Sirius, Graphic Packaging, NII price deals, DISH terms emerge; funds gain $713 million, seventh inflow

By Paul Deckelman

New York, Aug. 13 - There was just no stopping the high yield primary market again on Thursday as the busy primary week continued to roll on, with pricings for three more deals - NII Capital Corp., Sirius XM Radio Inc. and Graphic Packaging International Inc. - collectively totaling over $1 billion.

Terms also emerged on the $1 billion offering which DISH Network Corp. had priced on Wednesday night, well after that day's trading had come to an end.

And chemical and ammunition maker Olin Corp. was heard shopping a smallish deal around; pricing Friday was seen as possible, although by no means a certainty.

When the new Sirius deal, and NII, hit the secondary market, they were each seen to have moved up by 1½ to 2 points to above the 99 level. However the giant DISH deal was only heard to be straddling its issue price several points below par. From earlier in the week, Brunswick Corp.'s new offering continued to hang onto the strong gains it had notched - gains which took the bonds well over par, after having priced several points below that.

Secondary market activity was still muted, with the dazzling parade of new deals continuing to hold most participants' attention, but activity in the non-new-deal sphere did pick up a little from earlier in the week.

Junk funds up $713 million, seventh straight gain

And as trading was finishing up for the session, market participants familiar with the high yield mutual fund flow statistics generated by AMG Data Services of Arcata, Calif. - a key barometer of overall market liquidity trends - said that in the week ended Wednesday some $713 million more came into weekly-reporting funds than left them.

It was the seventh straight inflow, continuing the trend seen in the previous week, ended Wednesday Aug. 5, when there was a $688.6 million net inflow to the funds. A net of $3.549 billion has come into the funds over those past seven weeks. Including the latest week's total, inflows have now been seen in 21 weeks out of the last 22, according to a Prospect News analysis of the AMG numbers, totaling $12.539 billion during that long stretch. Before the most recent seven weeks, the funds had seen a rare outflow of $110.1 million in the week ended June 24 - and before that, an incredible 14-week stretch of consecutive inflows, dating back to mid-March, during which time the funds grew by a record $9.1 billion.

With the year's second half now well underway, inflows have been seen in 28 of the 32 weeks since the beginning of the year, versus just four weeks of outflows - the one seen in the June 24 week, plus three weeks of fund losses in late February and early March that totaled some $996 million, according to the analysis. Counting the latest week's inflow number, the year-to-date net inflow for the weekly-reporting funds rose to $15.103 billion - a new peak level for the year so far, up from the old zenith of $14.39 billion seen in the previous week.

A market source also said that in the latest week, flows into and out of the funds which report on a monthly basis rather than doing so weekly rose by $148.8 million, following the previous week's $250.1 million inflow. That cash infusion lifted the year-to-date cumulative inflow for such funds to $10.113 billion from the previous week's $9.964 billion total.

The source further said that on an aggregate basis, consolidating the inflows for the weekly and the monthly reporting funds, a total of $25.216 billion more has come into the funds so far this year than has left them, well up from $24.354 billion the week before.

Those sustained inflows have helped the junk market bounce back nicely from last year's staggering 25%-plus loss and sharply reduced primary activity totals. Total returns so far this year continue to impress - they remained around an astonishing 39%-40% context as of the close Wednesday - handily beating virtually every other major asset class. Meanwhile, the $84.127 billion of new high yield debt issued so far this year globally, as of Wednesday's close -- $69 billion of it domestic - is running almost 38% ahead of the anemic pace of last year's primary tally. Domestic new issuance is almost 43% ahead of its year-ago levels.

All cumulative fund-flow totals can include unannounced revisions and adjustments to figures from prior weeks.

The flow of money into and out of the junk bond funds is seen as a generally reliable market barometer of overall high yield market liquidity trends - although they comprise less of the total monies floating around the high yield universe than they used to - because there is no similar reporting mechanism to accurately track the movements of cash coming into the junk market from other, larger sources seen in recent years such as insurance companies, pension funds and hedge funds.

