Cequel, Select Medical, Alere deals drive by in $2.2 billion session; Ball Corp. eases; calendar builds

By Paul Deckelman and Paul A. Harris

New York, May 13 - The high-yield primary sphere on Monday resumed the brisk pace seen last week, as more than $2.2 billion of new U.S. dollar-denominated, junk-rated paper from domestic or industrialized-country issuers was heard by syndicate sources to have come to market.

Most of the new issuance was in the form of quick-to-market same-day deals brought by opportunistic issuers.

Cable operator Cequel Communications Holdings I, LLC had the big deal of the day with $750 million of eight-year notes.

Out of the health care sector came a par of drive-by deals. Hospital and outpatient clinic operator Select Medical Corp. did an upsized $600 million of eight-year notes, while Alere Corp., which provides patient diagnostic, monitoring and health management services, got a $425 million seven-year subordinated deal done.

The sole non-drive-by issue was from Australian mining contractor Barminco Holdings Pty Ltd. Its financial unit completed a downsized $480 million of five-year notes.

While the Cequel and Select Medical deals were seen little moved from their issue price, traders saw Alere's new notes push upward when it was freed for secondary activity.

Also in the secondary market, packaging manufacturer Ball Corp.'s recent megadeal was actively traded, but was seen by market participants continuing to struggle.

Away from the deals actually priced, syndicate sources saw a whole slew of upcoming new issues announced, including a deal for junk issuer Bon-Ton Department Stores, Inc., which will use proceeds from its offering to fund a tender offer for the retailer's existing notes.

The overall market remained weaker, carrying over the trend seen at the end of last week. Statistical measures of market performance fell across the board for a second consecutive session.

Cequel $750 million drive-by

Four issuers, each one bringing a single tranche of notes, raised a combined total of $2.26 billion on Monday.

Three of the four deals came quick to market.

Cequel Communications Holdings and Cequel Capital Corp. priced a $750 million issue of senior notes due Dec. 15, 2021 (B3/B-) at par to yield 5 1/8%.

The yield printed in the middle of the 5% to 5¼% yield talk.

Credit Suisse, Goldman Sachs, J.P. Morgan, RBC and SunTrust Robinson were the joint bookrunners for the quick-to-market debt refinancing deal.

Select Medical upsizes

In other drive-by action, Select Medical priced an upsized $600 million issue of eight-year senior notes (B3/B-) at par to yield 6 3/8%.

The deal was upsized from $500 million.

The yield printed at the tight end of yield talk set in the 6½% area.

J.P. Morgan, Goldman Sachs, BofA Merrill Lynch, Morgan Stanley, RBC and Wells Fargo were the joint bookrunners for the debt refinancing.

Barminco restructures

Australian mining contractor Barminco Finance priced a downsized $485 million issue of five-year senior notes (B1/B-) at par to yield 9%.

The deal was downsized from $500 million.

The yield printed at the tight end of the 9% to 9¼% yield talk.

The deal, which launched as a five-year senior note with two years of call protection, was restructured into a five-year bullet and a three-year 50% equity clawback was added.

J.P. Morgan, Goldman Sachs and HSBC were the joint bookrunners.

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

Alere at the tight end

Alere priced a $425 million issue of 6½% seven-year senior subordinated notes (Caa1/CCC+) at par to yield 6½%.

The yield printed at the tight end of the 6½% to 6¾% yield talk.

Goldman Sachs, Jefferies and Credit Suisse were the joint bookrunners for the quick-to-market debt refinancing deal.

Frigo prices €250 million

In the European market, Frigoglass SAIC priced €250 million five-year notes at par to yield 8¼%.

The yield printed at the tight end of the 8¼% to 8½% yield talk.

Citigroup and HSBC were the bookrunners for the deal for the debt refinancing.

Murray Energy eight-years

Monday saw a healthy buildup of the active forward calendar, as market sources forecast a busy week ahead in the primary market.

Murray Energy Corp. plans to price a $400 million issue of eight-year senior secured second-lien notes (Caa1/B) before the end of the week.

Goldman Sachs has the books.

The St. Clairsville, Ohio-based coal company plans to use the proceeds to refinance debt.

Builders roadshow

Builders FirstSource, Inc. began a roadshow on Monday for its $350 million offering of eight-year senior secured notes.

The deal is set to price later this week.

Credit Suisse, Citigroup and SunTrust are the joint bookrunners for the debt refinancing.

Getco-Knight merger

Bonds backing the merger of Getco with Knight Capital Group Inc. came into the market on Monday.

The $305 million offer of five-year senior secured notes is expected to price during the May 20 week.

Jefferies and Goldman Sachs are the joint bookrunners.

Proceeds, together with a new credit facility, will be used to refinance debt and finance the merger between Knight Capital and Getco.

Bon-Ton starts Tuesday

Bon-Ton Department Stores plans to start a roadshow on Tuesday for its $300 million offering of eight-year second-lien senior secured notes (existing ratings Caa1/B-).

The deal is set to price late this week.

BofA Merrill Lynch, Credit Suisse and Goldman Sachs are the joint bookrunners for the debt refinancing deal.

StoneMor starts roadshow

StoneMor Partners LP and its subsidiary, Cornerstone Family Services of West Virginia, Inc., began a roadshow on Monday for a $175 million offering of eight-year senior notes.

The deal is expected to price before the end of the week.

BofA Merrill Lynch is the sole bookrunner.

