Tibco prices $4 billion to yield 10%; secondary trading in junkland down ¼ point

By Paul A. Harris and Abigail W. Adams

Portland, Me., Sept. 20 – Tibco Software Inc. priced a $4 billion issue of 6½% senior secured notes (B2/B) at 83.561 to yield 10% late Tuesday, in a deal that was closely watched and long awaited.

Meanwhile, the secondary space gave back its gains from Monday’s session with the cash bond market down ¼ point as the Federal Open Market Committee meeting commenced.

Treasury yields resumed their climb with the two-year and 10-year reaching multiyear heights while remaining steeply inverted.

While the overall market was lower, topical news exacerbated the selling pressure in certain names.

Embarq Corp.’s (Lumen Technologies Inc.) 7.995% senior notes due 2036 (Ba2/BB) continued to see outsized losses with the notes falling another 8 points after leveraged buyout financing for some of Lumen’s assets were announced.

Ford Motor Co.’s 6.1% senior green notes due 2032 (Ba2/BB+) sank to a new low after the automaker downwardly revised its earnings forecast.

Home Point Capital Inc.’s 5% senior notes due 2026 (Caa1), a small, illiquid issue, were weaker in active trading on Tuesday.

Mega-LBO

The $4 billion 6.5-year notes from Tibco, which came in support of the buyout of Citrix Systems Inc. by Vista Equity Partners and Evergreen Coast Capital, priced 25 basis points beyond the wide end of yield talk, with the issue price coming more than a dollar cheap to price talk; yield talk and price talk had both been set well wide of initial guidance.

The deal also underwent investor-friendly covenant changes.

At the initial scheduled time for the close of books on Monday orders for the bonds modestly exceeded deal size, according to a market source who added that demand for the concurrent $4.05 billion term loan B was somewhat stronger.

The buyout deal was struck last January, taking its place amid a flurry of high profile leveraged acquisition financings.

A number of those financings subsequently slipped below the waterline during ensuing months as inflation, global economic uncertainty and geopolitical tension exacted tolls upon the capital markets.

The Citrix deal continued to face stiff headwinds right up to the very end, sources said.

Whereas the steep discount and the tightened credit indentures might, in other circumstances, have sparked late interest among investors, the issue's size, and Tuesday's miserable capital markets backdrop (the Dow Jones industrial average dropped 1.01% on the day) were piled onto the deal's misfortunes, a trader remarked after the session's close.

Meanwhile, earlier in the day in Europe Granite Bidco SAS disclosed plans to sell €350 million of six-year senior secured notes (B2) backing the buyout of France-based information technology company Inetum SA by Bain Capital.

Targeted investor calls are scheduled to take place through Thursday.

Embarq sell-off accelerates

In secondary trading, Embarq’s 7.995% senior notes due 2036 experienced another day of outsized losses with the notes falling 8 points after plunging 6 points the previous session.

The 7.995% notes traded as low as 59.625 on Tuesday.

However, they pared their losses and were wrapped around 61 heading into the close, a source said.

The yield was about 14.7%.

There was $37 million in reported volume.

The notes have lost 13 points since the financing package for Apollo’s leveraged buyout of Lumen’s assets, to be rebranded Brightspeed, was announced Monday.

The notes will be pushed far down in Brightspeed’s capital structure with the company about to price $5.465 billion of secured debt to finance the transaction.

The financing package includes $1.865 billion of seven-year senior secured notes, which is slated to price next week.

Ford’s new low

Ford’s 6.1% senior notes due 2032 hit a new low on Tuesday after the automaker became the latest blue-chip company to issue a dire earnings warning.

The 6.1% notes sank 1½ points in heavy volume.

They were marked at 93¾ bid, 94¼ offered early in the session.

However, the notes improved as the session progressed and stood poised to close the day at 94 3/8, a source said.

The yield was about 6.891%.

There was $29 million in reported volume.

The 6.1% notes are rate sensitive and have been under pressure as the market upwardly revised its Federal Fund rate target.

However, a downwardly revised earnings forecast pushed the notes to new lows.

Ford announced post-close on Monday that third-quarter earnings would fall far short of expectations due to supply chain and inflation pressures.

The company released revised guidance for operating profits of $1.4 billion to $1.7 billion due to a production delay of 40,000 to 45,000 vehicles and $1 billion in higher-than-expected costs.

Analysts had expected an operating profit of $2.9 billion.

Ford is the second blue-chip company in as many weeks to downwardly revise its third-quarter earnings forecast with FedEx’s earnings revision sinking markets late last week.

Home Point active

Home Point’s 5% senior notes due 2026, a small, illiquid issue, were weaker in heavy volume on Tuesday.

The notes were off about ¾ point.

They were changing hands in the 67½ to 68 context heading into the market close, according to a market source.

There was $17 million in reported volume.

Moody’s Investors Service recently downgraded Home Point’s unsecured debt to Caa1 from B3, due to diminished prospects for profitability, Prospect News reported.

The notes have been on a strong downtrend amid rising rates, which have hit REITs particularly hard, a source said.

The mortgage originator has seen lower origination volumes amid rising mortgage rates with the 30-year fixed mortgage rate blowing past 6% last week.

Fund flows

High-yield ETFs saw a healthy $504 million of daily cash inflows on Monday the most recent session for which data was available at press time, according to a market source.

However actively managed high-yield funds sustained $215 million of outflows on the day.

The combined funds are tracking $997 million of net outflows on the week that will conclude with Wednesday's close, according to the market source.

Indexes

The KDP High Yield Daily index fell 6 points to close Tuesday at 53.46 with the yield now 7.54%.

The index gained 5 points on Monday.

The ICE BofAML US High Yield index fell 21.1 bps with the year-to-date return now negative 11.959%.

The index gained 24.1 bps on Monday.

The CDX High Yield 30 index fell 55 bps to close Tuesday at 98.97.

The index rose 54 bps on Monday.

© 2015 Prospect News.
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