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E*Trade bonds show resilience in softer high yield bond secondary

Both tranches of Tuesday’s E*Trade Financial drive-by are essentially steady since freed to trade, though a longer-tenor piece has shown a bit more resilience to the softer market conditions today. The 6% notes due 2017, for example, traded at 100.125-100.25 on the break yesterday, from par issuance, but slipped to 99.25/99.75 this morning, with prints at 99.5 and 99.75, according to sources and trade data.

The seven-year piece held par issuance, however. The 6.375% notes due 2019 also priced at par, traded at 100.25 on the break, and 99.875 and par this morning, according to trade data. Both are SEC-registered senior notes with B-/B2 ratings.

The deal train keeps chugging, and plenty of new paper remains in demand. Royal Caribbean 5.25% notes due 2022 remain at either side of 102, from par issuance last week, and Cincinnati Bell subsidiary Cyrus One’s 6.375% notes due 2022 are pegged at 102/102.5, against par issuance yesterday, according to sources. The unfunded HY CDX 19 index is tracking stocks, and it’s down eleven sixteenths of a point, at 99/99.25, according to Markit.

The net $1.305 billion, two-part issue from E*Trade was completed via joint bookrunners Bank of America, Goldman Sachs, and Morgan Stanley. Pricing came at the midpoint of guidance for the five-year notes and at the wide end of talk for the longer-dated tranche.

The online bank-and-brokerage firm will use proceeds from the deal to redeem $930 million of its springing-lien 12.5% notes due 2017 as well as the $243 million left of the 7.875% notes due 2015. The two series total the $1.305 billion sought for the new issue, inclusive of redemption premiums, accrued interest, and fees, according to the company.

E*Trade was last in market in May 2011 via sole bookrunner J.P. Morgan. The $435 million issue of SEC-registered 6.75% bullet notes due 2016 priced at par, the middle of guidance, though they traded yesterday at 106.5, yielding roughly 4.75%, and 106.25 today, yielding about 4.81%, according trade reports.

That was the company’s first regular-way tap since 2005. Thereafter, E*Trade was in market in mid-2009 with a par-for-par debt swap with heavy support by Citadel Investment Group, the largest holder of E*Trade’s stock and bonds at the time. Investors were offered new 10-year zero-coupon convertible notes for all outstanding 8% senior notes due 2011 and a portion of the company’s 12.5% springing-lien PIK notes due 2017. The transaction was heavily oversubscribed. – Matt Fuller

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