Stillwell Mining shops deal; new Sealed Air trades up solidly amid otherwise uneventful market

By Paul Deckelman and Paul A. Harris

New York, Sept. 19 - With the long-awaited and eagerly anticipated Sealed Air Corp. megadeal now successfully launched and trading around in the aftermarket, things got back to business as usual in the high-yield primary sphere on Monday as the focus shifted to smaller, less-spectacular deals.

Stillwater Mining Co., a precious metals company, was heard by syndicate sources to be hitting the road this week to market a $300 million issue of five-year notes, with pricing expected later this week.

From Europe came word that German equipment-rental concern Albis Leasing AG is offering a small tranche of five-year euro-denominated notes.

The $1.5 billion, two-part Sealed Air deal, which priced on Friday afternoon and then moved up in initial aftermarket dealings, was seen by traders to have firmed even further in Monday's dealings, as what were being described as inadequate allocations of the heavily oversubscribed offering of the new bonds helped to drive demand.

Also among recently priced offerings, Omnicare, Inc.'s new offering, which also priced last week and then moved up initially, was seen having firmed further.

Traders otherwise saw not much going on in the secondary market amid general investor hesitancy, following the lead of equities, which moved lower for the first time in six sessions. Statistical indicators of Junkbondland performance trended lower with the reduced volume.

Stillwater brings five-years

No issues priced during the Monday primary market session, as volatility driven by the ongoing credit situation in the euro zone reasserted its influence upon the global markets.

There were announcements, however, including Stillwater, which began marketing its $300 million offering of five-year senior notes via bookrunner Deutsche Bank Securities.

Pricing is expected late in the present week following an investor roadshow.

The Billings, Mont.-based palladium and platinum producer plans to use the proceeds, together with cash on hand, to fund the cash portion of the acquisition of Peregrine Metals Ltd. The remaining proceeds will be used to advance existing development and expansion projects and for other general corporate purposes.

Albis euro deal

Albis Leasing pitched an offering of up to €50 million of 7 5/8% five-year notes to both institutional accounts and retail investors in a Monday press release.

A subscription period for the unrated high-yield notes ends on Sept. 30.

Investors may subscribe via agents Cortal Consors, DAB Bank AG, Flatex AG and ViTrade, or via the homepages of the company or the Hamburg Stock Exchange.

The company plans to list the notes on the SME market exchanges of Hamburg and Hanover on Oct. 4.

The Hamburg-based company plans to use the proceeds to strengthen its capital base.

Albis notwithstanding, it remains to be seen whether the euro-denominated high-yield new issue market is presently open, sources say.

Since the beginning of September, only one euro-denominated tranche has been priced.

Fresenius Medical Care AG priced €400 million of 6½% senior notes due in 2018 on Sept. 8.

More recently, Sealed Air abandoned up to €500 million of senior notes originally contemplated as part of an overall $1.5 billion equivalent of junk bond financing backing the acquisition of Diversey Holdings Inc.

Sealed Air ultimately came with a $1.5 billion all-dollar two-part deal priced late last week. It was said to have played to a $4 billion order book.

The Sealed Air euro tranche failed to materialize because while the high-yield market in the United States is perceived as being open, the European market remains relatively untested since the sell-off, which got under way in late July, according to a London-based banker who was in the Sealed Air syndicate.

Window-to-window primary

In addition to the above-mentioned Stillwater Mining deal, there is one other dollar-denominated offering on the active calendar.

Avis Budget Group is marketing a $250 million offering of senior notes due in March 2020 via Morgan Stanley, Citigroup, Credit Agricole, RBS and Scotia Capital.

The deal is set to price late in the present week. However, had last week's rally held into the Monday session, the deal might actually have priced on Monday, according to a trader from a high-yield mutual fund who is following the situation.

This scenario made sense to a high-yield capital markets banker not in the Avis Budget deal.

"In a market like this, you would be crazy not to price the deal the minute you have a book together," the official said.

Issuance in the near-to-intermediate term will likely be somewhat muted and nothing like the torrid primary market pace seen in the first half of the year, the sellsider added.

