Cloud Software jumps in high-yield aftermarket; Noble, ZF trade at premium; Valaris lags

By Paul A. Harris and Abigail W. Adams

Portland, Me., April 5 – On the heels of Tuesday's big primary market session, which saw four issuers price a $6.34 billion face amount of dollar-denominated junk in five tranches – the biggest day for dollar issuance in one-and-a-half years – the new issue market was dormant on Wednesday.

No new issue business is expected before the extended Easter holiday weekend, which gets underway following Thursday's close, sources said.

Meanwhile, it was a soft day in the secondary space with the market giving back some gains from the strong rally of the previous week.

Credit spreads again pushed out after the snap back recovery in the final weeks of the first quarter with the ICE BofAML US High Yield index spread again brushing against 500 basis points.

However, it was all about the new paper in the secondary space, which was flooded with new supply after a long drought.

The majority of deals to price during Tuesday’s session were trading at a premium to their issue price with Cloud Software Group Holdings Inc.’s (Citrix) 9% second-lien notes due 2029 (Caa2/B-) the outperformer.

Noble Corp. plc’s 8% senior notes due 2030 (B2/BB-/BB-) and ZF North America Capital Inc.’s two tranches of senior secured green bullet notes (Ba1/BB+) were holding a decent premium despite a down day for the market, although the notes remained on a par handle.

However, Valaris Ltd.’s 8 3/8% senior secured second-lien notes due 2030 (B2/BB/BB-) were the laggard with the notes dropping below par.

Citrix second-liens outperform

Citrix’s 9% senior second-lien notes due 2029 outshined the market on Wednesday with the notes trading several points above their deeply discounted issue price.

The 9% notes continued to trade largely in the 81 to 82 context, a level reached shortly after breaking for trade, a source said.

There was $261 million in reported volume during the session.

Cloud Software Group priced a $3,837,622,000 issue of the 9% notes at 79 to yield 14.047% on Tuesday.

The issue price came in the middle of final price talk for 79, plus or minus 50 cents.

The issue replaces the second-lien dealer bridge loan backing the buyout of Citrix Systems, Inc., which became hung debt in 2022 amid deteriorating market conditions.

The 9% notes are the riskiest part of Citrix’s leveraged buyout deal, a source said.

Citrix’s 6½% senior secured first-lien notes due 2029 (B2/B) held on to the strong gains made since dealers started a roadshow for the second-lien notes.

The 6½% notes closed Wednesday at 88¾ with the yield about 9%.

At a premium

Noble’s 8% senior notes due 2030 and ZF’s two tranches of senior secured green notes held on to a premium.

Noble’s 8% notes remained unchanged after a solid break with the notes continuing to trade in the par ¼, par ¾ context, a source said.

In a heavily oversubscribed offering, Noble priced a $600 million issue of the 8% notes at par on Tuesday.

The yield printed tighter than the 8¼% to 8½% yield talk.

The deal was heard to have played to $4.1 billion of demand.

ZF’s 6 7/8% secured notes due 2028 and 7 1/8% secured notes due 2030 were also marked at par ¼ bid, par ¾ offered on Wednesday.

ZF North America Capital, a subsidiary of Germany-based ZF Friedrichshafen AG, priced a $600 million tranche of the 6 7/8% notes at 99.688 to yield 6.95% and a $600 million tranche of the 7 1/8% notes at 99.583 to yield 7.2%.

Valaris lags

Valaris’ 8 3/8% senior secured second-lien notes due 2030 were the laggard of recent issues with the notes falling below par in the aftermarket.

The 8 3/8% notes dropped to 99¼ bid, 99¾ offered on Wednesday after a flat break.

Valaris priced an upsized $700 million, from $600 million, issue of the 8 3/8% notes at par on Tuesday.

The yield printed at the tight end of yield talk in the 8½% area.

Fund flows

The dedicated high-yield bond funds saw a substantial-or-better $803 million of net daily cash inflows on Tuesday, the most recent session for which data was available at press time, according to a market source.

Actively managed high-yield funds saw $490 million of inflows on the day.

High-yield ETFs saw $313 million of inflows on Tuesday, the source said.

The combined funds are tracking $3.5 billion of net inflows on the week that is set to conclude with Wednesday's close, representing their largest amount of weekly inflows since that week to Nov. 2, 2022, according to the market source.

Indexes

The KDP High Yield Daily index fell 8 points to close Wednesday at 51.75 with the yield now 7.12%.

The index dipped 3 points on Tuesday after gaining 18 points on Monday.

The ICE BofAML US High Yield index fell 25.5 bps with the year-to-date return now 3.67%.

The index slid 8.8 bps on Tuesday after gaining 29.4 bps on Monday.

The CDX High Yield 30 index was down 55 bps to close Wednesday at 100.23.

The index fell 48 bps on Tuesday and 23 bps on Monday.

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