Fortress on deck; selling resumes in HY secondary; Michaels volatile; Carnival hits new low

By Paul A. Harris and Abigail W. Adams

Portland, Me., June 28 – The domestic high-yield primary market remained quiet on Tuesday with one offering on the forward calendar.

Fortress Transportation and Infrastructure Investors LLC was scheduled to wrap its roadshow for its $500 million offering of five-year senior secured notes (B2/B-), with pricing expected on Wednesday.

Meanwhile, selling pressure returned to the secondary space on Tuesday with the cash bond market off ½ to ¾ point.

While Treasuries remained stable on Tuesday, ETF selling and end-of-quarter repositioning were driving the market lower, sources said.

Carnival Corp.’s senior notes continued to lose ground under Tuesday’s heavy market conditions with the notes now below their level heading into last week’s business update.

Michaels Stores, Inc.’s notes were volatile in heavy volume with the craft store retailer’s notes, issued by Magic MergerCo, Inc., strong at the market open but closing the day unchanged to slightly softer.

Fortress on deck

The primary market passed a quiet Tuesday, with no deals pricing, and just one dollar-denominated offer on the active forward calendar.

Fortress Transportation and Infrastructure was due to wrap up the roadshow for its $500 million offering of FTAI Escrow Holdings, LLC five-year senior secured notes, with pricing expected on Wednesday.

Pending official price talk initial guidance has the deal – backing the spinoff of FTAI Infrastructure Inc. – coming with a coupon of 10¼% to 10½% at an original issue discount to yield 11%.

The Fortress offer was heard to be playing to $450 million of orders on Tuesday, according to a sellside source who added that it appears to be a “clubby” deal and that orders are tending to be “chunky.”

It has the feel of a “put-away deal,” the sellsider said.

Carnival finds a bottom

Carnival’s senior notes continued to lose ground in heavy volume on Tuesday.

The cruise line operator’s recently priced 10½% senior notes due 2030 (B2/B) fell 2 points to an 87-handle.

The notes were changing hands in the 87¼ to 87¾ context heading into the market close with the yield now 13%, according to a market source.

Tuesday marked the lowest level for the notes since the $1 billion issue priced at par on May 18.

There was $19 million in reported volume.

Carnival’s 7 5/8% senior notes due 2026 fell 1 point.

The notes were changing hands in the 82¼ to 82¾ context heading into the market close with the yield brushing up against 14%.

The notes were the most active in the capital structure with $29 million in reported volume.

Carnival’s 6% senior notes due 2029 were off 1 point with the majority of round lot trades on Tuesday in the 73¾ to 74¼ context.

The trading level also marked the lowest for the notes since the $2 billion issue priced in October 2021.

Carnival’s notes were trading lower than their level heading into last week’s business update.

Carnival’s capital structure was under pressure heading into the report, which was released on June 24, but bounced following the update with the results better than expected.

The bounce was short-lived, however, with Carnival’s senior notes giving back their gains on Monday and resuming their downtrend during Tuesday’s session.

Michaels volatile

Michaels’ senior notes were volatile during Tuesday’s session with the notes launching the day with strong gains but closing unchanged to weaker.

Michaels’ 7 7/8% senior notes due 2029 (B3/CCC+) rose 2 points early in Tuesday’s session to trade as high as 71¼.

However, the notes were driven lower as selling pressure took hold of the market.

The 7 7/8% notes closed the day on a 68-handle.

They were changing hands in the 68 to 68¼ context heading into the market close.

The yield on the notes was 15½%.

There was $21 million in reported volume.

Michaels’ 5¼% senior secured notes due 2028 (Ba3/B) were also up 2 points early in the session to trade as high as 83, according to a market source.

However, the notes were driven lower as the session progressed and closed the day down 1 point.

The notes were changing hands on an 80-handle at the close and ended the day wrapped around 80¼ with the yield 9¾%.

The craft retailer, which was taken private in 2021 by Apollo, was in focus on Tuesday after a better-than-expected earnings report.

While earnings beat the market’s expectations, a weak reading of the consumer confidence index dragged down risk assets on Tuesday.

$623 million Monday outflows

The dedicated high-yield bond funds sustained $623 million of net outflows on Monday, according to a market source.

The high-yield ETFs had $466 million of outflows on the day.

Actively managed high-yield funds sustained $157 million of outflows on Monday, the source said.

The combined funds are tracking $529 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 fell 30 points to close Tuesday at 54.9 with the yield now 7.54%.

The index added 4 points on Monday.

The ICE BofAML US High Yield index sank 50.84 basis points with the year-to-date return now negative 12.8084%.

The index rose 5.76 bps on Monday.

The CDX High Yield 30 index plunged 125 bps to close the day at 97.52.

The index shaved off 13 bps on Monday.

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