Edgen Murray, David's Bridal, SGS deals cap $10 billion week; activity quiets down pre-holiday

By Paul Deckelman and Paul A. Harris

New York, Oct. 5 - The high yield market finished off a moderately active week on Friday as three issuers priced some $1 billion of new paper.

Edgen Murray Corp., a distributor of specialized steel products for the energy, mining and construction industries, priced a downsized $540 million of eight-year senior secured notes at a discount to par, with the new notes moving up a little when they were freed to trade.

David's Bridal, Inc., a retailer specializing in wedding gowns and accessories, priced $270 million of eight-year bonds - a deal which was first downsized, and then restored to its original amount.

And SGS International Inc., a provider of graphic services, did $210 million of eight-year paper.

The latter two deals were quoted at solidly higher levels in the aftermarket, although overall activity was quiet ahead of Monday's U.S. debt market close for Columbus Day.

That trio of deals raised the week's tally to $9.97 billion in 21 tranches, according to data compiled by Prospect News - a respectably active week for the primaryside, though less than the $11 billion in 28 tranches that made its debut last week, ended Sept. 28.

On a year-to-date basis, that swelled the amount of new dollar-denominated, purely junk-rated paper from domestic and developed-country issuers to some $244.5 billion in 505 deals, running about 38.5% ahead of the pace seen at this time last year.

Thursday's deal from Getty Images, Inc. continued to hold the solid gains it notched when it was freed to trade, but that day's other issues were mostly trading around or just a little above their respective issue levels.

Traders said that with many market participants taking an early pre-holiday exit, activity was mostly confined to the new-deal sphere, with not much happening in the non-new-deal secondary realm.

But statistical measures of market performance ended higher on the day, and on the week as well.

Edgen Murray downsizes

Heading into a three-day holiday weekend in the bond market, the high-yield primary took something of a breather on Friday, as three issuers, each bringing a single dollar-denominated tranche, raised $1.02 billion.

Uncharacteristically for post-Labor Day primary activity, none of Friday's deals were drive-by executions. Each priced at the conclusion of an investor roadshow.

Edgen Murray brought the session's biggest deal, pricing a downsized $540 million issue of 8¾% senior secured notes (Caa1/B+) at 99.285 to yield 8 7/8%.

The yield printed in the middle of the 8¾% to 9% yield talk. The reoffer price came in line with price talk which specified an original issue discount of approximately ¾ point.

The deal was downsized from $575 million. In connection with the downsizing, a seller note outstanding at the Bourland & Leverich subsidiary of Edgen Group, which was to be retired using the proceeds from the bonds, will now remain in place after closing.

Jefferies & Co., Morgan Stanley and Bank of America were the joint bookrunners.

The Baton Rouge, La.-based distributor of steel products to the energy sector and industrial markets plans to use the proceeds to repay debt including its 12¼% senior secured notes.

David's Bridal upsizes

David's Bridal priced an upsized $270 million issue of eight-year senior notes (Caa2/CCC+) at par to yield 7¾%.

The yield printed on top of price talk.

The deal was increased to $270 million from $250 million after having earlier been downsized to $250 million from $270 million, a downsizing which saw $20 million shifted to the term loan.

The re-upsizing by $20 million provided proceeds which will be used to reduce the equity contribution to the leveraged buyout of the Conshohocken, Pa.-based retailer of bridal gowns and wedding-related apparel and accessories by sponsor Clayton, Dubilier & Rice.

Morgan Stanley, Bank of America, Barclays, Goldman Sachs, Credit Suisse and Deutsche Bank were joint bookrunners.

SGS comes inside of talk

SGS International priced a $210 million issue of eight-year senior notes (Caa1/CCC+) at par to yield 8 5/8%.

The yield printed 12.5 basis points inside of price talk that was set in the 8 5/8% area.

Deutsche Bank, Credit Suisse, Bank of America and Goldman Sachs were the joint bookrunners for the LBO deal for the Louisville, Ky.-based graphic services provider.

