Citrix, Tellurian on deck; NCR plunges in junkland; Medline weaker; Royal Caribbean sinks

By Paul A. Harris and Abigail W. Adams

Portland, Me., Sept. 16 – The primary market sat idle on Friday with a $5 billion active forward calendar set to clear in a pair of transactions slated to price early in the week ahead.

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. continues to command the market's attention with pricing expected on Tuesday.

Tellurian Inc.’s $1 billion notes and warrants deal, recently heard to have undergone investor-friendly covenant changes, is set to hit the block on Monday.

Meanwhile, the secondary space remained soft on Friday although selling pressure in the market seemed to subside as the session progressed, a source said.

While the market opened the day down as much as ¾ point, it pared its losses throughout the day to end lower by about ¼ point, a source said.

However, the cash bond market has fallen more than 2 points and the CDX index more than 2.5 points since Tuesday’s Consumer Price Index report.

The larger implications of the weak market conditions were apparent in the topical news that caused NCR Corp.’s senior notes to plummet double digits.

The company, which was once a strong acquisition candidate, announced that it was splitting in two as opposed to selling itself due to the weak valuation of the company.

NCR’s capital structure fell 6 to 13 points on the news.

Medline Industries’ secured and unsecured notes were weaker in heavy volume.

And Royal Caribbean Group’s 11 5/8% senior notes due 2027 (B3/B) were once again under water with the notes falling back to a 99-handle after trading on a 102-handle on Monday.

The forward calendar

The primary market idled on Friday with a pair of transactions scheduled to price early in the week ahead.

The mammoth Picard Midco $4 billion offering of 6.5-year senior secured notes backing the buyout of Citrix Systems by Vista Equity Partners and Evergreen Coast Capital Corp. continues to be carefully watched.

Timing has been overtaken by events, market sources said on Friday.

When it kicked off at the beginning of the week the Picard/Citrix bond deal was slated to price this coming Monday.

However, owing to the Monday bank holiday in England, in observance of the state funeral of Queen Elizabeth II, the big bond deal is now expected to hit the block on Tuesday, according to market sources (terms on the $4.05 billion term loan are also expected Tuesday, they say).

The word in the market on Friday held that the bond offer began to hit headwinds last Tuesday amid the massive capital markets rout set in train by a hotter-than-expected Consumer Price Index report which is widely expected to fully expose the fangs of the Fed when the Federal Open Market Committee meets on Tuesday and Wednesday to confer on its benchmark Fed Funds rate, which it is widely expected to raise by 75 basis points.

Nor have those headwinds died down, sources say.

Initial talk had the Picard/Citrix notes, which come with a 6½% coupon, pricing at a discount of 88 to 90 to yield in the high-8% to 9% area.

However, that yield talk has been heard to have widened to as much as 9½%, market sources said on Friday.

That would deepen the already steep discount the dealers planned to offer, as they endeavor to clear their books of underwater debt commitments struck during easier times in the capital markets.

Earlier in the week the deal's credit indentures – particularly those that bear upon how the issuer may incur additional debt – also came under discussion, sources say.

Meanwhile, the Tellurian $1 billion notes and warrants project financing deal, recently heard to have undergone investor-friendly covenant changes, is set to hit the block on Monday, according to a source who is closely following that trade.

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

NCR plummets

NCR’s capital structure plunged 6 to 13 points on Friday after the company announced it was splitting in two as opposed to selling itself due to the valuations caused by current market conditions.

NCR’s 5¼% senior notes due 2030 (B3/B) sank 13 points to close the day at 79 with the yield just shy of 9%, according to a market source.

NCR’s 5 1/8% senior notes due 2029 fell 10½ points to close the day at 81½.

The issue was the most active in the ATM and payments solutions company’s capital structure with about $13 million in reported volume.

NCR’s 5% senior notes due 2028 fell 9½ points to close the day at 81.

NCR’s 6 1/8% senior notes due 2029 fell 9 points to 85½.

NCR’s notes were yielding about 9% following the sell-off.

NCR had long been an acquisition favorite with the company receiving interest from several buyers since it launched a strategic review process in February.

However, “given the state of current financing markets, we cannot deliver a whole company transaction that reflects an appropriate and acceptable value for NCR to our shareholders,” NCR’s executive chairman stated in a late Thursday press release.

The company instead has opted to separate its digital commerce business and ATM business into two separate publicly traded companies.

Medline weaker

Medline Industries’ secured and unsecured tranches were weaker in heavy volume on Friday.

Medline’s 5¼% senior notes due 2029 (Caa1/B-/B-) were off as much as 2 points in intraday activity although the notes pared their losses into the close.

After trading down to an 81-handle early in the session, the notes were lifted as the market gained strength.

The 5¼% notes were down 1 point to change hands in the 82 to 82½ context heading into the close, a source said.

There was $20 million in reported volume, making the issue among the most actively traded in the secondary space.

Medline’s 3 7/8% senior secured notes due 2029 (B1/B+/BB-) fell ½ point to an 83-handle, according to a market source.

They were changing hands in the 83 3/8 to 83 7/8 context heading into the close, a source said.

There was $15 million in reported volume.

Royal Caribbean under water

Royal Caribbean’s 11 5/8% senior notes due 2027 again sank under water on Friday after setting a new all-time high on Monday.

The recently priced 11 5/8% notes were down ½ point to trade in the 99 to 99½ context throughout Friday’s session.

There was $14 million in reported volume.

The high-beta notes have traded as high as a 102-handle and as low as a 97-handle in the past two weeks.

The notes set a new all-time high of 102½ on Monday, a height reached after bottoming out at 97¼ about one week ago.

$1.09 billion ETF outflows

High-yield ETFs sustained $1.09 billion of daily cash outflows on Thursday, the most recent session for which data was available at press time, 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.

The combined funds have sustained $49 billion of net outflows in the year to Thursday's close, the source said.

Indexes

The KDP High Yield Daily index fell 34 points to close Friday at 53.47 with the yield now 7.53%.

The index was down 18 points on Thursday, 16 points on Wednesday and 55 points on Tuesday after rising 4 points on Monday.

The index posted a cumulative loss of 119 points on the week.

The ICE BofAML US High Yield index fell 66.8 bps with the year-to-date return now negative 11.989%.

The index was down 33 bps on Thursday, 28.6 bps on Wednesday and 99.2 bps on Tuesday after climbing 26.3 bps on Monday.

The index posted a cumulative loss of 201.3 bps on the week.

The CDX High Yield 30 index fell 10 bps to close Friday at 98.98.

The index dropped 132 bps on Thursday, gained 20 bps on Wednesday, plunged 162 bps on Tuesday and gained 34 bps on Monday.

The index posted a cumulative loss of 250 bps on the week.

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