In a couple of weeks, the quarter will end and there will be an issuance blackout as financial numbers become refreshed.

After that, during the run-up to 2012, new issue activity is apt to resemble that seen in late 2007 and early 2008, during which there will be windows of opportunity allowing issuers to make an approach.

"Everybody has a bunch of deals that they could bring, and they are monitoring the market day to day looking for an opportunity," the sellsider said, referring to the dealers.

Right now the market is definitely open for high quality issuers, the banker said, adding that such issuers are probably going to pay a concession of between 35 basis points and 75 bps to present market volatility.

"You can certainly understand how an opportunistic issuer might decide to stay on the sidelines and wait for more favorable conditions," the syndicate banker said.

"The assumption there is that conditions will improve by the time they actually need to come, which of course may or may not happen."

New Sealed Air in focus

A secondary market trader said that overall there was "not a lot of volume" and that the most active name was the new $1.5 billion two-part offering from Sealed Air, which priced on Friday afternoon at par for both tranches, when then moved up when those eagerly anticipated bonds were freed to trade.

Both the Elmwood Park, N.J.-based plastic packaging products maker's $750 million of 8 1/8% notes due 2019 and its $750 million of 8 3/8% notes due 2021 pushed up to 101¾ bid, 102¼ offered late Friday after their respective par pricings.

On Monday, the trader said that he saw the bonds start the morning around a 1013/4-102ish context, and then both tranches moved up to trade in a bid range between 102¼ and 102 3/8. He saw them going home at the latter figure, the high of the days.

A second trader saw the bonds get even better than that, with the eight-year notes going home at 102 5/8 bid, 103 1/8 offered, while the 10-years were finishing at 102¾ bid, 103¼ offered.

A trader at another desk said that at his shop, "we just quoted it here; we didn't trade it."

The first trader said that it seemed to him that "everybody pretty much got cut back on their allocations," not surprising since the $1.5 billion issue played to a book of more than $4 billion, making it impossible for everyone to get the amount of bonds requested.

With many buyers getting only relatively small pieces, he said, "If you had some pieces that weren't quite enough for a core position, people were flipping out of them."

They did find ready buyers among accounts that wanted to increase their positions in those bonds.

He added, however, that "not a lot of people selling... interesting."

Omnicare offering improves

Also among the recently issued bonds, Omnicare Inc.'s 7¾% notes due 2020 were seen having moved up to above the 103 bid level, although they finished below their peak level of 103½ bid.

The Covington, Ky.-based pharmaceutical services company priced its $150 million add-on issue on Thursday at 100.25 to yield 7.698%.

The issue - upsized from the $100 million originally planned - had moved solidly higher in Thursday's relatively thin immediate aftermarket dealings, back up to around 100½ bid, 102½ offered, and on Friday, the bonds advanced further still, to around 102 bid, 102½ offered at the end of the day.

Market indicators turn lower

Traders said that activity in the new Sealed Air issue was about the only real, identifiable trend in the market. Everything else was nebulous and on limited activity, with dollar-volumes on Monday having fallen more than 22% from Friday's levels.

Overall, statistical measures of market performance, after turning mixed on Friday from strong showings on Wednesday and Thursday, went a step further on Monday and headed for the downside.

A trader said the CDX North American Series 16 HY Index was down by¼ point on Monday at 93¼ bid, 93½ offered, after having eased by 1/8 point on Friday.

The KDP High Yield Daily Index declined by 3 basis points on Monday to end at 72.06, after having risen by that same amount on Friday. Its yield went up by 2 bps on Monday, to 7.86%. after having edged downward by 1 bp on Friday.

The Merrill Lynch U.S. High Yield Master II Index fell by 0.107% on Monday - its first loss after trending upward the previous three sessions, including Friday, when it gained 0.176.

The loss Monday left the index's year-to-date return at 1.542%, down from Friday's 1.651% gain. That cumulative return remains well below the peak level for the year of 6.362% set on July 26.

Quiet start to the week

A trader opined that it was "a pretty quiet day today on my end of the world. Even Trace was pretty inactive.

"I really didn't see a whole lot of activity."

