NortonLifeLock hits new low in junkland; Ford under duress; funds add $734 million

By Paul A. Harris and Abigail W. Adams

Portland, Me., Sept. 15 – The domestic U.S. high-yield market was quiet on Thursday, but in Europe a junk bond deal priced from Italy’s Lottomatica SpA.

Meanwhile, the downtrend in the secondary space continued with the cash bond market off another 3/8 point.

The ICE BofAML US High Yield index returned to a negative 11% handle after narrowing to a negative 9% handle on the eve of the Consumer Price Index report.

While optimism about an upcoming pause in the Federal Reserve’s rate hike schedule propelled the market higher leading into Tuesday’s report, it evaporated following the latest inflation reading.

“Sentiment is negative across the board,” a source said.

The market is once again increasing its bets that the Federal Reserve will hurtle the economy into a recession and market players are on the defense, a source said.

NortonLifeLock Inc.’s two tranches (B1/BB-/BB+) of senior notes sank deeper below par in the market downturn with both tranches closing Thursday on a 98-handle.

Ford Motor Co.’s 6.1% senior green notes due 2032 (Ba2/BB+) were also under pressure and retesting their all-time lows during Thursday’s session.

Carnival Corp.’s senior notes (B3/B) saw heavy volume over the day although with little movement in price.

Meanwhile, high-yield mutual and exchange-traded funds snapped their streak of outflows with $734 million entering the space in the week through Wednesday’s close, according to the Refinitiv Lipper Fund Flows report.

Primary

The European high-yield primary market generated news on Thursday as Italy-based multinational gaming company Lottomatica SpA priced €350 million of five-year senior secured notes (B1/B) – a deal that came in support of strategic acquisitions – at par to yield 9¾%.

The yield printed at the tight end of the 9¾% to 10% yield talk. Initial guidance was in the 10% area.

The transaction was heard to have gone well, and the notes traded to par ½ bid, 101½ offered, a market source said.

In the dollar-denominated market the focus is on the early part of the week ahead, with the only two deals on the active calendar both slated to price on Monday.

Tellurian Inc. brought investor-friendly covenant changes to its $1 billion notes and warrants project financing deal, a market source said on Thursday.

The Houston-based LNG company also reaffirmed price talk.

The units include an 11¼% senior secured note due 2027 talked at 95.5, and 75 attached warrants for the company’s common stock with a strike price to be calculated at a 20% premium to the 20-day volume-weighted average share price.

Terms are also expected Monday 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.

NortonLifeLock’s new low

In secondary trading, NortonLifeLock’s two recently priced tranches of senior notes hit their lowest level on Thursday since pricing at par last week.

The 6¾% senior notes due 2027 and the 7 1/8% senior notes due 2030 were off about ¾ point with both tranches closing the day on a 98-handle.

The 6¾% notes were trading in the 98 to 98½ context heading into the market close.

There was $15 million in reported volume.

NortonLifeLock’s 7 1/8% senior notes due 2030 were also changing hands in the 98 to 98½ context.

There was $12 million in reported volume.

While the notes saw a lackluster reception in the secondary space, which sources attributed to their tight pricing, the notes were holding above par on Monday.

However, they have been on a steady downtrend as selling pressure took hold following Tuesday’s CPI report.

Ford downshifts

Ford’s 6.1% senior green notes due 2032 were retesting their all-time low on Thursday with the notes falling to a 96-handle in heavy volume.

The 6.1% notes were down ½ point with the notes trading in the 96½ to 96¾ context heading into the market close, according to a market source.

There was $18 million in reported volume.

The notes have fallen 2½ points since Tuesday with the notes opening the week on a 99-handle.

The 6.1% notes were retesting the all-time low they hit amid the selling pressure of the previous week before optimism lifted the market ahead of the CPI report.

Carnival active

Carnival’s senior notes were active although with little movement in price during Thursday’s session.

The 7 5/8% senior notes due 2026 closed Thursday flat at 86 with the yield about 12¾%, a source said.

There was $27 million in reported volume, making it the most actively traded issue of the session.

Carnival’s 5¾% senior notes due 2027 were also active with the notes continuing to trade on a 79-handle.

The notes were wrapped around 79½ heading into the market close with the yield about 11 7/8%.

There was $19 million in reported volume.

Indexes

The KDP High Yield Daily index fell 18 points to close Thursday at 53.81 with the yield now 7.38%.

The index was down 16 points on Wednesday and 55 points on Tuesday after rising 4 points on Monday.

The ICE BofAML US High Yield index was down 33 basis points with the year-to-date return now negative 11.321%.

The index was down 28.6 bps on Wednesday and 99.2 bps on Tuesday after climbing 26.3 bps on Monday.

The CDX High Yield 30 index fell 132 bps to close Thursday at 99.08.

The index gained 20 bps on Wednesday, plunged 162 bps on Tuesday and gained 34 bps on Monday.

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