Bonds issued this week as part of VodafoneZiggo's €2.1 billion cross-border refinancing effort have struggled to find a bid on the break as investors steer clear of longer-dated bonds, and Bund yields approach positive territory amid hawkish central bank messaging.
VodafoneZiggo — which is the Netherlands' third-largest mobile operator and owned through a joint venture between Liberty Global and Vodafone — on Jan. 6 priced €750 million of 10-year notes at par for a 3.5% yield, and a $1.525 billion dollar tranche with the same maturity priced at 99.03 for a 5.125% yield.
The euro paper came in line with initial price thoughts in the 3.5% area, while the dollar bonds were forced wide of 5% area IPTs as investors expressed concern over relative value and duration.
Having initially opened in a 100.2/100.7 context in the secondary market, according to sources, the euro bonds failed to maintain a bid at reoffer and fell roughly half a point to 99.5, while the dollar notes opened only slightly higher at a 99.5 offer.
"In retrospect it was punchy to open the market with a roughly €2 billion 10-year trade in a market that's hyper-sensitive on rates," said one investor this morning.
Indeed, longer-dated euro high yield paper opened the week under pressure, with Netflix’s 2030 bonds for example losing up to half a point on Jan. 4. There was then a dramatic spike in government bond yields on Jan. 5 after December FOMC minutes suggested that the Federal Reserve may accelerate the reduction of its asset purchase program and bring forward interest-rate rises to combat soaring inflation. Yields gapped higher again yesterday, with 10-year Bunds edging close to the zero mark at -0.07%.
"There is not a bid for duration right now and if you look at existing VodafoneZiggo bonds, they have not performed well," another high yield fund manager said during bookbuild. He says he declined to take part in yesterday’s bond sale because aggressive pricing means that VodafoneZiggo new issues tend not to perform on the break, despite describing the company as a "fantastic credit."
Other investors told LCD they planned to buy the bonds in the secondary market with the expectation that they would fall below par on the break.
Prior to this week's transaction, the operator had not been in the euro high yield market since December 2020 when it priced a €700 million 2.875% offering of vendor finance notes due 2029, which were on Jan. 5 quoted well below par at 96.55-bid, or 3.46% in yield terms. Further out, its 3.375% secured notes due 2030, placed in February 2020, closed Jan. 5 at 97.599 for a 3.72% yield, according to S&P Global Market Intelligence data.