A record-setting week

With the $1.215 billion proceeds which priced in Thursday's three deals for NII Holdings, Sirius and Graphic Packaging, the current week's $8.209 billion total solidified its claim to being the busiest in terms of dollar amount of new issue proceeds so far this year.

Just through Wednesday alone, $6.993 billion of new paper had priced, including the DISH deal. There had been $1.921 billion of new paper priced Monday, an astounding $3.56 billion on Tuesday, and another $1.51 billion on Wednesday. Thursday's pricings boosted the week's total so far to $8.209 billion - and further drive-by pricings are possible on Friday, although the forward calendar of scheduled new deals has been pretty much swept bare, but for the $150 million offering launched by Olin Corp.

Even if nothing further prices on Friday, this week has already eclipsed the previous high-water mark for the year, the week of May 11 to 15, when $7.83 billion of new bonds came to market. That week was one of a cluster of three in early-mid May which saw an astoundingly robust pace of new issuance -- $7.652 billion in the week of May 4 to 8, and $6.287 billion the week of May 18-22.

DISH gets its wish

When early-bird market participants hit the office Thursday and switched on their screens, they learned that DISH Network - which had been expected to price its $1 billion 10-year offering (Ba3/BB-) on Wednesday after the order books closed, had in fact done precisely that, although the actual pricing did not surface during the trading hours. Terms emerged piecemeal on Thursday.

Those 7.875% notes due Sept. 1, 2019 priced at 97.467 to yield 8¼%, -- at the wide end of pre-deal market price talk projecting a yield in the 8% to 8¼% range, and the issue price was cheap versus market expectations of around 1½ points of original issue discount.

The quickly-shopped Rule 144A/Regulation S mega-deal - which priced the same day that the company had announced the issue - was brought to market by bookrunner Deutsche Bank Securities, Inc.

Englewood Colo.-based DISH Network, the second-largest U.S. satellite TV provider behind DirecTV Group Inc., plans to use the bond offering's proceeds for general corporate purposes, which it did not specify.

NII Capital comes to market

With the DISH pricing finally out of the way, market participants could turn their attention to other deals, among them a scheduled calendar offering from NII Capital Corp., a unit of NII Holdings - the former Nextel International, a provider of telecommunications service to Latin America.

The Reston, Va.-based company priced an $800 million offering of seven-year senior notes (B1/BB-) - upsized from the $500 million previously planned.

The 10% notes due Aug. 15, 2016 priced at 97.568 to yield 10½% -- at the wide end of price talk envisioning a yield of between 10¼% and 10½%.

The Rule 144A and Regulation S deal, being sold with registration rights, was brought to market via bookrunners Morgan Stanley & Co., Inc. and J.P. Morgan Securities Inc.

NII plans to use the deal proceeds for general corporate purposes.

A secured deal for Sirius

New York-based satellite radio broadcaster Sirius XM Radio priced a $257 million offering of senior secured notes (Caa2/B+), with the 9% notes due Sept. 1, 2015 coming in at 97.248 to yield 10 3/8% -- in the middle of talk calling for a yield of 10¼% to 10½%, and also in line with market expectations of between 2 and 3 points of original issue discount.

The slight upsizing of the bond issue to $257 million let Sirius reap proceeds of just under $250 million, the size of the deal which the company had announced late Wednesday.

The Rule 144A for life/Regulation S deal was brought to market via bookrunner J.P. Morgan.

Sirius XM - created out of the merger of its eponymous former arch-rivals - is now the sole provider of satellite radio broadcasting service to the listening public - which still has not kept the company out of some financial difficulty, as it has struggled to carve a workable, profitable niche for itself against such competing entertainment sources as traditional terrestrial radio broadcasters and the proliferation of devices like iPods that threaten to take market share from radio and render Sirius XM's paid-subscriber business model untenable. The sharp downturn in the sale of cars - Sirius is heavily dependent on factory installations of its receivers in new vehicles - is another headache.

