Tenneco on tap; secondary rally fades; Citrix weaker; Carnival falls; Charter down

By Abigail W. Adams

Portland, Me., Oct. 31 – The domestic high-yield primary market reared its head on Monday with Pegasus Merger Co. announcing a roadshow to market $1 billion of six-year no-call-three senior secured notes backing Apollo Global Management Inc.’s buyout of Tenneco.

The announcement of the long-awaited deal hit the tape late with no word on early guidance by press time.

However, the amount announced is a fraction of what the market had been expecting, a source said.

While there were signs of life from the primary market on Monday, the ETF buying frenzy that lifted the cash bond market by more than 2½ points the previous week came to an end.

While the secondary space was positive early, selling pressure took hold as the session progressed with the cash bond market closing the day down ¼ point.

Carnival Corp.’s senior notes, which had rallied as ETFs bid up the broader market, came crashing down on Monday with the capital structure off 1 to 2 points.

Citrix Systems Inc./Tibco Software Inc.’s 6½% senior secured notes due 2029 (B2/B) were also weaker in active trading.

Charter Communications, Inc. subsidiary CCO Holdings, LLC’s senior notes (B1/BB-) were also taking a hit with the notes down 1 to 3 points following last Friday’s earnings report.

Tenneco’s roadshow

Pegasus Merger’s long-awaited deal backing Apollo’s buyout of Tenneco hit the tape late Monday, although the deal announced was a fraction of what the market had been expecting.

Pegasus Merger announced it would start a roadshow for $1 billion of six-year no-call-three senior secured notes with an investor conference call scheduled for Wednesday, according to a market source.

The roadshow is expected to run through Nov. 10.

The deal was announced after 5 p.m. on a slow day for the high-yield market with early guidance not yet available.

However, the deal announced was a significant reduction from what the market had been expecting.

The LBO deal had been on hold since July.

It was pre-marketed as a $3 billion package of secured and unsecured notes with the secured tranche expected to be $2 billion and the unsecured tranche $1 billion.

Early guidance for the secured tranche in July was in the 10% area with the unsecured notes guided 250 basis points to 300 bps behind the secured notes.

Citrix weakens

Citrix’s 6½% senior secured notes due 2029 were weaker in heavy volume on Monday.

The 6½% notes fell 1 point to trade in the 86¾ to 87 context heading into the market close with the yield 9¼%, according to a market source.

There was $43 million in reported volume.

The notes were changing hands in the 87½ to 88 context at Friday’s close.

The 6½% notes were the last leveraged buyout deal to clear the market with the notes pricing at a deep discount to get it out the door.

Tibco priced $4 billion of the 6½% notes at 83.561 to yield 10% in late September.

Carnival down

Carnival’s capital structure fell 1 to 2 points on Monday as the ETF buying frenzy that drove the notes up the previous week came to an end.

Carnival’s 10 3/8% senior priority notes due 2028 (B2/B+) returned to a 101-handle after breaking above last Friday.

The notes were wrapped around 101½ heading into the market close.

They remained active with $26.5 million in reported volume.

Carnival’s 5¾% senior notes due 2027 (B3/B) dropped 2½ points to close the day at 69 3/8 with the yield 15¾%.

There was $23 million in reported volume.

Charter lower

Charter subsidiary CCO Holding’s senior notes were taking a hit on Monday after the telecommunication company reported earnings last Friday.

The senior notes were off 1 to 3 points.

CCO’s 4¾% senior notes due 2032 suffered the largest losses with the notes down 3 points.

They closed Monday at 78¼ with the yield 8 1/8%, according to a market source.

There was $14 million in reported volume.

CCO’s 4¼% senior notes due 2034 were down 1½ points to close the day at 73½ with the yield 7 7/8%.

There was $26 million in reported volume.

The 5 3/8% senior notes due 2029 were down 1 points to 89 with the yield 7½%.

There was $24 million in reported volume.

The 4¼% senior notes due 2031 were off ¾ point to 79 with the yield 7¾%.

The selling pressure in CCO’s notes may have been a delayed reaction to Charter’s earnings report released Friday.

Charter missed on EBITDA, a source said.

Indexes

The KDP High Yield Daily index fell 12 points to close Monday at 51.5 with the yield 7.69%.

The index posted a cumulative gain of 107 points on the week last week.

The CDX High Yield 30 index fell 72 bps to close Monday at 99.21.

The index posted a cumulative gain of 168 bps on the week last week.

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