Europe's Bluewater Energy, Astaldi, SNAI price; pre-holiday market quiet, but pick-up coming

By Paul Deckelman and Paul A. Harris

New York, Nov. 27 - High-yield market participants were almost universally expecting a slow session on Wednesday before they headed for home ahead of the Thanksgiving holiday break, and they were not disappointed.

Primaryside activity dwindled, with only one dollar-denominated, junk-rated issue heard to have priced during the session, and that one was from an overseas-domiciled borrower.

Netherlands-based Bluewater Energy Services BV, which designs and constructs floating production, storage and offloading systems for the oil and natural gas industry, priced $400 million of six-year senior notes, according to a market source. That deal arrived too late in the truncated session for any kind of aftermarket activity.

According to the sources, all of the day's other pricings - from Italian issuers Astaldi SpA, a construction group, and sports betting company SNAI SpA - were euro-denominated transactions.

Back among the dollar-denominated bonds, Tuesday's new deal from beverage can sheet metal producer Wise Metals Group LLC was seen by several traders to have held onto the gains notched in initial aftermarket trading following that pricing, or even expanded them a little.

However, there was not much else seen in the way of trading in recent deals.

Primary market sources meantime predicted a pick-up in pricing activity following the holiday break, although they were skeptical whether the junk market would see the same kind of big finish to the trading year as was seen last year, which set a new junk issuance record.

Away from the new-issue realm, there wasn't much going on, with many market participants making an early day of it, if they were in at all.

Here and there were exceptions.

Clear Channel Communications Inc.'s 2016 notes continued to gain traction on the Monday announcement that the media company will give holders of those notes new longer-duration but higher-coupon bonds for their existing paper.

Charter Communications Inc.'s 2022 notes were busy, amid new reports of the cable and broadband operator's plans to raise $25 billion with which to fund a bid for Time Warner Cable.

But there was no trading in any real size seen in American Airlines parent AMR Corp.'s bonds, even as a bankruptcy court judge signed off on a proposed settlement between AMR and prospective merger partner US Airways Group Inc. on the one hand and federal and state regulators, who had raised objections to that mega-merger, on the other, clearing the way for the transaction to take place and for AMR to exit Chapter 11 next month.

Astaldi upsizes

With the dollar-denominated high-yield primary market becalmed ahead of the long Thanksgiving holiday weekend in the United States, most of Wednesday's action came from Europe.

Two issuers brought a total of three euro-denominated tranches, with which they raised a total of €980 million.

Astaldi priced an upsized €500 million issue of seven-year senior notes (expected ratings B1/B+/B+) at par to yield 7 1/8%.

The deal was upsized from €400 million. The yield printed at the tight end of yield talk in the 7¼% area.

Joint bookrunner BNP Paribas will bill and deliver.

Banca IMI, BBVA, Credit Agricole CIB, Credit Suisse, Deutsche Bank, HSBC, ING, Natixis and UniCredit were also joint bookrunners.

The Rome-based construction group plans to use the proceeds to refinance debt.

SNAI, inside of talk

Italian sports betting operation SNAI upsized its two-part notes transaction to €480 million from €460 million and priced both tranches inside of yield.

An upsized €320 million tranche of senior secured notes due June 15, 2018 (B1/B-) priced at par to yield 7 5/8%. The tranche was increased from €300 million. The yield came 12.5 basis points beneath the tight end of the 7¾% to 8% yield talk.

In addition SNAI priced a €160 million tranche of five-year senior subordinated notes (Caa1/CCC) at par to yield 12%. The yield came 25 bps beneath the tight end of the 12¼% to 12½% yield talk.

Joint physical bookrunner JPMorgan will bill and deliver. Banca IMI and UniCredit were also joint physical bookrunners.

The Porcari, Italy-based company plans to use the proceeds to repay debt.

2013 could come up short

The dollar-denominated primary market passed the final day of the pre-Thanksgiving week in relative quiet, but don't look for it to stay that way, a trader advised on Wednesday.

The post-Thanksgiving week is expected to be a busy one.

Watch for a $300 million to $400 million drive-by, out of the gate on Monday, to be led by Citigroup, the source added.

