Morning Commentary: New Lottomatica 9¾% notes trade to premium; ETF outflows eyed

By Paul A. Harris

Portland, Ore., Sept. 16 – The high-yield bond market opened 3/8 of a point lower on Friday morning with the major U.S. stock indexes all trading in the red, according to a bond trader in New York.

With the S&P 500 stock index down 1% at mid-morning, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was down 0.24%, or 18 cents, at $73.77.

The most recent deal to clear the market, a euro-denominated trade from Lottomatica SpA, was trading at a premium to the new issue price on Friday morning.

The Lottomatica 9¾% senior secured notes due September 2027 (B1/B) were 101 bid, 101¼ offered, a London-based debt capital markets banker said.

The €350 million issue priced at par on Thursday.

Although Lottomatica, which was in the market to fund strategic acquisitions, got the deal done as much as 37.5 basis points inside of initial guidance (10% area), the perception is that the Italy-based multinational gaming company’s cost of capital included an appreciable concession to market conditions, a source remarked.

Meanwhile, the primary market sat idle on Friday, with a $5 billion active forward calendar set to clear in a pair of Monday transactions.

That’s when terms are expected on the mammoth Picard Midco, Inc. $4 billion offering of 6.5-year senior secured notes backing the buyout of Citrix Systems Inc. by Vista Equity Partners and Evergreen Coast Capital Corp.

The notes have a 6½% coupon and have been discussed at a discount of 88 to 90 to yield in the high-8% to 9% area, according to market sources.

Lately the deal's credit indentures – particularly those that bear upon how the issuer may incur additional debt – have come under discussion, sources say.

Also teed up for Monday is the Tellurian Inc. $1 billion notes and warrants project financing deal, recently heard to have undergone investor friendly covenant changes.

The units include an 11¼% senior secured note due 2027 talked at 95.5, and 75 attached warrants for the company’s common stock.

Thursday outflows

High-yield ETFs sustained $1.09 billion of daily cash outflows on Thursday, according to a market source.

Actively managed high-yield funds were essentially flat on the day, posting $7 million of inflows on Thursday, the source said.

News of Thursday’s daily cash flows trails a Thursday afternoon report that the combined funds saw $734 million of net inflows in the week to the Wednesday, Sept. 14 close, according to fund tracker Refinitiv Lipper.

That stemmed a three-week run of outflows totaling $11.9 billion, the biggest outflows for any such interval since March 2020, according to the market source.

© 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.