GulfMark leads $1.2 billion pricing day; Cenveo up on tender offer; funds see more inflows

By Paul Deckelman and Paul A. Harris

New York, March 1 - They say March comes in like a lion and goes out like a lamb. The first part of that adage was true enough on Thursday, with appropriately chilly and overcast weather seen in New York and other Northeastern business centers and even twisters reported in parts of the Midwest.

The junk market primary meantime continued to roar along with its sixth consecutive $1 billion-plus day and fourth this week. More than $1.2 billion of new paper came to market.

There were no giant-sized transactions like Clear Channel Worldwide Holdings Inc.'s massively upsized $2.2 billion two-parter on Wednesday or the almost equally large Linn Energy, LLC and Sprint Nextel Corp. mega-deals earlier in the week.

Instead, there were a series of medium-sized offerings including GulfMark Offshore, Inc.'s $300 million 10-year issue, which traded up after it priced.

Domestic issuers New Enterprise Stone & Lime Co., Inc. and Thermadyne Holdings Corp. also came to market, the latter with a smallish add-on to an existing bond issue. So did overseas borrowers Afren plc and Veridian Group Fund Co. II Ltd., the latter bringing an issue of dollar- and euro-denominated mirror tranches.

None of the day's other pricings outside of GulfMark were seen in the aftermarket, but there was trading in the earlier deals, including the Clear Channel, Sprint and Linn behemoths as well as Hertz Corp.'s add-on.

Away from the new issues, Cenveo Corp.'s bonds were actively traded and its stock surged on news of a tender offer for its existing debt.

Statistical indicators of junk market performance were mixed on Thursday, and high-yield mutual funds - considered a good proxy for overall junk market liquidity trends - notched the latest in a long string of recent inflows.

AMG posts $565 million inflow

As Thursday's session was winding down, market participants familiar with the weekly AMG high-yield mutual fund flow statistics said that in the week ended Wednesday, $565 million more came into those weekly reporting funds than left them.

It was the ninth consecutive gain so far this year, coming on the heels of the $837 billion cash injection seen by Arcata, Calif.-based AMG - a unit of Thomson Reuters' Lipper/FMI division - in the week ended Feb. 22.

There have been no outflows so far in 2012, while net inflows have totaled about $13.36 billion, according to a Prospect News analysis of the numbers, up from $11.79 billion the week before.

It was also the 13th consecutive inflow overall, a streak that dates back to early December. Over that roughly three-month stretch, net inflows have totaled $15.47 billion, according to the Prospect News analysis.

EPFR sees $1.36 billion inflow

Another fund-tracking service, Cambridge, Mass.-based EPFR Global, whose methodology differs from AMG, also reported a 13th straight week of inflows.

About $1.36 billion more came into those funds than left them during the week ended Wednesday.

That followed an almost identically sized $1.34 billion cash addition the previous week.

On a year-to-date basis, with no outflows seen so far in 2012, inflows have totaled $22 billion, EPFR said.

EPFR's figures and those of AMG generally point in the same direction, although their actual numbers usually differ since they calculate their respective fund-flow totals very differently. EPFR, for instance, includes results from non-U.S. domiciled funds as well as the domestic funds and counts exchange-traded funds excluded from the more narrowly focused AMG tally.

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

Analysts say 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 - fueled the record new-deal borrowing binges seen in both 2009 and then in 2010, as well as the robust secondary market seen both years, and continued to be the driver behind 2011's near-record issuance.

Those fund flows are also seen as the key element behind the high-yield secondary market's fairly strong performance so far this year and relatively active new-deal developments.

GulfMark prices tight

The primary market saw $1.2 billion of issuance on Thursday. Five issuers each priced a single dollar-denominated tranche.

GulfMark Offshore priced a $300 million issue of 10-year senior notes (B1/BB-) at par to yield 6 3/8%, at the tight end of price talk that had been set in the 6½% area.

Credit Suisse Securities (USA) LLC, Wells Fargo Securities LLC and RBS Securities Inc. were the joint bookrunners.

The Houston-based provider of offshore marine services plans to use the proceeds to fund a tender offer for its 7¾% senior notes due 2014 and to refinance bank debt.

Afren massively oversubscribed

Elsewhere, Afren priced its $300 million of 10¼% senior secured notes due 2019 (/B/B) at 99.976 to yield 10¼%, on top of final talk that was lowered from the previous 10½% to 10¾% range.

Goldman Sachs International, BNP Paribas, Deutsche Bank AG, Global Hunter Securities and Natixis were the underwriters.

London-based Afren conducts oil and gas exploration, development and production operations in African countries.

The deal, which got off to a slow enough start, picked up momentum last week during the London roadshow, sources said.