Gulfport Energy

The active forward calendar is thin, heading into the four-session week ahead.

Gulfport Energy Corp. plans to start a roadshow on Tuesday for a $250 million offering of eight-year senior notes.

The deal is set to price later in the week.

Credit Suisse is the bookrunner.

The Oklahoma City-based oil and gas exploration and production company plans to use the proceeds to repay revolver debt and pre-fund its drilling capital expenditures program.

Day's deals trade up

When Edgen Murray's 8¾% senior secured notes due 2020 were freed to trade in the aftermarket, a trader saw the new bonds at 99¾ bid, 100¼ offered.

He noted that the offering had priced at 99.285, "so it did move up some."

David's Bridals 7¾% notes due 2020 were seen by a trader to have pushed up to 101 bid, 101½ offered from their par pricing level.

A second trader quoted the issue at 101 1/8 bid, 101 5/8 offered.

SGS International's 8 3/8% notes due 2020 ended the day at 101 3/8 bid, 101 7/8 offered, up from the par level at which the deal had priced.

Thursday deals hold levels

A trader - noting that "everybody was gone by 2 o'clock [ET]," making for an unofficial early close ahead of Monday's Columbus Day holiday, which will see U.S. government and corporate debt markets closed - said that there really was "not much to report" in the secondary arena. "It was a pretty quiet day."

He said that most of the day's action that did take place was confined to the new or recently priced deals.

He saw the new 7% notes due 2020 from Getty Images continuing to pretty much hold their own, trading at 102 bid, 102½ offered.

The Seattle-based photo image distributor's $550 million issue had priced at par on Thursday after downsizing from an originally shopped $750 million, and in the immediate aftermarket, had moved as high as 103 bid, before coming down from that peak level and finishing Thursday's session around the same 102 to 102½ area that was seen on Friday.

Among some of the other deals that had come to market during Thursday's $2 billion session, a trader said that LIN Television Corp.'s 6 3/8% notes due 2021 "didn't do much" on Friday, pegging the Providence, R.I.-based TV station company's quick-to-market $290 million deal at 99¾ bid, 100¼ offered, straddling its par issue price. That was about where the bonds had finished up on Thursday.

He also saw Manitowoc Co. Inc.'s 5 7/8% notes due 2022 at that same level on Friday.

The maker of construction cranes and food-service equipment, based in the Wisconsin town of the same name, priced its quickly-shopped $300 million deal at par Thursday after upsizing it from an originally announced $250 million. The issue came to market too late in the session to trade at that time.

First Quantum Minerals Ltd.'s 7¼% notes due 2019 were quoted Friday at 100¾ bid, 101¼ offered, up about ¼ point from the levels at which those bonds had traded late Thursday.

The Vancouver, B.C.-based mining and metals company had priced its $350 million scheduled forward calendar offering earlier in the day at par.

And Petco Holding Inc.'s 8½% PIK senior toggle notes due 2017 were holding on Friday around the 100¼ bid, 100¾ offered level, not far from their aftermarket levels on Thursday.

The San Diego-based pet supplies retailer's $550 million drive-by deal had priced Thursday at 99.5 to yield 8.624%.

Hertz holds on

Going back a little further during the week, a trader saw both tranches of Hertz Corp.'s $1.2 billion of new bonds trading at 101¾ bid, 102¼ offered.

The Park Ridge, N.J.-based vehicle rental and equipment leasing giant had priced its quickly shopped two-part offering on Monday, consisting of $700 million 5 7/8% notes due 2020 and $500 million of 6¼% notes due 2022. Both tranches had priced at par after the eight-year piece was upsized from an originally shopped $600 million and the 10-year tranche was likewise downsized by $100 million from $600 million originally.

