NortonLifeLock prices; Royal Caribbean reclaims par; junk funds out $2.28 billion

By Paul A. Harris and Abigail W. Adams

Portland, Me., Sept. 8 – The primary market successfully moved its first post-Labor Day issue through pricing on Thursday as NortonLifeLock Inc. left the day with an upsized offer that did well against talk.

Meanwhile, it was another green day in the secondary space with the cash bond market up another 3/8 to ½ point for no reason in particular, sources said.

The European Central Bank’s 75 basis points rate increase and the latest weekly jobless claims report, which saw claims fall to a three-month low, did little to faze the market with a 75 bps rate increase at the Federal Reserve’s September meeting now expected.

The risk-on sentiment remained firm with several lower quality credits lifted during Thursday’s session.

Royal Caribbean Group’s 11 5/8% senior notes due 2027 (B3/B) continued their upward momentum with the notes reclaiming par in active trading.

Live Nation Entertainment, Inc.’s 3¾% senior secured notes due 2028 (B1/B+) jumped more than 2 points in heavy volume.

Tenneco Inc.’s 5% senior notes due 2026 (Caa1/B) jumped more than 3 points in active trading after the vehicle parts manufacturer issued a conditional call for the notes.

Meanwhile, high-yield mutual and exchange-traded funds saw their third consecutive week of multibillion-dollar outflows.

Funds lost $2.28 billion in the week through Wednesday’s close, according to the Refinitiv Lipper Fund Flow report.

The outflow follows the previous week’s $5.043 billion outflow, the second largest of the year, which was preceded by a $4.568 billion outflow.

Norton upsizes

NortonLifeLock priced the inaugural post-Labor Day speculative-grade bond issue on Thursday – an upsized $1.5 billion amount of senior notes (B1/BB-/BB+) in two tranches.

The deal, which was upsized from $1.2 billion, included a $900 million issue of 6¾% eight-year notes that priced at par to yield 6.749%, at the tight end of yield talk.

It also included a $600 million issue of 7 1/8% eight-year notes that priced at par to yield 7.124%, on top of talk.

Demand for the deal came to approximately $4.5 billion across both tranches, according to a sellside source who added that orders tended to be chunky.

Late Thursday the notes in both tranches were trading at 99 5/8 bid, par 1/8 offered, the sellsider said.

Away from Thursday's inaugural autumn issue, a junk bond megadeal backing the leveraged buyout of Citrix Systems Inc. by Vista Equity Partners and Evergreen Coast Capital Corp., which the market began looking for around the Fourth of July, is expected to officially kick off in the week ahead, according to market sources.

Dealers are expected to come with as much as $3 billion of senior secured notes that are being whispered in the high 8% area.

Credit Suisse Securities (USA) LLC is expected to be on the left.

Meantime a $4.05 billion term loan launched on a Thursday lender call.

Dealers scrapped plans to bring the behemoth Citrix debt financing in the post-Independence Day timeframe as market volatility related to inflation, global economic uncertainty and heightened geopolitical danger related to Russia's invasion of the Ukraine dragged most of the global capital markets lower, sparking widespread risk aversion (see related stories in this issue).

Royal Caribbean reclaims par

In existing issues, Royal Caribbean’s 11 5/8% senior notes due 2027 reclaimed par on another strong day for the market.

The 11 5/8% notes rose another ¾ point and were changing hands in the par to par ¼ context heading into the market close, a source said.

There was $14 million in reported volume.

The 11 5/8% notes jumped more than two points over the past two sessions.

The notes closed Monday wrapped around 98 after trading to an all-time low of 97¼ last Thursday.

Live Nation gains

Live Nation’s 3¾% senior secured notes due 2028 made large gains in heavy volume on Thursday.

The 3¾% notes jumped more than 2 points to close the day at 90¼ with a yield of 5.9%, a source said.

There was $16 million in reported volume.

The 3¾% notes are a relatively small and illiquid issue and the price movement may have been a result of supply and demand dynamics in the market, a source said.

There was no news to have sparked the activity in the name.

Tenneco’s call

Tenneco’s 5% senior notes due 2026 were on the rise after the company announced a conditional call of the notes in relation to its pending acquisition.

The 5% notes jumped 3¾ points to close the day at par, according to a market source.

The notes were on a 96-handle heading into Thursday’s session.

There was $11 million in reported volume.

The vehicle parts manufacturer announced a conditional call for the full outstanding amount of the 5% notes on Wednesday.

The notes will be called at 101.667 plus outstanding interest for a total payment of 102.8, Prospect News reported.

The 5% notes saw a good mix of buyers and sellers with some holders pocketing their profits and buyers looking to gain from the notes’ takeout, a source said.

The call was conditional and dependent on the completion of Apollo Global Management’s acquisition of the company.

Indexes

The KDP High Yield Daily index gained 22 points to close Thursday at 54.34 with the yield 7.12%.

The index rose 20 points on Wednesday after falling 12 points on Tuesday.

The ICE BofAML US High Yield index rose 46.3 bps with the year-to-date return now negative 10.605%.

The index gained 27.8 bps on Wednesday after sliding 14.7 bps on Tuesday.

The CDX High Yield 30 index gained 33 bps to close Thursday at 100.44.

The index jumped 107 bps on Wednesday and 88 bps on Tuesday.

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