Junk: Aston Martin, Starwood price; Beazer holds gains; Citrix mixed post-earnings

By Paul A. Harris and Abigail W. Adams

Portland, Me., March 13 – In the Wednesday junk bond primary session two issuers, each bringing a single dollar-denominated tranche of junk, raised $1.56 billion.

Aston Martin Lagonda Global Holdings plc and Starwood Property Trust, Inc. both used favorable market conditions to upsize their offerings.

Meanwhile, it was another quiet and flat day in the secondary space with little to move the needle in markets.

While Treasury yields inched higher, the cash bond market was again unchanged with trading volume thin as market players awaited the deals in the pipeline, a source said.

New issues remain the market’s focus and the area where money is being put to work, sources said.

Beazer Homes USA, Inc.’s new 7½% senior notes due 2031 (B1/B+) held on to the strong gains made on the break with the small issue size supporting the notes’ solid aftermarket performance.

Xerox Holdings Corp.’s recently priced 8 7/8% senior guaranteed notes due 2029 (B1/BB) shrugged off recent weakness with the notes improved in active trade.

Outside of new and recent issues, Citrix Systems Inc.’s senior notes were in focus with the notes mixed post-earnings.

While Cloud Software Group Holdings Inc.’s (Citrix) 9% second-lien notes due 2029 (Caa2/B-) improved, Citrix Systems Inc./Tibco Software Inc.’s 6½% senior secured first-lien notes due 2029 (B2/B) were unchanged.

Wednesday primary

In a deal that was heard to have played to huge demand U.K.-based carmaker Aston Martin Lagonda Global Holdings plc priced £1.15 billion-equivalent of five-year senior secured notes (B3/B-/B) in two tranches.

A $960 million tranche priced at par to yield 10%. The tranche size decreased to approximately £750 million-equivalent from £800 million equivalent. The yield printed 25 basis points beneath the tight end of the 10¼% to 10½% price talk. Early guidance was 10½% to 11%.

An upsized £400 million tranche of sterling-denominated notes priced at par to yield 10 3/8%. The tranche upsized from £350 million, and priced tight to talk that had it coming 50 basis points behind the dollar-denominated notes.

The deal upsized from £1.14 billion-equivalent across both tranches.

Demand for the dollar-denominated notes was heard to be $6 billion on Wednesday morning, a trader said, and added hearing that sterling order books contained £3 billion of demand, at that time.

The Aston Martin deal officially kicked off Monday, but was pre-marketed late in the March 4 week, according to sources who said that the company addressed investor concerns, especially those related to the carmaker’s high rate of cash burn, and its lack of profitability.

Elsewhere Wednesday Starwood Property Trust, Inc. priced an upsized $600 million issue of five-year sustainability-linked senior bullet notes (Ba3/BB-/BB+) at par to yield 7¼%.

The issue size increased from $400 million.

The yield printed at the tight end of the 7¼% to 7 3/8% revised yield talk. Earlier talk was in the 7½% area. Initial guidance was in the 7¾% area.

Trailing Wednesday’s action, one dollar-denominated deal remained on the active forward calendar.

Encore Capital Group, Inc. is expected to price a $400 million offering of five-year senior secured notes (//BB+) before the end of the week. Initial guidance has the notes coming to yield in the mid-9% area.

And the week’s burst of sterling-denominated issuance – a tranche apiece from Aston Martin and Heathrow – still has at least a little way left to run.

Pinewood Studios was expected to wrap up a brief roadshow on Wednesday for its £500 million offering of Pinewood Finco plc six-year senior secured notes (BB+/expected BBB), in the market with initial guidance in the mid-6% area.

Beazer holds gains

Beazer Homes’ 7½% senior notes due 2031 held on to the strong gains made on the break in active trade on Wednesday.

The notes continued to trade in the 101 to 101¼ context in active trade, a source said.

There was $19 million in reported volume.

The small issue size helped drive demand, which lifted the notes in the aftermarket, a source said.

Beazer Homes priced a $250 million issue of the 7½% notes at par in a Tuesday drive-by.

The yield printed at the tight end of the 7½% to 7¾% yield talk.

Xerox improves

Xerox’s recently priced 8 7/8% senior guaranteed notes due 2029 improved in active trade on Wednesday after experiencing some weakness over the past few sessions, a source said.

The notes added about ¼ point to close the day in the par ¼ to par ½ context, a source said.

There was $21 million on the tape.

Xerox’s senior notes played to heavy demand during bookbuilding and performed well in their initial days in the aftermarket with the notes trading in the par 7/8 to 101 1/8 context.

However, they began to show signs of weakness late last week and sank to the par 1/8 to par 3/8 context on Monday.

Citrix’s earnings

Citrix’s senior notes were in focus on Wednesday with the notes mixed after the company reported earnings.

The Cloud Software 9% second-lien notes due 2029 improved in active trade while the Citrix/Tibco 6½% senior secured first-lien notes due 2029 were unchanged.

The Cloud Software 9% notes added ½ to ¾ point.

The 9% notes were trading in the 94¾ to 95¼ context heading into the market close, a source said.

The yield was about 10¼%.

There was $24 million in reported volume.

The Citrix/Tibco 6½% senior secured first-lien notes due 2029 were largely unchanged.

The 6½% notes continued to trade in the 93½ to 94 context in active trade, a source said.

The yield was about 8%.

There was $23 million in reported volume.

Citrix reported strong numbers with revenue and EBITDA making large year-over-year gains, a source said.

The Cloud Software 9% second-lien notes due 2029 and Citrix/Tibco 6½% senior secured first-lien notes due 2029 saw a nice runup in the market rally that began in December 2023 and extended throughout the first quarter with both issues trading well above their deeply discounted issue prices.

In deals that priced to clear hung debt from Citrix’s acquisition, a $3.84 billion issue of the Cloud Software 9% notes priced at 79 to yield 14.047% in April 2023 and a $4 billion issue of the Tibco 6½% senior notes priced at 83.561 to yield 10% in September 2022.

Indexes

The KDP High Yield Daily index inched up 1 basis point to close Wednesday at 50.83 with the yield 6.81%. The index added 1 bp on Tuesday and shed 8 bps on Monday.

The ICE BofAML US High Yield index added 9.9 bps with the year-to-date return now 1.163%.

The index inched up 3 bps on Tuesday and shaved off 2.6 bps on Monday.

The CDX High Yield 30 index rose 5 bps to close Wednesday at 107.

The index gained 21 bps on Tuesday and crept up 1 bp on Monday.

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