Primary floodgates open; Matador, Ford price; roadshow starts for hung Citrix debt, outstanding notes gain

By Paul A. Harris and Abigail W. Adams

Portland, Me., April 3 – The first week in April got started with a heavy volume of news in the high-yield primary market.

A pair of benchmark-sized deals priced as drive-bys.

Ford Motor Credit Co. LLC priced a $1.5 billion issue of 6.8% five-year senior notes at 99.987 to yield 6.8%, on top of yield talk.

The deal, which priced on the investment-grade syndicate desk, was heard to have played to $5 billion of demand, a trader said.

And Matador Resources Co. priced an upsized $400 million issue (from $500 million) of 6 7/8% five-year senior notes (B1/BB-/BB-) at 98.96 to yield 7 1/8%.

The coupon came at the tight end of the 6 7/8% to 7 1/8% coupon talk. The price came in line with price talk that had the deal coming at a one-point discount. The yield printed at the tight end of yield talk in the 7¼% area. Initial yield talk was in the mid-to-high 7% area.

The deal was heard to be a blowout, leaving a lot of accounts complaining about allocations, according to a sellside source, who added that the market heard that the dealer had extended a 99¾ bid for the notes late Monday afternoon.

There was also a meaningful build-up of the active new issue calendar.

In the center ring, by virtue of its size and the headline news surrounding it, is Cloud Software Group, which began a two-day roadshow for $3,837,641,000 of 9% senior second lien notes due Sept. 30, 2029, which come in an attempt to replace the second lien dealer bridge loan backing the buyout of Citrix Systems, Inc., which was hung up late last summer.

The deal, which was heard to have been pre-marketed, a process said to have circled up $2.5 billion of interest prior to the Monday morning announcement, is set to price Tuesday.

Late Monday buzz had the notes coming at OID 78 to yield 14.32%, with one of the sponsors poised to take down a significant portion of the notes, a trader said.

There were also deal announcements on Monday from Noble Corp. plc and Valaris Ltd.

All three – Cloud, Noble and Valaris – are set to price Tuesday.

Further deal announcements on Tuesday are a possibility, sources say.

The first week of April is a holiday abbreviated one, with the bond market set to close on Good Friday, ahead of the Easter holiday weekend.

Meanwhile, the strong rally in the secondary space showed signs of waning on Monday with the market launching the day strong but closing on softer footing.

While the cash bond market continued to add, the CDX index closed the day down ¼ point.

Activity in the space also waned as market players awaited the new deals in the pipeline.

However, real money accounts continued to circulate offers-wanted-in-competition lists for specific names, a source said.

Citrix’s 6½% senior secured notes due March 31, 2029 (B2/B) were on the rise on the heels of the new offering with the first-lien notes higher up on the capital structure.

The strong rally in DISH Network Corp.’s senior notes late last week also faded with the notes lower in heavy volume.

Citrix gains

Citrix’s 6½% senior secured notes due March 31, 2029 were on the rise on the heels of the new offering.

The notes climbed 1½ points to an 88-handle.

They were changing hands in the 88¼ to 88¾ context heading into the market close, a source said.

The yield was about 9%.

There was $26 million in reported volume.

The notes have been on a strong uptrend since late last week alongside the broader market.

While early guidance had Citrix’s new notes coming with a 14% yield, the new notes were the riskiest part of the LBO financing, a source said.

The 6½% notes, which priced at 83.561 to yield 10% in September 2022, are first-lien and mature about six months prior to the new offering.

DISH gives back

DISH’s senior notes were weaker on Monday as the strong three-day rally in the capital structure, which nearly sliced its losses in March in half, waned.

The notes were off ½ to 1 point as the broader market came in.

DISH's 11¾% senior secured notes due 2027 (Ba3/B+) were off about ½ point.

The notes were trading in the 95¾ to 96¼ context in heavy volume with the yield about 12 7/8%.

There was $37 million on the tape.

The notes jumped 7 points late last week after trading to an all-time low of 90¾ last Tuesday.

DISH’s soon-to-mature 5 7/8% senior notes due Nov. 15, 2024 (B3/B) were off ¾ point.

The notes were trading in the 88½ to 89 context heading into the market close with the yield about 13 ¾%, a source said.

There was $15 million in reported volume.

They jumped 9 points late last week.

DISH’s senior notes have been a mainstay on Trace in March with the capital structure seeing heavy selling throughout the course of the month with market players speculating that a restructuring was on the horizon.

However, the notes surged as buyers returned to the Telecom sector in the wake of Intelsat’s merger talk news last Wednesday.

The notes are also high beta and trade with the general market.

Indexes

The KDP High Yield Daily index rose 18 points to close Monday at 51.86 with the yield now 7.07%.

The index gained 73 points on the week last week.

The ICE BofAML US High Yield index gained 29.4 basis points with the year-to-date return now 4.013%.

The CDX High Yield 30 index fell 23 bps to close Monday at 101.26.

The index gained 216 bps on the week last week.

Fund flows

High-yield ETFs saw a hefty $861 million of inflows on Friday, the most recent session for which data was available at press time, according to a market source.

Actively managed high-yield funds were negative on the day, sustaining $93 million of outflows on Friday, the source said.

The combined funds have sustained $16 billion of year-to-date net outflows, according to the market source.

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