Things got so bad for Sirius earlier this year that it faced a default on an issue of convertible notes that were coming due in mid-February. Sirius avoided that consequence with the help of a timely $530 million loan from Liberty Media Corp. Proceeds of the bond deal will go to repay certain debt incurred as part of that transaction.

Graphic grabs additional money

The day's other bond deal came from Graphic Packaging International, which priced a $180 million add-on to its existing 9½% senior notes due 2017 (B3/B-). Those bonds priced at 103 for a yield-to-worst of 8.825%. The company said the issue would have an effective yield to maturity of approximately 8.95%.

The deal came at the pre-deal market talk of a 103 price, and produced proceeds of $185.4 million.

The new deal brings the total amount of those 9½% 2017 notes up to $425 million. Graphic Packaging priced the original $245 million of bonds on June 2 at 97.292, to yield 10%, and with a spread over comparable Treasury issues of 665 basis points - in contrast to the 546 bps spread on the add-on bonds, an indication of the robust spread tightening which the junk bond market has recently been seeing.

The add-on was a quickly marketed drive-by deal, pricing just hours after the company had first announced it.

The Rule 144A, with registration rights/ Regulation S deal was brought to market via bookrunner Bank of America Merrill Lynch.

The Marietta, Ga.-based producer of packaging for various consumer products and industrial applications, will use the deal proceeds to redeem its $180 million of outstanding 8½% senior notes due 2011, which the company called on Thursday. The redemption will take place on Sept. 13.

Olin deal could come Friday - or not

Elsewhere in the primary sphere, Olin Corp., a Clayton, Mo.-based manufacturer of chemicals and small-caliber ammunition for firearms, announced plans to bring a $150 million issue of 10-year senior notes to market via a public offering registered with the Securities and Exchange Commission.

A primary market source said the roadshow for the offering began Thursday with an investor luncheon and would continue on Friday - but declined to predict whether the notes might be priced on Friday.

The deal will be brought to market via bookrunners Citigroup Global Markets Inc. and Bank of America Merrill Lynch.

Olin said it is pursing the bond deal to strengthen its long-term liquidity "given uncertain economic times." It will also use part of the proceeds to prefund a debt maturity in 2011.

Some new bonds sizzle...

Much of the activity in the secondary market consisted of trading in the bonds of the new issues once they were freed for such aftermarket dealings.

A trader saw the new Sirius 9¾% notes due 2015 having gotten as good as 99¼ bid, 99 7/8 offered - well up from the 97.248 level at which those bonds had priced earlier in the session to yield 10 3/8%.

Another trader pegged the Sirius notes at 99 bid, par offered.

Another gainer in the aftermarket was the new issue from NII Holdings. A trader saw those bonds, which had priced at 97.568 to yield 10½%, as having broken at 98-99, and then having moved further from there. By the day's end, he saw those bonds at 99 bid, 99½ offered.

Another trader meantime saw the bonds at 98½ bid, 99 offered.

And the new Brunswick Corp. 11¼% notes due 2016, which had priced 97.036 to yield 11 7/8%, and which then had moved up almost immediately by around 3 or 4 points, were still hovering at 101½ bid, 102 offered.

At another desk, a trader agreed that the Lake Forest, Ill.-based recreational product maker's new notes had turned in "a stellar performance."

However, another trader was not so certain, noting several recent deals which like the Brunswick bonds had zoomed in secondary - for instance, last week's Affinia Group, Inc. issue of 10¾% notes due 2016. Those bonds had come at 98.799 to yield 11% -- and had then promptly moved up to above the 102 level. He suggested that the bonds had been priced way too cheaply - not necessarily in terms of their dollar price, but in terms of having such a relatively fat coupon.

"Come on - any time you have an immediate 4 point pop in an issue after it prices - it means the issuer is either clueless, or desperate [to accept such pricing terms] - or both."

