Ford drives by, outstanding notes weaken; Cleveland-Cliffs improves; Roblox lower

By Paul A. Harris and Abigail W. Adams

Portland, Me., June 5 – Ford Motor Credit Co. LLC priced $1.75 billion senior notes (Ba2/BB+/BB+) in two bullet tranches on Monday.

A $900 million tranche of three-year notes priced at par to yield 6.95%, on top of talk.

An $850 million tranche of seven-year notes priced at par to yield 7.2%, also on top of talk.

The notes in both tranches were wrapped around par heading into the Monday close, according to a bond trader.

“It was a typical Ford deal,” the trader said, noting that the issuer came as the market was rallying, the bonds priced tight, and pretty much held around their issue prices.

A proposed tranche of three-year floating-rate notes was withdrawn from the market.

The deal was priced on the investment-grade syndicate desk.

Although there were no official deal announcements on Monday, the stage is set of a couple of megadeals to hit the market later in the week.

HUB International Ltd. is expected to launch $2.675 billion of secured notes on Wednesday via Morgan Stanley.

HUB is also putting in place a $4.25 billion term loan that was scheduled to launch on a Monday lender call.

Watch for bonds backing Apollo’s $8.1 billion buyout of Univar Solutions Inc. later in the week, sources say.

Tranche sizes and other details remain to be announced.

A debt commitment announced in March set forth a structure including $3.5 billion of senior secured credit facilities and a $2 billion senior secured bridge loan.

Apart from those, there are apt to be one or two more deals during the June 5 week, including a possible offering from a name in the chemicals sector, a trader said.

Meanwhile, it was a sideways day in the secondary space with the cash bond market unchanged after the strong gains of the previous session.

While ETFs remained buyers with strong inflows in the latter part of last week, the buying spree that lifted the market last Friday tempered.

With the risk of a government default in the rear-view, the market’s attention was again turning to rates and recession with the Federal Open Market Committee scheduled to meet next week.

While the market is largely expecting a pause in rate hikes, previous expectations for rate cuts by the year’s end are diminishing, a source said.

With the macro backdrop quiet during Monday’s session, topical news was a driver of activity in the space.

Ford Motor Credit’s senior notes were weaker in heavy volume on the heels of its latest benchmark offering.

Cleveland-Cliffs Inc.’s struggling 6¾% senior guaranteed notes due 2030 (Ba3/BB-/BB-) gained some traction in active trade.

Roblox Corp.’s 3 7/8% senior notes due 2030 (Ba2/BB) were lower on reports about the threat of regenerative AI to gaming companies.

Ford weaker

Ford’s outstanding senior notes were weaker on the heels of its new benchmark offering, according to a market source.

Ford’s 6.8% senior notes due 2028 (Ba2/BB+) fell ¾ point to close the day below par, a source said.

They were wrapped around 99½ heading into the close with the yield about 6.9%.

There was $23.5 million in reported volume.

Ford’s 7.35% notes due 2027 were off about 1/8 point to close the day just shy of 102.

The yield was 6.8%.

There was $12 million in reported volume.

Ford’s new notes caused a mild repricing of the outstanding issues with the new tranches comparatively cheap, a source said.

Cleveland-Cliffs improves

Cleveland-Cliffs’ struggling 6¾% senior guaranteed notes due 2030 improved in active trade on Monday.

The notes gained another ½ point to break above a 95-handle for the first time since mid-May.

The notes were changing hands in the 95¾ to 96¼ context with the yield about 7½%, a source said.

There was $19 million in reported volume.

The notes were among the downtrodden new issues to benefit from the resurgence of buyers of the space over the past few sessions.

They jumped ½ point to a 95-handle in Friday’s rally.

Cleveland-Cliffs 6¾% notes rank among the top 10 worst performing issues of 2023, according to a market source.

The $750 million issue priced at par on April 11.

Roblox lower

Roblox’s 3 7/8% senior notes due 2030 were lower in active trade as market players eyed AI’s potential hit to the company.

The 3 7/8% notes dropped 1 point to close Monday’s session at 95½ with the yield rising to 6½%, a source said.

There was $12 million in reported volume.

The notes were lower in active trade following a report about the disruptive potential of generative AI on gaming and creative software companies, a source said.

Indexes

The KDP High Yield Daily gained 3 points to close Monday at 50.58 with the yield 7.3%.

The index posted a cumulative gain of 60 points on the week last week.

The CDX High Yield 30 index shaved off 15 basis points to close Monday at 101.83.

The index posted a cumulative gain of 102 bps on the week last week.

Fund flows

The dedicated high-yield bond funds saw $914 million of net daily cash inflows on Friday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs saw $864 million of inflows on the day. Those follow $897 million of inflows on Thursday and $334 million of inflows last Wednesday.

Actively managed high-yield funds saw $50 million of inflows on Friday.

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