yield 7¾%.

The deal, backing XPO Logistics, Inc.'s spinoff of its transportation brokerage platform, was trading slightly above new issue price on Wednesday morning at 99 bid, 99 1/8 offered, the trader said.

Slightly later a sellside source saw markets at 99 bid, 99 3/8 offered.

The drive-by deal, which was modestly upsized from $350 million, was heard to have played to an $800 million order book.

In Wednesday primary market news, London-based E&P EnQuest plc talked its $300 million offering of five-year senior notes (B3/B+) to yield 12% to 12¼% with 1 point to 2 points of original issue discount, tight to initial guidance in the 12¼% area. Pricing is expected later on Wednesday.

And Odeon Finco plc, an indirect subsidiary of AMC Entertainment Holdings, Inc., began marketing a $400 million offering of five-year senior secured notes, in the market with initial guidance that has the notes coming with a 12¾% coupon at OID 95 to 96, and set to price before the end of the week.

News of the new deal sent the price of the AMC 10% second-lien notes due 2026 tumbling 4 points, trading at 58 on Wednesday morning, according to the trader, who postulated that holders of the 10% notes are restive at the thought of being layered into a more expensive debt structure.

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