Verisure prices; junk secondary bounces off lows; crossover names in demand; Citrix jumps

By Paul A. Harris and Abigail W. Adams

Portland, Me., Sept. 28 – Verisure Holding AB, from Switzerland, worked its way off the junk bond calendar and through pricing on Wednesday.

Meanwhile, the secondary space bounced off its lows on Wednesday with risk assets “on fire” after the Bank of England announced a new bond buying program to help stabilize its currency and bond market, as both have been reeling since the passage of tax cuts.

The cash bond market gained 3/8 point and the CDX index was up more than 1 point after hitting its lowest level of the year the previous session.

The market was up 1½ points in a single session with the “Fed put,” or idea the central bank will not let markets fail, in full effect, a source said.

High-quality credits and crossover names were in demand as Treasury yields fell and credit spreads tightened.

Delta Air Lines Inc.’s 7 3/8% senior notes due 2026 (Baa3/BB) and Sprint Corp.’s 7 7/8% senior notes due Sept. 15, 2023 (Baa3/BB+) and 6 7/8% senior notes due 2028 (Baa3/BB+) were on the rise in heavy volume.

However, Citrix Systems Inc./Tibco Software Inc. 6½% senior secured notes due 2029 (B2/B) were among the most active in the secondary space as the notes reclaimed their former heights in the market rally.

Calendar

Verisure Holding AB generated the only primary market news on Wednesday, pricing a €500 million issue of five-year senior secured notes (B1/B) at par to yield 9¼%, at the tight end of talk, and on top of initial guidance.

Meantime investors await an update on the Connect Holding II LLC/Brightspeed $1.865 billion offer of seven-year senior secured notes (B2/B/B+) backing the carve-out acquisition of the Lumen Technologies fixed-line assets by Apollo Global Management.

There is still wood to chop on the deal, market sources said on Wednesday.

Initial talk had the bonds coming with an 8% coupon to yield in the low 10% area, with pricing expected late this week. Some market watchers have been looking for that talk to push higher, however.

The perception in the market is that the deal has good covenants, a trader said, but added that investors have also been professing a belief that the initial pricing is a little snug.

Crossover

High-quality credits and crossover names were in high demand on Wednesday as Treasuries rebounded and credit spreads tightened.

Delta’s 7 3/8% senior notes due 2026 jumped more than 1 point in heavy volume with the notes wrapped around 101 heading into the market close.

The yield on the notes fell to 6.8%.

There was $22 million in reported volume.

Sprint’s soon-to-mature 7 7/8% senior notes due 2023 improved in heavy volume although the longer duration 6 7/8% senior notes due 2028 outperformed their shorter duration counterparts.

Sprint’s 7 7/8% notes were up ¼ point to trade in the 102 to 102¼ context heading into the market close, a source said.

The yield on the notes was just shy of 5¾%.

There was $32 million in reported volume.

Sprint’s 6 7/8% notes jumped ¾ point to trade in the 103¼ to 103¾ context on Wednesday with the yield 6¼%.

Sprint’s notes, which were folded under the umbrella of T-Mobile USA following the completion of their merger in 2020, initially benefited from the spread compression that came from being scooped up by a higher quality credit.

However, Sprint’s notes have been on a strong downtrend in 2022 with rate-sensitive names hard hit by rising rates.

Higher-quality credits and crossover names had their day on Wednesday as the market snapped back from recent wides.

Those names offer the best value in a market recovery, a source said.

Citrix reclaims heights

Citrix’s 6½% senior secured notes due 2029 (B2/B) surged to their former heights in heavy volume on Wednesday.

The notes rose 2½ points to trade on an 85-handle.

They were wrapped around their previous high of 85¾ heading into the market close, a source said.

There was $38 million in reported volume.

After an initially strong secondary market performance, the 6½% notes gave back their gains and have hovered around their deeply discounted issue price amid the market rout of the past few sessions.

Tibco Software priced $4 billion of the 6½% notes at 83.561 to yield 10% on Sept. 20 before the Federal Open Market Committee’s Sept. 21 announcement sparked a sell-off that sent the market to its lowest level of the year.

Tuesday outflows

The dedicated high-yield bond funds sustained $489 million of net daily outflows on Tuesday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs had $377 million of outflows on the day.

Actively managed high-yield funds sustained $112 million of outflows on Tuesday, the source said.

With only Wednesday's daily fund flows numbers remaining to go into the tally the combined funds are tracking $2.32 billion of net outflows for the week that will conclude with Wednesday's close, according to the market source.

Indexes

The KDP High Yield Daily index shaved off 2 points to close Wednesday at 51.83 with the yield now 8.2%. The index was down 23 points on Tuesday and 45 points on Monday.

The ICE BofAML US High Yield index gained 25.1 basis points with the year-to-date return now negative 14.324%.

The index was down 36.6 bps on Tuesday and 75 bps on Monday.

The CDX High Yield 30 index rose 108 bps to close Wednesday at 96.28.

The index plunged 162 bps on Tuesday and 69 bps on Monday.

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