Investors warmed to the 10-handle yield and took note of the phenomenal rally the company's share price has seen since the beginning of the year, buoyed by spiking crude oil prices.

The issue, advertised as $300 million to $350 million in size, played to a book bearing $2 billion of orders, according to a fund manager who played the deal.

The main contingent in the deal was the emerging markets crowd, according to the investor, who plays both European and U.S. high-yield corporates in addition to emerging markets.

Afren was a Nigerian energy play, the buysider added.

People seasoned in the political risks associated with Venezuelan bonds demonstrated little if any apprehension as the line formed for Afren, the source added.

New Enterprise Stone & Lime

New Enterprise Stone & Lime priced an upsized $265 million issue of six-year senior secured cash/PIK notes (/B-/) at par to yield 13% via bookrunner Bank of America Merrill Lynch.

The coupon starts at 4% in cash and 9% in kind.

The proceeds of the quick-to-market deal, along with a new ABL revolver, will be used to repay all outstanding debt under the company's term loan A, term loan B, revolver and certain other debt.

Thermadyne taps 9% notes

Thermadyne priced a $100 million fungible add-on to its 9% senior secured notes due Dec. 15, 2017 (B2/B-) at par to yield 9%, on top of the price talk.

Jefferies & Co. Inc. and RBC Capital Markets, LLC were the joint bookrunners for the quick-to-market add-on.

Proceeds will be used to fund a distribution to equity sponsor Irving Place Capital.

The original $260 million issue priced at par in November 2010.

Viridian prices

Northern Ireland-based electrical utility Viridian priced £418 million equivalent amount of 11 1/8% five-year senior secured notes (B2//BB) at 96.723 to yield 12%.

The yield printed at the wide end of the price talk.

The notes, which were issued by special-purpose vehicle Viridian Group Fund Co. II Ltd., came in two tranches that were sized at $250 million and €313 million.

Global coordinator and joint bookrunner Deutsche Bank will bill and deliver. Royal Bank of Scotland was also a global coordinator and joint bookrunner. UBS, Commerzbank and Barclays were joint bookrunners.

Proceeds will be used to repay bank debt and for general corporate purposes.

The deal went well, and the bonds shot up three points in the secondary market, according to a fund manager who played it and who spotted the notes at 99¾ bid at the close.

This investor participated in the euro tranche, specifying that the dollar-denominated tranche was clubbed up by bank loan investors who were being taken out of loan paper.

Talking the deals

Looking toward the Friday session, TransUnion LLC talked its $600 million offering of 6.25-year payment-in-kind toggle notes (Caa1/B-) with a yield in the 9¾% area.

Goldman Sachs is leading the buyout deal, which is set to price Friday.

The order book for TransUnion was at $1 billion on Thursday afternoon, a buyside source said.

Elsewhere Zurich-based travel services provider gategroup talked its €350 million offering of seven-year senior notes (confirmed B1/expected BB) to yield 6¾% to 7%.

The deal is expected to price during the Friday session in London.

Global coordinator and joint bookrunner Credit Suisse will bill and deliver. Citigroup, Deutsche Bank AG and Goldman Sachs are also joint bookrunners.

At Thursday's close there was no price talk on the deal from lead producer Eco-Bat Technologies Ltd., which is in the market with a €300 million offering of five-year senior notes (expected ratings B1/B).

Friday investor meetings are scheduled for Amsterdam and Paris, and the deal could price on Friday, sources said.

Citigroup and Credit Suisse are global coordinators and joint bookrunners. Barclays and ING are also joint bookrunners.

The Matlock, England-based company plans to use the proceeds to repay its revolver and for general corporate purposes.

That use of proceeds had one high-yield investor scratching his head on Thursday afternoon.

Instead of refinancing the bank debt, the company ought to be refinancing its outstanding PIK notes, which are trading around 77¼ bid, 78¼ offered, the investor said.

GulfMark goes up

When the new GulfMark Offshore 10-year notes were freed for secondary dealings, a trader quoted the bonds at 101 bid, 101 3/8 offered.

Another trader saw the offshore marine services provider's bonds in a 101-to-101 1/8 bid context, well up from the $300 million deal's par issue price.

Traders did not see any aftermarket activity Thursday in any of the other deals that priced: Thermadyne, New Enterprise Stone, Afren or Viridian Group.

Clear Channel's bonds diverge

A trader said that Clear Channel's 7 5/8% series B senior subordinated notes due 2020 "were pretty much a par-lock," after trading in very narrow ranges of par to 100 1/8 and par to 100¼ "almost the whole day."

He also saw the San Antonio-based broadcasting and outdoor advertising company's 7 5/8% series A senior subordinated notes, also due 2020, at "a very wide" 97-to-98½ context.

