Four junk bond issuers price $2.55 billion; Citrix weaker; Tenneco moves lower

By Paul A. Harris and Abigail W. Adams

Portland, Me., Nov. 15 – A busy Wednesday in the high-yield new issue market had four issuers price single-tranche dollar-denominated deals for a combined total face amount of $2.55 billion.

Two came as drive-bys; the other two arrived on the heels of brief roadshows. Timing was accelerated on one of the roadshow deals.

One issue was upsized.

Executions were a mixed bag, with two deal coming at the tight ends of talk, while one came in the middle of talk and one came on the wide end.

Notably, three of Wednesday’s four deals priced at discounts.

Meanwhile, the secondary space took a breather after the spectacular rally over the previous session.

The cash bond market was either side of unchanged as equity markets extended gains and Treasuries pulled back following the latest macro data.

The Producer Price Index report released pre-open continued to reflect easing inflation, adding fuel to the post-CPI expectation that the Fed’s rate-hike campaign had officially come to an end.

However, retail sales also slowed, calling into question the strength of the consumer-powered economy.

While there is disparity in the amount expected, analysts are now widely calling for rate cuts in 2024.

However, the rate cuts may not be the good news the market expects and the product of a serious economic downturn, sources warned.

With the broader market flat and market players awaiting the deals in the pipeline to break for trade, topical news was the driver of activity in the space.

Cloud Software Group Holdings Inc.’s (Citrix) 9% second-lien notes due 2029 (Caa2/B-) and Citrix Systems Inc./Tibco Software Inc.’s 6½% senior secured first-lien notes due 2029 (B2/B) fell in heavy volume after Cloud Software announced a new incremental term loan.

Tenneco Inc.’s 8% senior secured notes due 2028 (B1/B) were again lower on market chatter the company’s chief financial officer was departing.

Citrix falls

In secondary trading, Cloud Software/Citrix’s 9% second-lien notes due 2029 and Citrix’s 6½% first-lien notes due 2029 fell in heavy volume after Cloud Software announced a new incremental first-lien term loan.

The 9% notes were down 1 to 1½ points on the news.

They gave back their gains from the previous session and returned to an 88-handle.

The notes were trading in the 88 to 88½ context heading into the market close with the yield about 11 7/8%, a source said.

There was $18 million in reported volume.

The 6½% first-lien notes due 2029 were off about 1 point to trade in the 89½ to 90 context.

The yield was about 9%.

There was $17 million in reported volume.

The notes were under pressure after Cloud Software announced plans to raise $850 million through a new incremental first-lien term loan.

The term loan will push Citrix’s first- and second- lien junk bonds further down the capital structure, a source said.

Tenneco weaker

Tenneco’s 8% senior secured notes due 2028 continued to lose steam in heavy volume on Wednesday.

The notes shaved off another ¼ point in heavy volume.

They closed the day in the 81¾ to 82 context, a source said.

The yield was about 13%.

There was $16 million in reported volume.

Tenneco’s 8% notes were volatile the previous session with the notes dropping almost 2 points in intraday activity.

While the notes traded as low as 80¼ on Tuesday, they recouped their losses and ended the day largely unchanged.

The notes have been active since Tuesday with market chatter circulating that the company’s chief financial officer was exiting the company although no official announcement has been made.

Fund flows

The high-yield ETFs had a massive $1.59 billion of daily cash inflows on Tuesday, the most recent session for which data was available at press time, according to a market source.

However actively managed high-yield funds sustained $240 million of outflows, which were broad-based, on Tuesday, the source said.

Over the past two weeks the combined funds have had $10 billion of net inflows, the second-largest on record for that interval, according to the market source who added that the largest inflows to the asset class came in the two-week period that concluded on June 3, 2020.

Indexes

The KDP High Yield Daily index fell 16 basis points to close Wednesday at 49.05 with the yield 7.72%.

The index gained 54 bps on Tuesday and 2 bps on Monday.

The ICE BofAML US High Yield index surged 102.6 bps with the year-to-date return now 7.942%.

The index added 6.5 bps on Monday.

The ICE BofAML US High Yield index was down 15.8 bps with the year-to-date return now 7.788%.

The index surged 102.6 bps and added 6.5 bps on Monday.

The CDX High Yield 30 index was down 7 bps to close Wednesday at 103.17.

The index gained 64 bps on Tuesday and 6 bps on Monday.

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