Ciena prices to strong demand; secondary junk firms; Starwood moves up; Ziggo improves

By Paul A. Harris and Abigail W. Adams

Portland, Me., Jan. 11 – The new issue market had $625 million clear in two junk-rated dollar-denominated tranches on Tuesday, including an oversubscribed offer from Ciena Corp.

Meanwhile, the secondary space remained volatile on Tuesday with the market down 1/8 point early in the session but rallied alongside equity and Treasury markets to close the day with a ¼ point gain.

While the 10-year Treasury yield hit 1.85% shortly before 11 a.m. ET, it closed the day at 1.742%.

The rally in the space was a “knee-jerk reaction” to Federal Reserve chair Jerome Powell’s confirmation hearing and assurance that inflation would be brought under control, a source said.

All eyes will be on Wednesday’s consumer price index report.

If the reading comes in higher than the anticipated 7% increase, more pain may be in store for the markets, the source said.

However, despite the volatility in the space and outflows which topped $1.6 billion on Friday, there is still plenty of money to be put to work with new issues the focal point, a source said.

Starwood Property Trust, Inc.’s 4 3/8% senior sustainability-linked notes due 2027 (Ba3/BB+) were in focus with the notes trading with a healthy premium to their issue price.

Several recent deals that struggled amid weak market conditions improved on Tuesday.

VodafoneZiggo’s 5% senior secured sustainability-linked notes due 2032 (B1/B+/BB) were on the rise after falling flat their initial days in the market.

Royal Caribbean Cruises Ltd.’s 5 3/8% senior notes due 2027 (B2/B) popped above par after spending the last few sessions under water.

Ciena and Pike

In the primary market, Ciena Corp. priced a $400 million issue of eight-year senior notes (Ba1/BB) at par to yield 4%.

Strong demand ($1.8 billion as of Tuesday afternoon) allowed the issuer to price the deal at the tight end of yield talk in the 4 1/8% area, and well inside of the 4¼% to 4 3/8% early guidance, a trader said.

Also Pike Corp. priced a $225 million add-on to its 5½% senior notes due Sept. 1, 2028 (expected ratings: B3/CCC+) at 98.51, on top of price talk.

Meanwhile MIWD Holdco II LLC (MI Windows and Doors, LLC) started a roadshow for a $400 million offering of eight-year senior notes (expected Caa1/B/confirmed BB-).

Initial guidance is in the low 6% area.

The deal is heard to be half done in reverse inquiry, a trader said.

And Fertitta Entertainment, LLC, formerly known as Golden Nugget, LLC, was heard to be in the process of downsizing its two-part offering of high-yield notes to $2.1 billion from $3.7 billion, late Tuesday.

The $1.6 billion of proceeds from the bonds would be shifted to the concurrent term loan.

Price guidance on the bonds was also heard to be on the march (see related stories in this issue).

Starwood at a premium

Starwood’s recently priced 4 3/8% senior notes due 2027 were trading with a healthy premium in the aftermarket.

The 4 3/8% notes were marked at par ¾ bid, 101¼ offered with the notes wrapped around 101 heading into the market close, sources said.

There was about $47 million in reported volume.

In a heavily oversubscribed offering, Starwood priced a $500 million issue of the 4 3/8% notes at par on Monday.

The yield printed in the middle of the 4¼% to 4½% yield talk.

VodafoneZiggo improves

VodafoneZiggo’s 5% senior secured notes due 2032 were on the rise in active trading on Tuesday.

The initially discounted 5% notes traded in a range of 99 to 99 7/8 during Tuesday’s session.

They stood poised to close the day at 99½, an increase of ½ point.

There was about $28 million in reported volume.

The 5% notes have traded largely flat since the telecommunications company priced the $1.525 billion tranche at 99.03 to yield 5 1/8% on Jan. 6.

Royal Caribbean above water

Royal Caribbean’s 5 3/8% senior notes due 2027 popped above par in active trading on Tuesday after spending the past few sessions below.

The 5 3/8% notes gained ¾ point on Tuesday to changed hands in the par ¼ to par ½ context.

The notes remained active with $20 million in reported volume.

While the 5 3/8% notes saw a strong break and traded up to a 101-handle after the cruise line operator priced the $1 billion issue at par on Jan. 4, the notes have been on a downtrend since.

The 5 3/8% notes were changing hands in the 99½ to 99 5/8 context on Monday. However, they improved on Tuesday alongside the broader markets.

Big ETF outflows continue

The dedicated high-yield bond funds sustained $828 million of net outflows on Monday, the most recent session for which data was available, according to a market source.

High-yield ETFs had $788 million of outflows on Monday, continuing a string of big outflows that included negative-$1.05 billion last Friday and $432 million last Wednesday.

Actively managed high-yield funds sustained $40 million of outflows on Monday, the source said.

The combined funds are tracking $2.97 billion 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 gained 6 points to close Tuesday at 65.08 with the yield now 4.22%.

The index fell 20 points on Monday.

The CDX High Yield 30 index rose 31 basis points to close Tuesday at 108.7.

The index gained 4 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.