Allegiant drives by; junk resumes rally post-CPI report; Charter regains par; Carnival rises

By Paul A. Harris and Abigail W. Adams

Portland, Me., Aug. 10 – The domestic high-yield primary market cleared one drive-by deal during Wednesday’s session.

Allegiant Travel Co. priced an upsized $550 million issue of five-year senior secured first-lien notes (Ba3/BB-/BB+) at a discount.

Meanwhile, the secondary space resumed its upward momentum following July’s Consumer Price Index report, which came in below expectations.

The report sparked a revision of expectations for the Federal Reserve’s rate hike schedule with the recently priced in 75 basis points rate hike expected in September downwardly revised to 50 bps.

The market was off to the races following the report with the CDX index marking its highest close since early May and high beta names climbing 1-plus points, a source said.

However, the report did not cast as glowing a picture on decelerating inflation as the market rally suggested.

The only category in the CPI that did not increase was energy and apparel and Federal Reserve speakers were quick to say they will still be raising rates aggressively, a source said.

However, the continued strength in the secondary market is to be expected given the massive inflows the market has seen over the past two weeks and the lack of a primary market calendar to put money to work in.

While strong, trading volumes remained thin, a product of the shortage of new paper and the season, a source said.

Charter Communications, Inc. subsidiary CCO Holdings, LLC’s recently priced 6 3/8% senior notes due 2029 (B1/BB-) remained active with the notes again returning to par after falling below the previous session.

NFP Corp.’s 7½% senior secured notes due 2030 (B1/B) also continued to rise.

Carnival Corp.’s senior notes (B3/B) outperformed the market despite a recent ratings downgrade as market players revise their recession forecasts.

Allegiant drives-by

Allegiant Travel priced an upsized $550 million issue (from $500 million) of 7¼% five-year senior secured first-lien notes (Ba3/BB-/BB+) at 99.486 to yield 7 3/8% in a Wednesday drive-by.

The yield printed at the inside of yield talk in the 7½% area. Initial guidance was in the 7¾% area.

The deal wound up being 4.5-times oversubscribed, according to a sellside source who added that it came into the market on the back of $750 million of reverse inquiry.

The notes were going out Wednesday afternoon at 100.75 bid, 101.25 offered.

The active forward calendar remained empty at Wednesday's close.

The CPI report, though, could spur further activity in the high-yield primary market, which has undergone a modest early-August revival, a source noted.

Charter above par

CCO Holdings’ recently priced 6 3/8% senior notes due 2029 again topped par on Wednesday after falling below amid the market weakness of the previous session.

The 6 3/8% notes were up 1 point to close Wednesday at par ¼, a source said.

They sank to a 99-handle on Tuesday, closing the day at 99¼.

CCO Holdings’ new paper has been volatile since the $1.5 billion issue priced at par on Aug. 4.

While the notes were trading at a slight premium on the break, they closed last Friday on a 99-handle.

The notes returned to par during Monday’s session but again dropped to a 99-handle amid the weakness in the market on Tuesday.

NFP gains

NFP’s 7½% senior secured notes due 2030 continued to rise amid the market rally on Wednesday.

The 7½% notes climbed another ½ point.

They were changing hands in the par ¾ to 101¼ context heading into the market close, according to a market source.

NFP priced the $350 million issue at par on Monday.

Carnival rises

Carnival’s senior notes outperformed the market on Wednesday despite a recent ratings downgrade.

The cruise line operator’s 10½% senior notes due 2030 gained 2½ points in heavy volume.

The notes jumped to a 95-handle and were changing hands in the 95 to 95¼ context heading into the market close.

The yield was just shy of 11½%.

Carnival’s 5¾% senior notes due 2027 gained 2 points to return to an 82-handle.

They were changing hands in the 82½ to 82¾ context heading into the market close with the yield about 10 5/8%.

Carnival’s 6% senior notes due 2029 gained 2½ points to climb to an 81-handle.

The notes were changing hands in the 81¼ to 81¾ context heading into the market close with the yield about 9 7/8%.

Carnival’s notes were on the rise despite a recent ratings downgrade.

Moody’s Investors Service downgraded Carnival’s corporate family rating to B2 from B1, its secured notes ratings to Ba3 from Ba2, and its unsecured note rating to B3 from B2 on Monday.

The downgrade was the result of a weaker than expected recovery.

However, it did little to move Carnival’s capital structure, which had already been trading well wide of the B index, a source said.

Carnival and other cruise line operators have become de facto recession indicators, sources have said.

Last Friday’s jobs report and Wednesday’s CPI print were a boon to Carnival’s senior notes as market players dial back their recession forecasts, a source said.

$839 million Tuesday outflows

The dedicated high-yield bond funds sustained large net outflows of $839 million on Tuesday, the most recent session for which data was available at press time, according to a market source.

The negative flows were heavily concentrated in the high-yield ETFs which saw $734 million of outflows on the day.

Actively managed high-yield funds sustained $105 million of outflows on Tuesday, the source said.

The combined funds are tracking $306 million of net inflows for the week that concluded with Wednesday's close, according to the market source.

Indexes

The KDP High Yield Daily index jumped 42 points to close Wednesday at 57.55 with the yield 6.37%.

The index fell 18 points on Tuesday after gaining 18 points on Monday.

The ICE BofAML US High Yield index gained 60.7 bps with the year-to-date return now negative 7.746%.

The index fell 31.7 bps on Tuesday and gained 35.2 bps on Monday.

The CDX High Yield 30 index jumped 151 bps to close Wednesday at 102.48.

The index fell 61 bps on Tuesday after rising 16 bps on Monday.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.