Crown Castle International Corp.'s 5¼% notes due 2023 were seen at 101¾ bid, 102¼ offered, around the same levels seen on Thursday. Those levels, in turn, were up a little from where the bonds had ended up in initial aftermarket trading following their pricing on Wednesday. The Houston-based communications antenna tower owner and operator's quick-to-market $1.65 billion offering had priced at par, and then finished the session trading around 101¼ bid, 101¾ offered.

EPFR sees $420 million outflow

The flood of new deals seen for most of this year has been helped along by ample liquidity - but that trend may have run its course.

Cambridge, Mass.-based EPFR Global, which tracks the flow of money into and out of high-yield mutual funds and exchange-traded funds, reported that in the week ended Wednesday $420 million more left those funds than came into them.

It was the first such outflow recorded by EPFR after 16 straight weeks of inflows, dating back to the week ended June 13. During that time, net inflows to those funds had totaled $28.07 billion, according to a Prospect News analysis of the data.

On a year-to-date basis, EPFR said that cumulative net inflows have totaled $63.67 billion, with inflows seen in 34 weeks out of the 40 weeks since the start of the year, against six outflows, four of them coming during a consecutive stretch from mid-May through early June.

The EPFR figures pointed in the same direction as numbers which circulated around very late on Thursday from the other major service that tracks those money flows into and out of the mutual and ETF funds, Arcata, Calif.-based AMG Data Services, a unit of Thomson Reuters' Lipper/FMI division.

Market sources familiar with those weekly AMG statistics said that in the week ended Wednesday, $891.8 million more left those funds than came into them - the second consecutive week in which an outflow was reported. A $310 million cash loss was seen last week.

AMG/Lipper had also seen an amazing stretch of inflows dating back to mid-June, during which those inflows had totaled about $13.69 billion, according to a Prospect News analysis of the figures.

On a year-to-date basis, the week's outflow pulled the cumulative net inflow figure down to $31.2 billion, including the ETFs, with 33 weeks of inflows seen, against seven weeks of outflows.

AMG Lipper and EPFR use different methodologies to calculate their numbers, usually resulting in figures that are far apart but pointed mostly in the same direction, except for a rare divergence as happened last week, when AMG had seen a $310 million outflow and EPFR reported a $1.59 billion inflow.

Cumulative fund-flow estimates, whether from EPFR or from AMG/Lipper, may be revised upward or downward or be rounded off and could include unannounced revisions and adjustments to figures from prior weeks.

The continued flow of fresh cash into junk - and the mutual funds represent but a small, though observable and quantifiable percentage of the total amount of money coming in - have been seen by analysts as a key element behind the high-yield secondary market's strong performance so far this year versus other fixed-income asset classes, and its active new-deal pace, which has recently surged past 2011's year-to-date totals.

Indicators up on day, week

Away from the new deals, statistical indicators of junk market performance were higher for a second straight session on Friday, and were up on the week as well.

The Markit Group CDX North American Series 19 High Yield Index edged up by 1/32 point on Friday to end at 100 9/16 bid, 100 13/16 offered, after having risen by 3/8 point on Thursday.

It was well up from 99 ¾ bid, 100 offered at the close last Friday, Sept, 28.

The KDP High Yield Daily Index meantime rose for a third straight session Friday, gaining 12 basis points to end at 74.41, after having gained 6 bps on Thursday.

Its yield fell by 1 bps to 6.02%, after having risen by 10 bps Thursday.

Those readings compare with the previous Friday's index finish at 74.24 and yield at 6.04%.

And the widely followed Merrill Lynch U.S. High Yield Master II Index made it a lucky seven in a rose on Friday, rising by 0.118%, on top of Thursday's 0.136% advance.

That lifted its year-to-date return to 12.523% from Thursday's 12.39%, although the year-to-date level remains below its 2012 peak level of 12.814%, set on Sept. 19.

The index gained 0.494% on the week, in contrast to the previous week's 0.603% loss - its first such downturn after five straight weeks of upturns -- which had left the year-to-date return last Friday at 11.97%.

© 2015 Prospect News.
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