December should be busy, said the trader, but perhaps not busy enough to push 2013 issuance into record territory.

Year-to-date issuance stands at $304.9 billion at Wednesday's close.

The record, set in 2012, is $327.1 billion.

If during the run-up to 2014 the market were to see last December's $26.8 billion amount of issuance, it would easily push 2013's issuance of $304.9 billion so far into record territory, reaching $331.7 billion and eclipsing last year's standing record of $327.1 billion.

However the market is not expecting to see a repeat of the December 2012 volume this year, a trader said on Wednesday.

The reason is that the primary market was very hot in September and October ($73.3 billion), and a lot of the expected refinancing issuance came to market at that time, leaving what is believed to be a thinner deal pipeline for December, the trader said.

Bluewater bonds unseen

In the secondary market, traders saw no activity at all in the day's lone dollar-denominated junk pricing from Bluewater Energy Services.

The Hoofddorp, Netherlands-based company, which designs, engineers, constructs, installs and delivers floating production, storage and offloading systems and single point mooring systems for use by energy exploration and production companies, was heard by a market source to have priced $400 million of 10% six-year notes.

No other deal terms were immediately available at press time.

The deal's size came midway in the range of $375 million to $425 million that observers were expecting, and in line with the 10% price talk that circulated.

The Rule 144A issue was brought to market by bookrunners Pareto Securities and DNB Markets and was shopped around to prospective investors via a roadshow.

Wise issue improves

Among Tuesday's deals, a trader saw Wise Metals Group's new 8¾% senior secured notes due 2018 at 102 bid, 102½ offered, calling that a gain of ¼ point on the day.

Another trader, though, while quoting the bonds in a 102 to 103 bid context, pointed out that those were the levels at which the new notes had been trading on Tuesday, and that he had not seen any activity in the notes on Wednesday.

Wise Metals - a Linthicum, Md.-based metals recycling company and producer of sheet aluminum used in the manufacture of soft-drink and beer cans - priced $650 million of the notes at par in a scheduled forward calendar deal after the offering was upsized from $625 million originally. Its Wise Alloys Finance Corp. subsidiary was the co-issuer.

Traders said the new Wise bonds firmed smartly when they reached the aftermarket later Tuesday, quoting them as high as a 102 to 102¾ context.

Activity in EM bonds

Against a backdrop of almost universally lackluster pre-holiday activity, there was some trading activity Wednesday in two other junk-rated deals that priced this week - although a trader pointed out that both of those Third World resource-play deals were of more interest to emerging markets investors, with little participation from traditional high-yield accounts.

One was Afran plc's 6 5/8% senior secured notes due 2020. The London-based energy exploration and production company, which operates in Africa and the Middle East, priced $360 million of the notes at par on Tuesday after a roadshow.

On Wednesday, the notes began trading about ½ point higher, finally finishing at 100¾ bid, on round-lot volume of over $7 million, according to a market source.

Pacific Rubiales Energy Corp.'s 7¼% notes due 2021 were seen by a market source to have fallen 1 point to 105¼ bid, although volume in the credit was only $1 million.

The Toronto-based oil and natural gas exploration and production company, which operates in Colombia and Peru, priced $300 million of those notes as an add-on to its existing paper in a quick-to-market transaction on Monday. That add-on priced at 105 to yield 6¼%.

There was more activity, however, in some of the company's established bonds. Its 5 1/8% notes due 2023 were seen by a market source to have gained 3/8 point to go home at 90 5/8 bid. Volume was over $15 million, making it one of the most actively traded junk-rated bonds on the day.

Its 5 3/8% notes due 2019 gained about 5/8 point to close just under 100¾ bid. Volume was over $8 million.

Slow session seen

Away from the new-deal names, a trader described Wednesday as a "slow half a day." Although technically speaking it was supposedly a regular day - the Securities Industry and Financial Markets Association was recommending an early close (2 p.m. ET) for Friday rather than Wednesday - the reality was that "everybody was [saying] 'OK, I'm eating lunch and then I'm leaving.'"

He called the day "a non-event - there are a lot of clean-up situations going on," with traders and others looking to close out their books for the month of November.

