Robust demand for new junk issues; Matador trades with strong premium; new Ford flat

By Paul A. Harris and Abigail W. Adams

Portland, Me., April 4 – Against a macroeconomic background that few would describe as supportive the dollar-denominated high-yield new issue market had its biggest day in over a two-and-a-half years, on Tuesday.

Elsewhere, new paper was in focus in the secondary space which again launched the day strong but closed on soft footing.

Ford Motor Credit Co. LLC’s new 6.8% senior notes due 2028 (Ba2/BB+/BB+) were flat by dollar price although the notes were trading with a wider credit spread.

Matador Resources Co.’s 6 7/8% senior notes due 2028 (B1/BB-/BB-) were trading at a strong premium to their discounted issue price.

Citrix’s 6½% senior secured notes due 2029 (B2/B) continued to trade in heavy volume with the notes coming in slightly after a 1½ points gain the previous session.

Market rejuvenates

The huge primary session on Tuesday included the sale of $3.84 billion of second-lien bonds from the Citrix leveraged buyout that had been sitting on dealer balance sheets since late in the third quarter of 2022, standing as an obstructive force to a genuine reactivation of the dollar-denominated junk primary market, sources say.

All told Tuesday's session saw four issuers price a $6.34 billion face amount of notes in five junk-rated, dollar-denominated tranches.

Demand across all of Tuesday's offerings was heard to be robust.

Cloud Software Group Holdings Inc., an entity that was merged with and into Citrix in the 2022 LBO, sold $3,837,622,000 of 9% senior second-lien notes due Sept. 30, 2029 (Caa2/B-) at 79 to yield 14.047%.

The issue price came in the middle of final price talk, and rich to the 78 whisper.

The bonds were sharply higher in active trading late Thursday, according to a bond trader in New York who said they went out 81¼ bid, 82 offered.

Demand was heard to have climbed to $6 billion during the Tuesday session, sources say, adding that one of the LBO's equity sponsors took down a significant portion of the notes.

Elsewhere ZF North America Capital Inc., a subsidiary of Germany-based automotive technology components supplier ZF Friedrichshafen AG, priced $1.2 billion of senior secured green notes (Ba1/BB+) in two bullet tranches: $600 million of 6 7/8% five-year notes that priced at 99.688 to yield 6.95%, and $600 million of 7 1/8% notes that priced at 99.583 to yield 7.2%.

Both tranches came on top of yield talk.

Valaris Ltd. and Valaris Finance Co. LLC priced an upsized $700 million issue (from $600 million) of seven-year senior secured second-lien notes (B2/BB-/BB-) at par to yield 8 3/8%, at the tight end of talk.

The deal was heard to be playing to $3 billion of demand.

And Noble Corp. plc priced a $600 million issue of Noble Finance II LLC seven-year senior notes (B2/BB-/BB-) at par to yield 8%, 25 basis points through yield talk, and playing to $4.1 billion of demand.

All told it was the biggest day in the high-yield new issue market since Sept. 30, 2021, which saw $10.25 billion of issuance in 10 tranches.

Tuesday's action cleared the active forward calendar.

Ford trades wide

In the secondary, Ford’s new 6.8% senior notes due 2028 were flat by dollar-price in heavy volume on Tuesday.

However, the notes were trading with a wider credit spread.

The notes were trading in a tight range between 99 7/8 and par throughout Tuesday’s session.

They were trading with a credit spread that was 20 bps wider than pricing, a source said.

Ford priced a $1.5 billion issue of the 6.8% notes at 99.987 to yield 6.8% in a Monday drive-by.

Pricing came on top of talk. Initial guidance was 7 1/8% to 7¼%.

The deal priced off of the investment-grade desk.

It was heavily oversubscribed and heard to have played to $5 billion of demand.

Matador at a premium

Matador’s 6 7/8% senior notes due 2028 were trading at a strong premium to their discounted issue price in the aftermarket.

The 6 7/8% notes traded as high as par ¼ in active trade.

However, they came in slightly to trade in the 99 7/8 to par context heading into the market close.

The pricing on the offering was “pretty tight,” a source said.

However, the deal played to heavy demand with allocations tight.

The oil and gas company came to the market with the energy sector well bid amid a spike in crude oil futures following OPECs surprise production cut.

Matador priced an upsized $500 million, from $400 million, issue of the 6 7/8% senior notes at 98.96 to yield 7 1/8% in a Monday drive-by.

The coupon came at the tight end of the 6 7/8% to 7 1/8% coupon talk and in line with talk for a one-point discount.

The yield printed at the tight end of yield talk in the 7¼% area.

Citrix comes in

As market players awaited Citrix’s second-lien notes to break for trade, the 6½% senior secured notes due 2029 were active with the notes coming in slightly after a 1½ points gain the previous session.

The 6½% notes were off ¼ point to trade in the 88 to 88¼ context with the yield wrapped around 9%.

The notes jumped to an 88-handle the previous session as dealers began a roadshow for the second-lien offering.

Indexes

The KDP High Yield Daily index dipped 3 points to close Tuesday at 51.83 with the yield 7.09%.

The index gained 73 points on the week last week.

The ICE BofAML US High Yield index slid 8.8 bps with the year-to-date return now 3.925%.

The index gained 29.4 bps on Monday.

The CDX High Yield 30 index fell 48 bps to close Tuesday at 100.78.

The index fell 23 bps on Monday.

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