NXP, Global A&T, Unifrax price; Talos, Ashton Woods up next; funds notch $92 million inflow

By Paul Deckelman and Paul A. Harris

New York, Jan. 31 - The high-yield primary market continued to slow down on Thursday. Syndicate sources heard that only about $1.3 billion of new dollar-denominated, junk-rated domestic or developed-country notes had priced in three tranches - down from Wednesday's more than $2.2 billion and well down from Tuesday's $5.7 billion total, the heaviest day of the new year so far.

The semiconductor industry dominated the proceedings. Netherlands-based computer chip maker NXP BV priced $500 million of eight-year notes in a quick-to-market deal. Singapore's Global A&T Electronics Ltd., a provider of assembly and testing services to semiconductor producers, did $625 million of six-year secured paper as a scheduled deal off the forward calendar.

Apart from the semiconductor sector, insulation products distributor Unifrax I LLC came to market with a downsized $205 million of six-year notes.

The day's deals priced late in the session and were not initially seen in the aftermarket.

In fact, secondary activity in even recent deals was seen somewhat restrained as investors mostly sat on their hands and tried to figure out the market's next move after several sessions in retreat. But D.R. Horton, Inc.'s new five-year notes - though not its 10-year notes - and First Data Corp.'s new eight-year notes were each seen having moved up during the session.

Junkbondland also saw a pair of euro-denominated deals price earlier in the day. One was from Swedish alarm service provider Securitas Direct AB and the other from Spanish cable television company Grupo Corporativo ONO SA.

Away from the deals that actually priced, FairPoint Communications Inc. announced plans for a $300 million secured bond deal, which is expected to price next week. Of a little more immediate importance, syndicate sources heard price talk out on deals from energy operator Talos Production LLC and from homebuilder Ashton Woods USA LLC, both of which are expected to price during Friday's session.

Statistical indicators of junk market performance were mixed on the session.

And flows of fresh cash in to and out of high-yield mutual funds and exchange-traded funds - seen as a reliable barometer for overall junk liquidity trends - notched their fourth consecutive weekly gain, according to one of the major agencies that track such fund flows.

AMG sees $92 million inflow

Late in the day on Thursday, junk market participants familiar with the fund-flow statistics generated by AMG Data Services, Inc. reported that in the week ended Wednesday, $92.29 million more came in to those funds than left them.

It was the fourth consecutive inflow seen by Arcata, Calif.-based AMG, a unit of the Lipper analytics division of Thomson Reuters Corp., including the $512 million cash addition recorded last week, ended Jan. 23. During that four-week stretch, inflows have totaled nearly $2.3 billion, according to a Prospect News analysis of the figures, about half of it attributable to the giant-sized $1.12 billion cash injection recorded in the week ended Jan. 9, the first inflow seen in the new year.

Before the figures came out, a trader said he heard that the "managed guys" - i.e., the traditional junk mutual funds - had produced a net inflow while the ETFs had produced a net outflow, mostly during the junk market's downturn on Tuesday and Wednesday of this week, "so I'll be curious to see what happens."

Five weeks into the new year, Lipper-reported 2013 net inflows have so far amounted to about $1.8 billion, according to the analysis.

The four recent inflows had followed three consecutive weeks of outflows dating back to mid-December that totaled about $1.17 billion, according to the analysis, and including the $473 million cash loss recorded in the first reporting week of the year, ended Jan. 2.

The return to positive funds-flow figures over the past few weeks is in line with the pattern of strength seen over most of last year, when cumulative net inflows for 2012 totaled an estimated $28 billion, according to the analysis, with inflows to the funds recorded in 39 weeks of the year and outflows in the remaining 13 weeks.

EPFR marks $631million inflow

Those Lipper inflows are also in line with similar cash injections recorded by the other major fund-tracking service, Cambridge, Mass.-based EPFR Global. That agency said that in the latest reporting week, also ended Wednesday, $631 million more came in to the funds that it tracks than left them.

It was the sixth consecutive inflow seen by the service, including the $615 million that came in to the funds last week. Inflows during that time, which also includes the final reporting week of 2012, have totaled about $4.4 billion, according to a Prospect News analysis of the figures.

It was also the fifth consecutive inflow seen so far in the new year, against no outflows; that net inflow total was about $4.2 billion, according to the analysis.

EPFR and Lipper calculate their respective fund-flow statistics using different methodologies; EPFR includes some non-U.S. domiciled mutual funds and ETFs in its tabulations, while the Lipper number is purely domestic funds. Despite the differences in the actual numbers, the two services' weekly results usually point in the same direction, although that was not the case as 2012 ended and 2013 opened, when EPFR was seeing net inflows and Lipper was recording net outflows.

