Enerflex better than issuance; Tibco softens; Credit Suisse up; Royal Caribbean drops

By Cristal Cody and Paul A. Harris

Tupelo, Miss., Oct. 7 – The junk bond primary market remained idle on Friday.

The Oct. 3 week saw one issuer place $625 million of speculative-grade bonds in a single tranche.

Enerflex Ltd. priced the issue of 9% five-year senior secured notes (B2/BB-/BB-) at 90.676 to yield 11½%, 25 basis points inside of yield talk, on Thursday, in a deal heard to have been playing to a quality book containing orders from more than 100 accounts, according to a sellside source.

Also, Chile-based Latam Airlines Group SA remains in the market with a $1.5 billion two-part offering of senior secured notes that it began marketing nearly two weeks ago.

Part of the audience for the emerging markets corporate deal includes U.S. high-yield accounts that were active in the Latam Airlines debtor-in-possession (DIP) loan.

Orders for the bonds, and for the concurrent $750 million term loan, are just above deal sizes, according to an investor who added that the deal is now expected to price early in the week ahead.

Recent pricing discussions had the five-year tranche coming to yield 15%, and the seven-year at 15¼%, the investor said.

Meanwhile, Enerflex’s new notes remained more than 2 points better in secondary trading Friday after hitting the primary market Thursday.

Other recent new high-yield bonds also saw some of the day’s heaviest secondary interest, sources said.

Tibco Software Inc.’s 6½% notes due 2029 (B2/B) gave back 7/8 point to head out at 85 7/8 bid, a source said.

Trading was active with $27.5 million of paper changing hands.

Tibco sold the notes in a $4 billion offering on Sept. 20 at 83.561 to yield 10% and 25 bps beyond the wide end of the 9½% to 9¾% yield talk.

The notes were priced as part of the buyout of Citrix Systems Inc.

Stocks sold off Friday following upbeat September employment data with the S&P 500 ending down 2.8% and the Nasdaq 3.8% lower.

The iShares iBoxx High Yield Corporate Bond ETF dropped 89 cents, or 1.22%, to $72.12.

“The market was sucking wind today,” a source said. “The high-yield market was down. CDX was down, HYG was down, junk was down.”

The Labor Department reported total nonfarm payroll employment rose by 263,000 in September, while the unemployment rate fell to 3.5% from 3.7% in August.

Crude oil was one of the day’s bright spots and rallied above $90 following the production cut announcement Wednesday from the Organization of the Petroleum Exporting Countries and partners.

West Texas intermediate crude oil benchmark futures for November deliveries settled up $4.19 to $92.64 a barrel.

Credit Suisse Group AG junk paper improved as the bank launched up to a $2 billion tender offer for dollar bonds and capped off a week of restructuring chatter.

Credit Suisse’s 9½% perpetual notes traded 2½ points better Friday, while the 6¼% perpetual securities were nearly ¾ point higher, a source said.

Royal Caribbean Group’s paper continued to decline in heavy trading over the day.

The 9¼% senior notes due January 2029 (B3/B+) were down more than ½ point, while the 11 5/8% senior notes due 2027 (B3/B+) dropped 2¼ points.

Enerflex active in secondary

Enerflex’s 9% senior secured notes due 2027 (B2/BB-/BB-) were quoted heading out Friday at 93, a source said.

Enerflex sold $625 million of the bonds on Thursday at 90.676 to yield 11½%, 25 basis points tighter than yield talk of 11¾% to 12%. The coupon came on top of coupon talk.

The deal was reported to Prospect News three to four times oversubscribed and played to a quality book containing orders from more than 100 accounts.

The issue went out the door on Thursday at 93¾ bid, up 2½ points.

Royal Caribbean declines

Royal Caribbean’s paper dropped about ½ point to nearly 3 points Friday on about $42 million of secondary action, a source said.

The 9¼% senior notes due January 2029 (B3/B+) were among the day’s most active junk issues and traded down more than ½ point to par ¼ bid.

The issue saw $21.5 million of secondary volume.

Royal Caribbean sold the bonds in a $1 billion offering at par on Sept. 22.

The cruise line operator’s 11 5/8% senior notes due 2027 (B3/B+) that priced in August also declined 2¼ points to 90¼ bid Friday on $9.5 million of secondary action.

Royal Caribbean sold $1.25 billion of the notes on Aug. 15 at par.

The company’s 5½% notes due 2028 (B3/B) also dropped 1 7/8 points to 71 bid over the session.

“The paper was down,” a source noted.

Royal Caribbean’s CDS spreads were more than 100 bps wider this week.

Fund flows

The high-yield ETFs saw $380 million of daily cash inflows on Thursday, according to a market source.

That news follows a Thursday afternoon report that the dedicated high-yield bond funds had $1.872 billion of net inflows during the week to the Wednesday, Oct. 5 close, according to Refinitiv Lipper.

It was the largest weekly inflow since the week to Aug. 3, the market source said.

And it was entirely concentrated in the junk ETFs, which saw $2.54 billion of inflows on the week.

Actively managed high-yield funds actually sustained $667 million of outflows during that period, extending their stretch of consecutive negative weekly flows to seven weeks, the source said.

The actively managed funds sustained another $145 million of daily outflows on Thursday, according to the market source.

The combined funds sustained $52.5 billion of net outflows in the year to Thursday's close.

Indexes

The KDP High Yield Daily index went out Friday at 51.71 and a yield of 7.82%, compared to 52.01 and a yield of 7.69% on Thursday.

The index ended Wednesday at 51.9 and a yield of 7.74%, 52.52 and a yield of 7.65% on Tuesday and at 51.84 and a yield of 7.95% on Monday.

The index posted a cumulative loss of 106 points in the previous week.

The CDX High Yield 30 index fell 67 bps to 96.81 on Friday.

The index was at 97.48 on Thursday, 97.79 on Wednesday, 97.73 on Tuesday and at 96.35 on Monday.

The CDX index posted a cumulative loss of 197 bps in the previous week.

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