Junk secondary lifted post-CPI; Citrix hits new heights; Ford gains; Atlas, Brinker gap up

By Paul A. Harris and Abigail W. Adams

Portland, Me., July 12 – The junk bond new issue market is winding down on euro deals and ready for some dollar issuance, with the first dollar deal for July prepped for Thursday pricing.

Meanwhile, the secondary space was hot on Wednesday with buyers flooding the market on the heels of a Consumer Price Index report that showed the slowest pace of inflation since early 2021.

Treasuries surged following the report with the two-year Treasury yield falling 12.6 basis points to 4.75% and the 10-year Treasury yield falling 11.2 bps to 3.862% after hitting as high as 5.11% and 4.08%, respectively, following the ADP employment report last Thursday.

The cash bond market added ½ to 1 point with some pockets of the market adding as much as 2 points, sources said.

“Any credit that’s a real company and has a coupon is getting lifted,” a source said.

The badly battered real estate investment trust sector was among the outperformers of the session with REITs gaining 1 to 1½ points across the board.

Tech names were up as much as 2 points with Cloud Software Group Holdings Inc.’s (Citrix) 9% second-lien notes due 2029 (Caa2/B-) hitting their highest level since pricing and Citrix’s 6½% senior secured first-lien notes due 2029 (B2/B) reapproaching an all-time high.

Ford Motor Credit Co. LLC’s senior notes (Ba2/BB+) also made strong gains with the notes among the rate-sensitive names to benefit from the move in Treasuries.

Heavily shorted names in the market were also on the rise with Brinker International, Inc.’s recently priced 8¼% senior notes due 2030 (B1/BB-) gapping up, which sources suspect may be the result of short-covering.

Rand Parent, LLC’s 8½% first-lien senior secured notes due 2030 (Ba1/BB/BB+), backing the buyout of Atlas Air, also gapped up with the notes now trading at their highest level since late April.

Euro-to-dollar

The July high yield new issue market continues to be an all-euro show, sources say.

All euro, that is, save for a CHF 100 million issue of SALT Mobile SA/Matterhorn Telecom SA 5¼% five-year senior secured notes (BB-/BB+) that priced on Wednesday.

Elsewhere the week’s euro calendar appeared to clear on Wednesday with the pricing of the TIM SpA (formerly Telecom Italia) €750 million issue of 7 7/8% five-year senior bullet notes (B1/B+/BB-), which came at the tight end of talk, and inside of early guidance.

Meanwhile, July’s first dollar-denominated deal is on deck for Thursday.

Demand is heard to be robust.

Seadrill Finance Ltd. is set to price a $450 million offering of seven-year senior secured second-lien notes (B2/BB/B+), in the market with initial guidance in the 8¾% area.

That deal was heard to be playing to a healthy $1.2 billion of demand across 68 accounts, on Wednesday morning, a trader said.

Citrix’s new heights

While the secondary market was hot across the board on Wednesday, technology was among the sectors to outperform.

Citrix’s 9% second-lien notes due 2029 hit their highest level since pricing in early April.

The notes added 2 points in active trade and were changing hands in the 88 to 88½ context heading into the close, according to a market source.

The yield was about 11 5/8%.

There was $14 million in reported volume.

The $3.84 billion issue priced at 79 to yield 14.047% on April 4 with dealers syndicating some of the hung debt from Vista Equity Partners’ and Evergreen Coast Capital Corp.’s buyout of Citrix in 2022.

Citrix’s 6½% senior secured first-lien notes due 2029 reapproached their all-time high on Wednesday with the notes once again flirting with a 90-handle.

The 6½% notes added 1½ points to trade in the 89 7/8 to 90 1/8 context heading into the close.

The yield was about 8¾%.

There was $21 million in reported volume.

Wednesday’s level was the highest for the notes since mid-April with the issue yet to break above a 90-handle, according to a market source.

Citrix priced the $4 billion issue at 83.561 to yield 10% on Sept. 20.

Ford rises

Ford’s senior notes were among the rate-sensitive names making strong gains amid the move in Treasuries on Wednesday.

Ford’s 7.35% notes due 2030 added 1 point in heavy volume.

They were changing hands in the 102 7/8 to 103 1/8 context heading into the market close.

The yield fell to about 6¾%.

There was $21 million in reported volume.

Wednesday marked the highest level for the notes since late February.

Ford’s 7.2% senior notes due 2030 added 1 point to break above a 101-handle.

The 7.2% notes were trading in the 101¾ to 102 context heading into the market close with the yield about 6 7/8%.

There was $17 million in reported volume.

The 7.2% notes briefly dipped below par last Thursday as Treasury yields hit multiyear highs following the ADP Employment report.

Shorts

Heavily shorted names in the market were seen gapping up on Wednesday, which sources suspect was the result of short-covering.

Brinker’s recently priced 8¼% senior notes due 2030 are among the names with a high short interest with the notes driven lower since the $350 million issue, which priced at par, hit the secondary space on June 22.

“Guys were attacking that one,” a source said.

The notes have traded on a 97-handle for much of July.

However, they added ½ point to close the day in the 98 to 98¼ context.

Atlas Air’s 8½% first-lien senior secured notes due 2030, which ranks as one of the worst performing issues of 2023, jumped 2 points in heavy volume.

The notes closed the day on a 92-handle with the notes trading in the 92 5/8 to 92 7/8 context heading into the close.

The yield narrowed to about 10%.

There was $14 million in reported volume.

The $850 million leveraged buyout deal priced at par in early February.

Fund flows

High-yield ETFs moved a hefty $741 million of daily cash inflows on Tuesday, the most recent session for which data was available at press time, according to a market source.

Actively managed high-yield funds, however, sustained $104 million of outflows on the day.

The combined funds are tracking $130 million of net outflows for the week that will conclude with Wednesday’s close, the market source said.

Indexes

The KDP High Yield Daily index added 41 points to close Wednesday at 50.86 with the yield 7.21%.

The index added 17 points on Tuesday and 7 points on Monday.

The ICE BofAML US High Yield index rose 94.bps with the year-to-date return now 6.256%.

The index was up 32.8 bps on Tuesday and 18.8 bps on Monday.

The CDX High Yield 30 index rose 56 bps to close Wednesday at 103.29.

The index gained 50 bps on Tuesday and 40 bps on Monday.

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