Reporting only the U.S. funds that it tracks - a category usually more closely aligned with the Lipper totals - EPFR saw a $125 million outflow in the latest week, which had followed a $442 million cash loss the week before. It has actually seen three weekly net outflows from the U.S.-only funds since the start of the year, against just two weekly inflows, although one of those was a massive cash injection of more than $900 million in the week ended Jan. 9. That leaves a 2013 net inflow to those domestic funds of just over $500 million, according to the analysis.

In 2012, EPFR's overall figure showed a cumulative net inflow of about $72.3 billion. According to the Prospect News analysis of the data, EPFR recorded 42 weeks of inflows last year against just 10 weeks of outflows.

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 and ETFs represent but a small, though very observable and quantifiable percentage of the total amount of investor money coming into the junk market - has been seen by analysts as a key element behind the high-yield secondary market's strong performance last year versus other fixed-income asset classes and its record active new-deal pace, which easily topped the $300 billion mark - patterns of primary activity and secondary strength that have continued into the new year so far.

Global A&T comes atop talk

The dollar-denominated primary market saw $1.33 billion of proceeds raised in three tranches from three separate issuers on Thursday.

In a deal that was closely followed in the United States, Singapore-based semiconductor company Global A&T Electronics priced $625 million of six-year senior secured notes (B1/B) at par to yield 10%, on top of yield talk.

Merrill Lynch (Singapore) Pte. Ltd., Credit Suisse (Singapore) Ltd., J.P. Morgan (S.E.A.) Ltd. and UBS AG, Singapore Branch were the bookrunners for the debt refinancing.

NXP drives by

The Thursday session was replete with quick-to-market action.

Netherlands-based NXP and NXP Funding LLC priced a $500 million issue of eight-year senior notes (B3/B) at par to yield 5¾%.

Again, the yield printed on top of yield talk.

Morgan Stanley & Co. LLC, Barclays, Credit Suisse Securities (USA) LLC and KKR Capital Markets LLC were the joint bookrunners for the debt refinancing.

Unifrax, at the tight end

Among all of the dollar- and euro-denominated deals that priced Thursday - a combined total of five new issues - only one priced at the tight end of price talk.

Unifrax I priced a downsized $205 million issue of six-year senior notes (Caa1/B-) at par to yield 7½%.

Yield talk was 7½% to 7¾%.

The deal was downsized from $250 million, with proceeds shifted to the company's term loan.

Goldman Sachs & Co., Wells Fargo Securities LLC and KeyBanc Capital Markets were the joint bookrunners.

The Niagara Falls, N.Y.-based supplier of high-temperature insulation products plans to use the proceeds to repay debt and to fund an acquisition.

ONO, at a discount

In the European market, Nara Cable Funding Ltd., a financing unit of Spanish cable operator Grupo Corporativo ONO, priced a €260 million issue of 8½% seven-year senior notes (B1/B+/BB-) at 98.69 to yield 8¾%.

The yield printed at the wide end of the 8½% to 8¾% yield talk. Initial guidance was 8% to 8¾%.

Deutsche Bank, BBVA and ING were the joint global coordinators for the deal, which was upsized from €250 million.

Bankia, BNP Paribas, Merrill Lynch, Credit Agricole, JPMorgan, Santander and SG were the joint bookrunners for the debt refinancing.

Securitas taps FRN

Securitas Direct priced a €100 million add-on to its three-month Euribor plus 650 basis points series A floating-rate notes (B2/B) at 101 in a quick-to-market Thursday transaction.

Again, the deal came on top of price talk.

The relative dearth of tight pricings, which had been the rule rather than the exception leading up to Thursday's session, was not lost on one debt capital markets banker working on the East Coast of the United States.

"The market felt heavy on Wednesday and Thursday," the banker said, adding that investors seemed to be measuring the high-yield market a little more carefully than had been the case since earlier in the week, when the buyside was scrapping for decent allocations.

With respect to the Securitas tap, joint bookrunner Morgan Stanley will bill and deliver. Goldman Sachs and Nomura were also joint bookrunners.

The Malmo, Sweden-based provider of monitored home alarm equipment plans to use the proceeds to repay revolver debt.

Other European news came from England.

Nord Anglia Education Inc. plans to price a $150 million offering of five-year PIK toggle notes (Caa2/CCC+) on Friday via bookrunner Goldman Sachs.

Proceeds will be used to partially redeem the company's preferred shares.

