Citrix, Brightspeed on tap; Embarq notes fall; Carvana bounces

By Paul A. Harris and Abigail W. Adams

Portland, Me., Sept. 19 – In the high-yield bond market, developments surfaced Monday on the Picard Midco, Inc./Citrix Systems Inc. megadeal.

Official yield talk on the $4 billion offering of 6.5-year senior secured notes came at 9½% to 9¾%, implying a discount range of 85.695 to 84.62.

The deal, backing the buyout of Citrix by Vista Equity Partners and Evergreen Coast Capital, is set to hit the block on Tuesday.

Official talk is around a nickel cheap to initial talk that had the Picard/Citrix notes coming at 88 to 90, to yield in the high-8% to 9% area, sources say.

That extra nickel of discount is apt to send issuers, investors, dealers and traders scurrying to recalibrate prices in the high-yield bond market, a trader commented late in the session.

In addition to Monday's official price talk came details on investor-friendly covenant changes to the Picard/Citrix deal.

Meanwhile marketing began on Monday for the Connect Holding II LLC $1,865,000,000 seven-year senior secured notes offer backing the carve-out acquisition of Lumen Technologies’ fixed line assets by Apollo Global Management.

The broadband and telecom services provider will be rebranded as Brightspeed.

A global investor call is set for 11 a.m. ET on Tuesday. Small-group investor calls are set to run through Sept. 28.

The initial talk is 10%.

Also on Monday Tellurian Inc. cited uncertain market conditions as it withdrew a $1 billion notes and warrants project financing deal from the market.

Meanwhile, selling pressure in the secondary space again seemed to diminish on Monday with buyers stepping in after a red open.

The market launched the day down ¼ point but gained steam as the session progressed to end the day up 1/8 to ¼ point.

There was an uptick of activity in the secondary space as the market prepared for the megadeals in the works.

Embarq Corp.’s (Lumen Technologies Inc.) 7.995% senior notes due 2036 (Ba2/BB) sank in heavy volume on Monday after Brightspeed announced LBO financing that pushed them down the capital structure.

Carvana Co.’s 10¼% senior notes due 2030 (Caa2/CCC) saw heavy volume with the notes bouncing after hitting a new low the previous session.

Royal Caribbean Group’s 11 5/8% senior notes due 2027 (B3/B) were again afloat on Monday with the notes up about 1 point after sinking below par the previous session.

Primed over

Embarq’s 7.995% senior notes due 2036 were under pressure on Monday after financing for Apollo’s leveraged buyout of Lumen’s assets to be rebranded Brightspeed pushed it further down the capital structure.

The 7.995% notes fell more than 6 points to a 69-handle.

They were changing hands at 69½ in the late afternoon with the yield 12¾%, according to a market source.

There was $16 million in reported volume.

Embarq is among the assets Apollo Global Management will purchase in its $7.5 billion acquisition of Lumen’s broadband and telecommunication assets in the Midwest and southeastern U.S.

However, the company announced on Monday the 7.995% notes would remain outstanding but would not be guaranteed or secured by Embarq or Brightspeed assets or subsidiaries.

The notes will be pushed far down in Brightspeed’s capital structure with the company about to price $5.465 billion of secured debt to finance the transaction, a source said.

Carvana bounces

Carvana’s 10¼% senior notes due 2030 were bouncing off a new all-time low on Monday.

The 10¼% notes rose 1½ points with most prints in the 76¼ to 76¾ context on Tuesday.

The yield on the notes was about 15½%.

There was $27 million in reported volume.

The 10¼% notes were on the rise after hitting a new low last Friday.

The notes traded as low as 74¾ on Friday but closed the day on a 75-handle.

Friday’s trading level for the notes marked a new rock bottom for the $3.28 billion issue, which priced at par in April.

Royal Caribbean above water

Royal Caribbean’s 11 5/8% notes due 2027 were back above water on Monday after sinking below par on Friday.

The 11 5/8% notes rose 1¼ points with the notes wrapped around 101 heading into the market close, a source said.

There was $12 million in reported volume.

The notes fell to a 99-handle last Friday after trading as high as 102½ last Monday.

Indexes

The KDP High Yield Daily index gained 5 points to close Monday at 53.52 with the yield now 7.51%.

The index posted a cumulative loss of 119 points on the week last week.

The ICE BofAML US High Yield index gained 24.1 bps with the year-to-date return now negative 11.748%.

The index posted a cumulative loss of 201.3 bps on the week last week.

The CDX High Yield 30 index rose 54 bps to close Monday at 99.52.

The index posted a cumulative loss of 250 bps on the week last week.

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