A trader at another shop suggested that "a lot of guys are not putting risk on the table right now. They're kind just waiting and seeing what goes on in Europe. Everybody's just trading around their little positions here and there, cutting some fat where they have to.

"We really don't have any major focuses here, primarily. For many accounts, just a little housekeeping" was all that was going on, the trader added.

"I wish we had more volume going on - but it's kind of light out there, sparse."

He continued: "We need more direction to trade in this market. It's a tough trading environment right now in the secondary."

Sentiment was not helped by a fall in equities, the first after five straight upside sessions.

With new fears of a Greek default once more occupying stock investors, the bellwether Dow Jones Industrial Average - up more than 75 points on Friday to close out its second best week in a year - gave all of those gains back and then some to end down 108.08 points, or 0.94%, at 11,401.01. Broader indexes such as the Standard & Poor's 500 and the Nasdaq Composite, followed suit, losing 0.98% and 0.36%, respectively.

Benchmark names head down

Among the big, familiar widely traded benchmark names, a trader said that Ford Motor Co.'s 7.45% bonds due 2031, which had firmed smartly over several sessions last week as bond investors were heartened by the Dearborn, Mich.-based No. 2 carmaker's plans for further debt-cutting, were down by three-quarters of a point on Monday, to 112½ bid, 113½ offered.

Franklin, Tenn.-based hospital operator Community Health Systems Inc.'s 9 7/8% senior secured notes due 2015 lost a quarter-point, to 100¾ bid, 101¼ offered.

Las Vegas-based gaming giant Caesars Entertainment Holding Co. 's 10% notes due 2018 were a half-point lower, at 72 bid.

AGY mystery continues

A high-yield trader said that the "the only interesting thing" that he was seeing in Monday's market,, aside from the trading of Sealed Air's new bond deal, was AGY Holding Corp.'s 11% notes due 2014, which had gyrated around wildly last week with no one offering an explanation.

He said that the normally little-traded bonds, which last week had plunged as low as 25 bid on Wednesday from recently quoted levels around 91 bid, only to come back the following day to climb back up to around the 51 mark, climbed again on Monday, to a 61-63 context. He said a couple of million dollars of the bonds had traded.

"I don't know who did it, but it was a nice trade," he said.

Another trader saw two trades on Monday, one at 61 bid and the other at 63.

"It was size-type of trades," he said, adding that the 61-63 context was where they were, and the 61 was up 11 points from their levels at the end of last week.

Traders queried by Prospect News remain baffled by the volatile movement in the bonds of the Aiken, S.C.-based maker of fiberglass yarns and other specialty glass products, particularly since there has been no fresh news seen out on the company and no announcements from them. Several phonecalls and e-mails to AGY were not answered.

Travelport trades up

Travelport Ltd.'s 9 7/8% notes due 2014 gained five-eighths of a point to close at 80 bid, recovering some of the ground which they lost last week after Standard & Poor's lowered its ratings on the Atlanta-based provider of transaction processing services to the travel industry to CCC, citing increased liquidity risk concerns over the upcoming maturity of its $693 million payment-in-kind loan at Travelport Holdings due in March 2012.

Over $10 million of the bonds had traded at mid-afternoon, making it one of the busier issues of the day in the high-yield world.

Travelport on Monday held a lender call with its banks on restructuring that 2012 PIK debt and extending the maturity of its revolving credit facility for two years in exchange for higher pricing on the revolver.

Dynegy activity dwindles

A trader said that Dynegy Holdings Inc.'s 7¾% notes due 2019, were trading down at 63½ bid, with "a couple of million" having changed hands. He called the Houston-based power generation company's issue down a half-point on the day.

Another trader said that he saw "not much activity" in the 73/4s, with a few trades right around the 63½ bid level, down a half-point on "not much volume."

The trader saw "no activity at all" in the company's 7½% notes due 2015 and no activity in its 8 3/8% notes due 2016.

"I just didn't see much volume an action in the name."

That was in sharp contrast to Friday's session, which saw Dynegy near the top of the high-yield most-actives list on the news that the company was offering to exchange new debt plus cash for up to $1.25 billion of its existing bonds, though at a deep discount to the existing bonds' face value.

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