He suggested that "the 'Bs' are by far the more liquid one, and I only saw the 'As' once."

Clear Channel priced both tranches of the $2.2 billion drive-by issue at par on Wednesday. The two-part transaction was massively upsized from an originally announced $1.25 billion.

The deal consisted of $275 million of the series A notes, whose proceeds will be used to fund an internal company dividend, and $1.93 billion of the series B notes, the proceeds of which will be used to repay bank debt.

Another trader said the series A bonds were trading at 98¼ bid, 98 5/8 offered, calling that down 1 point from Wednesday's late levels. He saw the series B bonds up 1/8 point at 100 1/8 bid, 100 3/8 offered.

Videotron comes back

A trader saw Videotron Ltd.'s 5% notes due 2022 trading at 100 3/8 bid, 100 5/8 offered.

That was up from the 99 7/8 bid, par offered level at which that $800 million issue of the bonds had been seen going home on Wednesday.

The Montreal-based broadband and cable company's quick-to-market deal - solidly upsized from an originally announced $500 million - priced at par on Wednesday.

Hertz heads higher

Among the deals from earlier in the week, Park Ridge, N.J.-based car rental giant Hertz's 6¾% notes due 2019 were seen by a trader having been lifted up to 105 1/8 bid, 105½ offered by Thursday afternoon.

That quickly shopped $250 million deal, styled as an add-on tranche to the company's existing $1 billion of the same kind of notes sold last year, priced at 104 to yield 5.833%.

After a little early indecision, investors have since pushed those bonds up to current levels.

Linn still struggling

A trader on Thursday saw Linn Energy's 6¼% notes due 2019 at 99½ bid, 99¾ offered.

The Houston-based oil and gas exploration and production company's $1.8 billion offering - solidly upsized from $1.5 billion originally - priced on Tuesday at 99.989 to yield 6¼%. But after an initial flurry slightly above par when the bonds were freed to deal on Wednesday, they sank back down to below their issue price.

New issues still the focus

As has been the case all week and much of the week before, the new or recently priced deals constituted a large chunk of secondary dealings.

For instance, a trader saw more than $16 million of Oklahoma City-based natural gas company Chesapeake Energy Corp.'s 6.775% notes due 2019 trading - this more than two weeks after that $1.3 billion deal, upsized solidly from an originally announced $1 billion, priced at 98.75 on Feb. 13 to yield 7%.

Several hundred million of the bonds traded in each of the several sessions immediately following the pricing. While volume levels dropped off to around the $50 million to $70 million each day of the following week and then to around the $15 million to $30 million area this week, the bonds continued to dominate the Junkbondland most-actives lists.

After hanging around their issue price for several sessions of very heavy trading, the bonds finally gradually moved up above the par level as volume lessened.

Virgin Media Finance plc's 5¼% notes due 2022 were seen around 101½ bid, 102 offered on Thursday, holding on to most of the gains that the British communications and entertainment company's $500 million issue - upsized from an originally shopped $400 million - had notched after pricing at par on Tuesday. More than $16 million of the bonds traded on Thursday.

Cenveo trades up on tender

Away from the new deals, the news that Cenveo will be tendering for three issues of its bonds pushed the Stamford, Conn.-based commercial printing and stationary company's 7 7/8% notes due 2013 up by several points.

"We were super busy in CVO today," a trader said, quoting the bonds in a 97-to-99 context.

He said the paper traded as low as 97 and up to that 99 area.

"It's a good name. A lot of people were involved in it one way or the other," he added.

A market source said more than $39 million of the bonds changed hands on Thursday, the most of any junk issue. The source saw the bonds get as good as 98¾ bid before coming off that peak to go home at 971/4, which he called up by 1 point on the day.

Market indicators stay mixed

Statistical measures of junk market performance were mixed on Wednesday and stayed that way on Thursday.

A market source said that the CDX North American Series 17 High Yield index was up by ¼ point on Thursday to end at 98 1/8 bid, 98 3/8 offered after having eased by 3/8 point on Wednesday.

The KDP High Yield Daily index, however, fell by 6 basis points Thursday to end at 74.64 after having jumped by 17 bps on Wednesday. Its yield rose by 3 bps after having come in by 9 bps on Wednesday.

The widely followed Merrill Lynch High Yield Master II index notched its 10th consecutive daily advance on Thursday, gaining 0.052% on top of Wednesday's 0.173% rise.

The latest gain lifted the index's year-to-date return up to 5.302% - its highest level since the 5.68% reading seen back on Aug. 3 of last year.

It was also a new peak level for 2012 so far, supplanting the old zenith of 5.248%, which had just been seen on Wednesday.

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