Cruise liners weaken as NCL extends voyage suspension; Hertz slides on SEC comments; CoreCivic weakens on dividend slash, advisor hires – Mid-Day Commentary

Cruise liner debt and equity swooned this morning after Norwegian Cruise Lines (NCL) announced that the majority of its cruises will remain suspended until at least 30 September, according to a trader and sellsider.

Norwegian, Royal Caribbean and Carnival in mid-March suspended voyages and have incrementally extended the extensions since then, while the Centers for Disease Control’s most recent no-sail order is through 24 July.

Carnival had laid out a plan in May to potentially resume North American cruises from ports in Florida and Texas from 1 August, while Royal Caribbean CEO Richard Fain also said on CNBC he hopes to resume sailing on 1 August. 

Norwegian’s announcement, late yesterday (16 June), shows a slower recovery in cruise activity than some investors had hoped for, sources said. 

While NCL’s debt remained muted this morning, its stock declined 7% to USD 19.48 per share and a market cap of USD 4.99bn. 

Royal Caribbean’s USD 1.15bn 4.25% senior unsecured notes due 2023 fell nearly six points to 104.53 yielding 2.663% from trades at 110.045 to yield 0.843% yesterday (16 June), according to MarketAxess. The USD 500m 3.7% senior unsecured notes due 2028 traded today at 69.25 to yield 9.374% from trades at 72.5 to yield 8.64% on 11 June. 

RCL’s stock last traded today at USD 57.69 per share for a market cap of USD 12.051bn, down 7.70% from yesterday’s close. 

Carnival’s stock also traded down 6.19% on the day in tandem with its peers to USD 19.16 per share and a market cap of USD 15.023bn. 

Hertz bonds fell further today as SEC Chairman Jay Clayton disclosed that the regulator has issues with the bankrupt car rental company’s plan to sell stock in lieu of raising DIP financing to fund operations through bankruptcy, according to three buysiders.

Moreover, yesterday the agency’s former chairman, Harvey Pitt, said that underwriter Jefferies could be exposed to liability in connection with the offering. 

The debtor’s bonds already erased some of their earlier gains after Hertz on Monday filed to sell a smaller-than-expected USD 500m in new equity. Hertz’s disclosures on Monday stated that new equity investors may receive nothing from an eventual bankruptcy plan after bondholders and other debtholders are paid. 

Hertz’s USD 800m 5.5% senior unsecured notes due 2024 traded at 37.938 this morning compared to 42.75 yesterday, while its USD 500m 7.125% senior unsecured notes due 2026 fell to 37.5 today from 43 yesterday, according to MarketAxess.

Hertz’s stock traded today at USD 1.94 per share and a market cap of USD 276.05m, down 0.51% from yesterday’s close. 

CoreCivic’s bonds ticked down after the private prison company announced it will suspend its quarterly dividend and evaluate corporate structure and capital allocation alternatives, according to two buysiders. 

The company has hired Moelis along with Bass, Berry and Sims and Latham and Watkins to assist in the evaluation, the press release states. 

The company said that the suspension of the dividend will not impact its REIT status for 2020 as it plans to reduce its minimum contribution commitment through the CARES Act. However, the two sources interpreted the move as a first step to changing the company’s REIT status moving forward. 

CEO Damon Hininger highlighted the company’s programs including “GED, vocational education, substance-abuse treatment and job placement assistance.”

“At this point, the company is reacting to the current news cycle and trying to show that it is part of helping improve the incarceration system as opposed to profiting from it,” one of the sources said. 

CoreCivic’s USD 250m 4.75% senior unsecured notes due 2027 traded today at 90.5 to yield 6.394%, down from trades at 91.5 to yield 6.205% on 3 June, according to MarketAxess. Meanwhile, the company’s stock fell 18.37% to USD 10.22 per share today and a market cap of USD 1.229bn. 

Overall, the recent market rally and positive sentiment driven by government stimulus has spurred high yield new issue activity and trading performance on the break, according to two sellsiders. At least seven high yield deals launched yesterday, followed by eight more today, according to Debtwire data. 

DCP Midstream debt inched up this morning as the energy company launched an offering for its USD 400m senior notes due 2027, with net proceeds marked for general corporate purposes, including debt repayment and funding capital expenditures. 

Its USD 600m 5.125% senior unsecured notes due 2029 traded up this morning to 98.5 for a 5.338% yield compared to 97.75 yesterday. Its stock traded at USD 13.92 for a market cap of USD 2.9bn this morning, up 2.96% from yesterday’s close.   

Dana’s newly issued USD 400m 5.625% senior unsecured notes due 2028 inched to 101.313 today for a 5.322% yield versus 100.75 yesterday. The automotive borrower issued the notes due 2028 on 15 June to partially repay its revolver. Its USD 300m 5.375% senior unsecured notes traded up to 102.75 this morning yielding 4.676% compared to 101 on 12 June.

Ford’s newly issued USD 1.75bn 5.125% senior unsecured notes due 2025 climbed up to 101.25 this morning for a 4.837% yield after pricing at par yesterday, according to MarketAxess. Proceeds from the financing were slated for general corporate purposes.

Comstock Resources’ USD 500m 9.75% non-fungible add-on notes due 2026 jumped up to 93.25 this morning for a 11.31% yield after issuing at 90 for an all-in yield of 12.096% yesterday, according to MarketAxess.

Similarly, Standard Industries’s USD 1.1bn 4.375% senior unsecured notes due 2030 changed hands at 100.875 yielding 4.245% this morning after allocating at par yesterday. Proceeds from the financing were slated to redeem its USD 1.1bn 5.375% senior unsecured notes due 2024. The notes due 2024 traded in size at 101.5 for a 4.709% yield on 11 June.

2020 Debtwire

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