Hyatt prices floaters; IPL Plastics, TreeHouse trade up; Royal Caribbean, Carnival climb

By Paul A. Harris and Abigail W. Adams

Portland, Me., Aug. 26 – While the domestic high-yield primary market remained quiet on Wednesday, one crossover name tapped the capital markets in a high-grade execution.

Hyatt Hotels Corp. priced $750 million of two-year floating-rate senior notes (Baa3/BBB-) during the session.

After a deluge of new issuance over the past few weeks, the domestic high-yield primary market is expected to remain muted until the return from Labor Day, sources said.

Meanwhile, the secondary space continued to firm on Wednesday with demand for new paper “huge,” a source said.

While the flood of new issuance over the past few weeks put pressure on the secondary space, the slowdown in the new deal pipeline caused many recent issues to firm alongside the broader market.

TreeHouse Foods, Inc.’s 4% senior notes due 2028 (Ba2/BB-) and IPL Plastics Inc.’s 6% senior secured notes due 2028 (B3/B) were in focus on Wednesday with both issues trading with large premiums in the secondary.

Cruise lines also remained active and continued to gape higher, despite continued headlines about delays in operation.

While Carnival Corp.’s recently priced 9 7/8% senior secured second-priority notes due 2027 (Ba1/BB+) continued to lag their issue price, the 11½% first-priority senior secured notes due 2023 (Baa2/BBB-) were active and continuing to trade with a steep premium.

Royal Caribbean Cruises Ltd.’s 11½% senior notes due 2025 were also in focus and making large gains.

Wednesday’s primary

While the high-yield new issue market remained engulfed in the horse latitudes of late August, Hyatt Hotels came with a $750 million issue of two-year floating-rate senior notes (Baa3/BBB-) that priced at par, on top of talk at a 300 basis points spread to Libor, in an investment-grade execution.

Reckoning the absolute yield of the floater to be approximately 3¼%, a trader said that the deal appealed to crossover accounts and high-grade investors hungering for yield.

Since July 1 22 tranches of speculative-grade bonds, representing 22.5% of the business transacted during that interval, priced with yields below 4%--some yielding at or below the yield that investment grade-rated Hyatt realized on Wednesday.

On Aug. 8 Warner Music Group (WMG Acquisition Corp.) priced $550 million of secured notes due 2031 (Ba3/BB) to yield 3%.

Meanwhile the active junk bond new issue calendar remained empty at Wednesday's close, and might remain that way until the new issue machine gets rolling again, in the aftermath of the Sept. 7 Labor Day holiday, the traditional summer-fall boundary in the bond market.

Word in the market, however, is that the primary won't remain completely dormant during the run-up to Labor Day, with several of the big dealers thought to be contemplating late-summer offerings, as the technical strength of the market remains outstanding, and issuers eyeball opportunities to lock in capital at rates that are pushing at the market's historic lows, sources say.

IPL Plastics in focus

IPL Plastics’ 6% senior secured notes due 2028 were in focus on Wednesday with the notes trading with a steep premium in the secondary space.

The 6% notes were changing hands in the 101¾ to 102 context heading into Wednesday’s close.

With more than $87 million on the tape, the notes were the most actively traded issue during Wednesday’s session.

Demand for the paper was “crazy,” with the deal more than 6x oversubscribed, a source said.

Order books were more than $4 billion with the offering less than $500 million.

IPL Plastics priced an upsized $485 million issue of the 6% notes at par on Tuesday.

Pricing came at the tight end of the 6% to 6¼% yield talk.

TreeHouse in demand

TreeHouse Foods’ 4% senior notes due 2028 were trading with a steep premium in high-volume activity on Wednesday.

The 4% notes were marked at 101½ bid, 101¾ offered heading into the market’s close.

The notes were active with more than $28 million in reported volume during Wednesday’s session, a source said.

The massive demand for new paper was driving the secondary performance of the notes, a source said.

TreeHouse’s offering was also heavily oversubscribed with orders exceeding $3 billion.

The packaged food and beverage manufacturer and distributer priced an upsized $500 million issue of the 4% notes at par on Tuesday.

Pricing came at the tight end of the 4% to 4¼% yield talk. Initial guidance was 4½% to 4¾%.

The issue size was increased from $400 million.

Cruise lines active

Cruisers continued to gape higher in active trading on Wednesday, despite continued headlines about delays in their return to operation.

Carnival’s 9 7/8% senior secured second-priority notes due 2027 continued to struggle in the aftermarket with the notes well below their issue price.

The 9 7/8% notes, which priced at par, were marked at 98 bid, 98½ offered on Wednesday.

However, Carnival’s 11½% first-priority senior secured notes due 2023 were firming in active trading.

The 11½% notes were changing hands on a 110-handle.

They were marked at 110¼ bid, 110¾ offered, a source said.

The notes remained active with more than $15 million in reported volume during Wednesday’s session.

In addition to being first-priority secured, the 11½% notes are short-dated paper, which has been in high demand in the aftermarket, a source said.

Royal Caribbean’s 11½% senior notes due 2025 made large gains in high-volume activity on Wednesday.

The notes climbed to 112¾ bid, 113½ offered, a source said.

The bonds saw more than $28 million in high-volume on Wednesday.

Cruise operators remain in demand in the secondary despite the continued uncertainty regarding their return to operations.

The negative headlines at this point “are not a surprise,” and did not seem to have an impact on their current levels.

Indexes gain

Indexes continued to post gains on Wednesday.

The KDP High Yield Daily index rose 13 basis points to close Wednesday at 67.11 with the yield now 5.4%.

The index was up 15 bps on Tuesday and 8 bps on Monday.

The ICE BofAML US High Yield index rose further into positive territory on Wednesday. The index was up 7 bps with the year-to-date return now 0.537%.

The index was up 26.1 bps on Tuesday and 29.2 bps on Monday.

The CDX High Yield 30 index rose 22 bps to close Wednesday at 105.5.

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