Morning Commentary: Newell Brands on tap with $1 billion in Friday drive-by; junk rallies

By Paul A. Harris

Portland, Ore., Sept. 9 – With the high-yield bond market rallying in the early going on Friday, Newell Brands Inc. appeared with a $1 billion split-rated offering of senior notes (Ba1/BBB-/BB+) in two bullet tranches that are set to price in a drive-by.

The public offering features $500 million of five-year notes with initial guidance in the high-6% area and $500 million of seven-year notes with initial guidance which has them coming 25 basis points behind the five-year notes.

Looking to the week ahead in the primary market, dealers are expected to come with as much as $3.5 billion of secured notes backing the leveraged buyout of Citrix Systems Inc. by Vista Equity Partners and Evergreen Coast Capital Corp.

The notes, which had been sidelined in mid-summer by market volatility that resulted in several conspicuously choppy executions, are being whispered in the high 8% area.

Meanwhile, the market awaits news on the Tellurian Inc. $1 billion notes/warrants project financing, which had been expected to price during the post-Labor Day week.

NortonLifeLock up

The broad market opened ¼ point better on Friday, with offers-wanted-in-competition (OWICs) outpacing bids-wanted-in-competition (BWICs) by a ratio of seven to one, a bond trader said.

With the S&P 500 stock index up 1.31% at mid-morning, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was up 0.66%, or half a dollar, at $76.01.

Bonds priced in an upsized $1.5 billion Thursday trade (from $1.2 billion) by NortonLifeLock Inc. – the inaugural high-yield issue for Autumn 2022 – were trading above issue prices on Friday morning, the trader said.

The NortonLifeLock 6¾% senior notes due September 2027 and the 7 1/8% senior notes due September 2030 (both tranches B1/BB-/BB+) were par 1/8 bid, par 3/8 offered at mid-morning.

Both tranches were priced at par.

The 7 1/8% eight-year notes traded as high as par ¾ earlier on Friday, while the 6¾% five-year notes traded as high as par 5/8, the trader said.

Demand was approximately $4.5 billion across both tranches, a market source said.

Elsewhere, the Ford Motor Co. 6.1% senior green notes due August 2032 (Ba2/BB+), which came in a high-profile late-summer transaction, were up nearly a point on Friday morning at 98 bid, 98½ offered in active trading, the source said.

The Ford green bonds came at par on Aug. 16 in a $1.75 billion high-grade-style execution.

Fund flows

High-yield ETFs saw $379 million of daily cash inflows on Thursday, according to a market source.

Actively managed high-yield funds were negative on the day, sustaining $81 million of outflows on Thursday, the source said.

News of Thursday’s daily flows trailed a Thursday afternoon report that the combined funds saw $2.28 billion of net outflows in the week to the Wednesday, Sept. 7 close, according to Refinitiv Lipper.

That extends a three-week run of net outflows to $11.9 billion, the biggest outflows for such an interval since the period ending March 18, 2020, according to the market source.

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