NRG junk bonds lose, Vivint gains on acquisition news; Citrix downtrend continues

By Paul A. Harris and Abigail W. Adams

Portland, Me., Dec. 6 – With a backdrop of a quieted junk bond primary market, it was another red day in the secondary space with the cash bond market off ¼ to 3/8 point as the market continued to reassess the dovish pivot rally of the previous week.

While the market was soft, it continued to hold well in the face of heavy selling in equities, sources said.

With no new domestic paper to trade, large, liquid issues and topical news were the driving forces of trading activity.

NRG Energy, Inc. and Vivint Smart Home Inc. (APX Group Holdings Inc.) were the names of the day after NRG announced its $2.8 billion acquisition of the home security company.

NRG’s junk bonds (Ba2/BB+) were taking a hit on the acquisition with its junk bonds down 2 to 4 points to rank among the largest losers of Tuesday’s session.

However, Vivint’s 5¾% senior notes due 2029 (Caa1/CCC) surged almost 7 points on the news with the notes the major gainers of Tuesday’s session.

Citrix Systems Inc./Tibco Software Inc.’s 6½% senior secured notes due 2029 (B2/B) continued their downtrend after setting an all-time high the previous week.

Primary

Trailing a Monday session that produced the new issue market's greatest news volume in months, with news on five deals – two dollar-denominated and three euro-denominated – hitting the tape, the primary returned to hibernation on Tuesday.

No deals were priced.

No new offers were announced.

Meantime the two dollar-denominated deals are now wending their ways along the high-yield road on timelines that have them pricing before the end of the week.

Chart Industries, Inc. is marketing $2.06 billion in two tranches: $1.31 billion of seven-year senior secured notes (Ba3/B+) with initial guidance of 8¼% to 8½% and a $750 million of eight-year senior unsecured notes (B3/B) with initial guidance that has them coming 250 basis points behind the secured notes.

The deal, backing the acquisition of Howden, came into the market pursued by $2.3 billion of reverse inquiry skewed toward the secured tranche, according to sources.

There is a buzz in the market that pricing on both tranches could tighten significantly, a sellside source said.

Meanwhile Jones DesLauriers Insurance Management Inc., a broker partner of Ontario-based Navacord Corp., plans to sell $300 million of eight-year senior notes (expected Caa2/expected CCC/confirmed CCC+).

Initial guidance has those notes coming to yield in the high-10% to low-11% area, a trader said.

Should the expected triple-hook ratings materialize from Moody's and S&P, the Navacord offer will be the first deal to present such a risk challenge to high-yield bond investors since mid-June when Iris Holdings Inc. priced a $400 million issue of 10% senior notes due December 2028 (Caa2/CCC+) backing the buyout of Intertape Polymer Group Inc.

That deal priced at 82 to yield 14.361%, busting through the price talk that had it coming at OID 83 to 85 to yield 13½% to 14%. Initial guidance on the Intertape deal had it coming with an OID in the low 90s to yield in the high-11% to low-12% area.

NRG down, Vivint up on acquisition

It was a topical day in the secondary space on Tuesday with NRG’s acquisition of Vivint dominating the market’s attention.

NRG’s junk bonds were taking a hit after the energy company announced its $2.8 billion acquisition of Vivint.

However, Vivint’s junk bonds surged on the news.

NRG’s 3 7/8% senior notes due 2032 fell 4 points to close the day at 78½ with the yield 7.1%, according to a market source.

The notes led losses in the secondary space on Tuesday.

The 5¼% notes due 2029 sank 2¼ points to close at 90¾ with the yield 7.04%.

The 3 3/8% senior notes due 2029 fell 2¼ points to close Tuesday at 82 with the yield 7%.

However, Vivint’s 5¾% notes due 2029 coursed upward after the announced acquisition.

The notes were up almost 7 points in intraday activity to trade as high as 92.

However, they lost steam into the close and ended the day in the 89½ to 89¾ context with a yield of about 7 7/8%, a source said.

They were trading on an 85-handle with a yield of about 8 7/8% heading into Tuesday’s session.

While the acquisition was a drag on NRG’s capital structure with S&P Global Ratings placing its ratings on CreditWatch with negative implications, it was an enormous step up for Vivint, sources said.

The acquisition will not trigger of a change-of-control poison put with the covenants giving exception to publicly traded companies, a source said.

NRG could redeem the notes; however, “based on the market’s reaction to the deal, I’d say NRG’s cost of capital just went up so the refi might be expensive,” a source said.

Vivint’s notes may be left outstanding with the notes trading in line with NRG’s credit profile.

Citrix down again

The downtrend in Citrix’s 6½% senior secured notes due 2029 accelerated on Tuesday with the notes off more than 1 point in heavy volume.

The notes opened Tuesday on an 86-handle after breaking below an 87-handle for the first time in more than one week on Monday.

However, the notes broke below the 86-handle as the session progressed.

The 6½% notes were changing hands in the 85½ to 86 context by the market close.

There was more than $30 million in reported volume.

The 6½% notes hit an all-time high of 88 1/8 the previous week but have been on a steady downtrend since.

Monday outflows

The dedicated high-yield bond funds sustained $1.135 billion of net daily cash outflows on Monday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs saw a whopping $1.05 billion of outflows on the day.

Actively managed high-yield funds sustained $85 million of outflows on Monday, the source said.

The combined funds are tracking $702 million of net inflows for the week that will conclude with Wednesday's close, according to the market source.

Indexes

The KDP High Yield Daily index fell 15 points to close Tuesday at 52.37 with the yield now 7.24%.

The index slid 8 points on Monday.

The ICE BofAML US High Yield index was down 25.1 bps with the year-to-date return now negative 10.256%.

The index was down 15.8 bps on Monday.

The CDX High Yield 30 index slid 8 bps to close Tuesday at 100.77.

The index was down 61 bps on Monday.

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