Talking the deals

No one ruled out drive-by activity for the Friday session. However, it will get underway with just two dollar-denominated deals expected to price.

On Thursday, Talos Production and Talos Production Finance Inc. set yield talk for their $300 million offering of five-year senior notes (Caa1/CCC+) at 9¼% to 9½%.

Citigroup Global Markets Inc. is the left bookrunner. Goldman Sachs, Nomura Securities Co. Ltd. and TD Securities (USA) LLC are the joint bookrunners.

Elsewhere, Ashton Woods USA and Ashton Woods Finance Co. talked their $250 million offering of eight-year senior notes (Caa1/B-) to yield 7% to 7¼%.

JPMorgan and Wells Fargo are the joint bookrunners.

FairPoint secured deal

The Thursday session came with a single roadshow announcement.

FairPoint Communications plans to sell $300 million of 6.5-year senior secured notes in the week ahead.

Morgan Stanley, Credit Suisse Securities (USA) LLC and Jefferies & Co. Inc. are the joint bookrunners for the debt refinancing.

Day's deals are latecomers

Traders did not see any initial aftermarket activity in the three dollar-denominated deals that priced on Thursday - from NXP, Global A&T and Unifrax - due to the relative lateness of the hour when they priced.

Wednesday deals move up

There was a little bit of activity seen in some of the new issues that had come to market during Wednesday's session.

A trader quoted First Data's 11¼% notes due 2021 as having firmed to 100 1/16 bid, 100 3/16 offered - up nearly a full point from the 99¼ bid, 99¾ offered level at which he had seen those bonds trading late Wednesday.

The Atlanta-based provider of electronic transaction processing services had priced its quickly shopped $785 million issue at par earlier Wednesday, and the notes were generally seen trading around or a little below that issue price when they first moved into the secondary realm.

A market source saw one of the company's existing issues, its 12 5/8% notes due 2021, having fallen 1 1/8 points on Thursday to end at 106 3/8 bid. Round-lot volume was a busy $10 million.

A trader saw D.R. Horton's 3 5/8% notes due 2018 having pushed up to 101 bid, 101½ offered when they began trading on Thursday.

The Fort Worth-based homebuilder had priced $400 million of those bonds at par on Wednesday, too late to really trade at that time.

Those five-year notes were part of a larger, $700 million two-part drive-by transaction from Horton, which also included $300 million of 4¾% notes due 2023 that priced at par. Unlike the strength shown by the five-year paper, the trader saw those 10-years anchored around their issue price at 99¾ bid, 100¼ offered.

Uncertainty rules

A trader said that the last session of the first month of the new year "was a boring day on both sides, secondary as well as primary. People didn't really feel like doing very much of anything."

He opined that "for today's price action, while the market felt like it might be lower, you couldn't buy any paper."

He theorized that "there's some uncertainty about the direction of interest rates" given the recent back-up in Treasuries. The 10-year government notes, which had been yielding about 1.85% a week ago, were quoted going home on Thursday yielding 1.98%, although that was little changed on the day as investors awaited Friday morning's release by the Labor Department of job-creation and unemployment-rate data for January.

He added that "there's also some uncertainty over whether spreads will continue to tighten or reverse themselves from here - so people were a little leery of putting on any aggressive trades today, so everybody sat on their hands."

The junk market's spread-to-worst over comparable Treasuries, as measured by the widely followed Merrill Lynch U.S. High Yield Master II index, has tightened smartly to around 481 bps as of the close on Wednesday, from the 523 bps over recorded on the last day of 2012, although over the past several sessions, it has backed up a little from its 2013 low of 474 bps over.

Noting the accompanying fall over the past few sessions in the Merrill Lynch index's year-to-date return, which finished at 1.634% on Wednesday, versus Monday's 2013 peak level of 1.991%, the trader suggested that with most observers anticipating a total gain for this year of around 5% to 7%, "we could flat-line for a month or two at current levels and still be on track to return 6% to 7%."

Market measures turn mixed

Overall, statistical junk market performance indicators were mixed on the day after having been decidedly lower over the previous three sessions.

The Markit Series 19 CDX North American High Yield index gained 1/8 point on Thursday to end at 102 1/8 bid, 102 3/8 offered after having lost 21/32 point on Wednesday, its third consecutive loss.

But the KDP High Yield Daily index continued to struggle, ending lower for a fourth straight session as it plunged 25 bps to 75.66, on top of Wednesday's 17-bps retreat.

Its yield rose by 7 bps on Thursday to 5.55%, its fourth straight increase, after having widened by 6 bps on Wednesday.

Cristal Cody contributed to this review

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