He said that even NII Holdings Inc.'s bonds, which had been going steadily lower over the past few sessions on active volume, were quiet and little changed.

"There are some sellers" of the bonds of the Reston, Va.-based provider of Nextel-branded wireless service to Latin American markets in the longer end of the curve, he said, "but there's not a lot of people around, so not a lot is being said."

Its NII Capital Corp. 7 5/8% notes due 2021 were quoted around the 40 bid level on volume of over $16 million on the day.

"It was very quiet," a second trader agreed. "I didn't see any markets."

Overall, he said, "pretty much a muted tone" prevailed, and most levels were unchanged.

Clear Channel keeps climbing

But that was not universally the case.

Clear Channel Communications' two series of 2016 bonds remained on the upside for a third consecutive session, with its 10¾% cash-pay notes due 2016 having gained another ½ point to finish at 101¼ bid. Volume was a respectable $11 million.

Meanwhile its 11%/11¾% PIK toggle notes due 2016 were also ahead by ½ point on Wednesday to around 101 bid, although volume was just about $3 million.

Both of those issues had firmed solidly on busy volume on Monday after the San Antonio-based radio broadcaster and outdoor advertising company announced plans to offer new, higher-coupon 2021 notes in exchange for the 2016 bonds.

The 10¾% notes moved up by over 3 points on Monday on over $22 million of volume and then gained another ¼ point on Tuesday on volume of over $14 million to end at 100¾ bid.

The 11% notes rose almost 3 points on Monday on volume of over $10 million, although they had been quoted off ¼ point Tuesday at 100½ bid on volume of over $14 million.

Charter off amid merger talk

On the downside, a trader said that Charter Communications' 5¼% notes due 2022 issued by its CCO Holdings LLC unit were seen by one trader down 5/16 point around 94 5/8 bid on volume of over $11 million.

The Stamford, Conn.-based voice, cable and broadband service provider's paper eased even as Wednesday's Wall Street Journal was reporting that Charter is arranging about $25 billion of debt financing as it pursues an acquisition of bigger rival Time Warner Cable Inc.

The paper, quoting unidentified people familiar with the matter, said the debt would "[allow] it to include a hefty cash component in any offer it makes for the New York-based cable operator," which has so far spurned Charter's advances.

Little AMR movement seen

Traders saw little or no movement in AMR's bonds, or those of its American Airlines subsidiary, even with news out about the Fort Worth-based airline company's pending merger with rival US Airways Group.

While there were numerous small trades, no large-bloc transactions were seen.

A trader said that American's recently sold 5.6% notes due 2020 were at par bid, 100½ offered, but he said there had been no trading in those bonds since last week.

New York federal bankruptcy court judge Sean Lane approved the settlement of a lawsuit that had been filed several months ago by the U.S. Department of Justice and several state regulators who had raised concerns about the planned combination of the two airlines.

Lane also ruled that the merger may be consummated despite an outstanding second lawsuit against the deal that was filed by other private parties.

With the federal case now settled, AMR filed notice with the court that the proposed effective date of its plan of reorganization, which incorporates the US Airways merger, will be Dec. 9.

Market signs steady to firmer

Overall, statistical junk-market performance indicators remained unchanged to mostly higher for a third straight session on Wednesday, after having been mixed for five sessions in a row before that.

The Markit Series 21 CDX North American High Yield index was unchanged for a second consecutive session at 107 3/16 bid, 107 5/16 offered on Wednesday. Those two steady sessions followed three consecutive advances before that.

The KDP High Yield Daily index gained 3 basis points on Wednesday to end at 74.39, its third straight improvement. On Tuesday, it had firmed by 5 bps.

Its yield meantime edged downward by 1 bp to finish at 5.65%, its third straight tightening. The yield had come in 4 bps on Tuesday.

And the widely followed Merrill Lynch High Yield Master II index put up its fourth straight gain, improving by 0.061%, on top of Tuesday's 0.073% advance.

The latest gain lifted its year-to-date return to 6.76%, a third consecutive new peak level for the year, eclipsing Tuesday's 6.694% reading, which had been the previous new 2013 zenith.

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