...While others fizzle

But not all of the new issues had instant cachet with the aftermarket. Case in point was the new DISH Network deal. While that $1 billion of 7 7/8% notes due 2019 had priced at 97.467, to yield 8¼%, a market source saw them trading late Thursday at 97¼ bid, 97¾ offered. A trader at another shop confirmed that quote.

Another trader saw one of the week's other mega-deals - farm equipment maker Case New Holland Inc.'s $1 billion of 7¾% notes due 2013, which priced on Tuesday at 97.062 to yield 8 5/8%, continuing to hold in the 97-97½ area.

Market indicators seen mixed

Back among the more established issues, secondary traders saw a mostly quiet market.

"It was a little boring in these names," one said. "There was not much volume."

However, another trader said that the non-new deal secondary "hung in there," and saw some buying.

The CDX Series 12 High Yield index, after having fallen more than a point on Tuesday and then staying at that level on Wednesday, was back on the slide Thursday, a trader said, seeing the market gauge down 3/8 point at 88 7/8 bid, 89 38 offered.

The KDP High Yield Daily Index, which lost 38 basis points on Wednesday, was virtually unchanged on Thursday, down 2 bps to 66.63, while its yield - which had gapped out by 15 bps on Wednesday - was also about unchanged on Thursday at 9.16%.

In the broader market, advancing issues - which had led declining issues for a 19th straight session on Wednesday - hung in there on Thursday, expanding their small lead over the laggards to about a 12-to-11 ratio.

CIT short bonds continue gains

A trader saw CIT Group Inc.'s floating-rate notes that come due on Monday trading in a 97-99 context, up from the mid-90s levels that the bonds had been holding, adding that "there's always volume in that stuff." He said the bonds were ending around 97.

The company is tendering for those bonds at 871/2, but traders have suggested they are trading higher because some holders plan not to tender the bonds in that offer, which expires Friday, but instead assume that they will be paid off at par on Monday.

Meanwhile, the New York-based commercial lender's 7¾% notes due 2012 were "still hanging around 60," seeing them Thursday in a 58-60 range, on "some volume, a decent amount." He said that they had been around the high 50s-60 area "for the last few days. It's still hanging in that range."

Realogy steadies after retreat

After Wednesday's slide in Realogy Corp. bonds, on investor fears that the Parsippany, N.J.-based real estate sales company may find itself in breach of its credit facility covenants relating to total leverage ratios, a trader saw its 12 3/8% notes due 2015 around 38.5 bid.

He said he was 'not seeing much volume in the longer stuff - the paper in the high 30s and low 40s." He saw the 11% notes due 2014 staying around 46, on maybe "one trade or two," while the 10½% notes due 2014 were at 55-57, which he said also seemed "largely unchanged."

Rite Aid steady too

Rite Aid Corp.'s bonds - which on Wednesday had been quoted down multiple points, though for no immediately apparent reason - were relatively inactive on Thursday, with a trader seeing its 10 3/8% notes due 2016 unchanged at 96, on "no real volume," while the Camp Hill. Pa.-based drugstore chain operator's 9 3/8% notes due 2015 were also unchanged on not much volume, "blah, blah, blah, blah, blah," he added.

Auto benchmarks largely unmoved

A trader said that General Motors Corp.'s benchmark 8 3/8% bonds due 2033 were "off the top a little bit," seeing them finishing around 15-16, which he called "sort of in the same range, maybe a little easier." However, he said that the issue was "really just quoted there - there was no volume in that."

Another trader also saw those bonds at 15 bid, 16 offered, characterizing them as down ¼ point.

GM domestic arch-rival Ford Motor Co.'s 7.45% bonds due 2031 were seen by a trader at 77 bid, 79 offered, "still where they [have been], not much activity there."

At another desk, a trader saw the Ford long bonds down a point at 76 bid, 77 offered.

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