The Levittown, Pa.-based cemetery and funeral services provider plans to use the proceeds to fund the tender for its 10¼% senior notes due 2017.

Neenah eight-year deal

Neenah Paper, Inc. began a roadshow on Monday for a $175 million offering of eight-year senior notes.

The deal is expected to price on Thursday.

Goldman Sachs, J.P. Morgan and Credit Suisse are the joint bookrunners.

The Alpharetta, Ga.-based producer of paper and technical products plans to use the proceeds to redeem its 7 3/8% senior notes due 2014, repay its revolver and for general corporate purposes.

Cooper-Standard tap

Cooper-Standard Holdings Inc. announced that it is planning a $25 million add-on to its 7 3/8%/8 1/8% senior PIK toggle notes due April 1, 2018.

Proceeds will be used for general corporate purposes, including funding share repurchases and making capital contributions to Cooper-Standard Automotive Inc.

The original $175 million issue priced at 99.5 on March 19, 2013.

New Ball Corp. stalls

A trader said that Monday's secondary market "was weaker today in the tighter end - the richer end of the market - the higher-quality credits struggling to maintain their spreads with the 10-year [Treasury note] backing up."

One such casualty, he said, was Ball Corp.'s new 4% notes due 2023. The Broomfield, Colo.-based packaging manufacturer had brought a quickly shopped $1 billion offering of those notes to market on Thursday, pricing the deal at par after having upsized it from the originally announced $600 million.

Despite initial investor enthusiasm for the deal causing it to be so massively upsized and letting the company and its underwriters price the transaction on the tight side of its already parsimonious 4 1/8% yield talk, the new bonds, while actively traded in the aftermarket, have lost ground.

Almost $90 million of the new notes were seen to have changed hands on Thursday, right after the deal priced, and levels mostly held to just a little below the par issue price. There was another $70 million traded on Friday, a market source said, and again, the notes eased only slightly, to around the 99 7/8 level at the close.

But on Monday, even though volume fell to a respectable, though not great, $23 million, the bonds' price slid by more than a full point, going home at 98 5/8 bid. A second market source pegged the bonds at 98¾ bid, while a third saw them between 98½ bid and 99 offered.

One of the trader said that the Ball Corp. bonds were suffering the impact of "having pushed the bonds [down to the 4% pricing level] on Thursday and having rates back up while they were doing it."

Her saw the bonds trading at 98¾% to yield 220 basis points over comparable Treasuries, "the spread that it came at."

He observed that, as a general principle, "when rates back up by 15 or 20 bps on an average high-yield bond, which is like 500 [bps] off, it doesn't matter. But when it's like 200 [bps] off, it matters."

As a result of this phenomenon, he continued, "where it's the tightest, you probably have the biggest drop in the market, while at the lower-quality end, there really hasn't been a lot of selling and bids are still there. They may back off initially, but bonds aren't chasing those bids."

A second trader agreed that while the Ball Corp. bonds were down a full point on the day at his shop, Thursday's deal from Claire's Stores Inc. was only off by a quarter-point on the day - and it was still trading as high as 102½ bid, 102¾ offered

The Hoffman Estates, Ill.-based specialty retailer $320 million of quickly shopped 7¾% notes due 2020 at par on Thursday. The new bonds jumped to around 102½ to 103 bid when they hit the aftermarket, and they continued to hit levels around 103 on Friday despite an overall weaker market.

New Alere bonds improve

Among the deals that priced on Monday, Alere's 6½% senior subordinated notes due 2020 "traded up" to around 101¾ bid, 102¼ offered, after the Waltham, Mass.-based company, a provider of diagnostic, monitoring and health management services, priced its quick-to-market $425 million of those bonds at par. A second trader pegged the notes at 102½ bid, 102¼ offered.

The first trader said that Alere's aftermarket strength, versus the lackluster performance of the new Cequel Communications bonds, "is what I'm talking about. Alere is a CCC credit, it came at 6½% and traded up."

"Then you've got Cequel, and it's not going to move up without some strength in [interest] rates," he added.

St. Louis-based cable operator Cequel's $750 million of 5 1/8% notes due 2021 were seen by the trader at 10-0 1/8 bid, while a second trader located them trading in a par to 100¼ bid range.

"The stuff that was able to come rich is getting cheaper because it's really bumping up against all-time low [yield] levels for junk bonds, even though spreads are not at their tightest," the trader said.

Junk yields are now averaging just above the 5% level.

Among the day's other deals, Select Medical's 6 3/8% notes due 2021 were quoted at par bid, 100¾ offered, after the Mechanicsburg, Pa.-based hospital and clinic operator's quickly shopped $600 million offering came to market at par.

Australian mining contractor Barminco's 9% notes due 2018 were not seen trading around on Monday after having priced at par, several traders said.

MBIA gains continue

As an example of the trend of distressed names starting to get a little too good to be considered in that category for long, he noted the gains recently notched by MBIA Inc., a sector peer of Philadelphia-based bond insurer Radian.

He said that the company's 4% surplus notes due 2033 "are well into the 80s," noting that the Armonk, N.Y.-based bond insurance company's paper had shot up dramatically over the past few days from prior levels in the 20s, after MBIA and Bank of America reached a $1.7 billion settlement of the five-year legal battle between the two financial firms.

"It's not really even distressed anymore since [the bonds] are now in the upper 80s," the trader suggested.

A market source at another desk quoted the 14% notes, issued by the company's beleaguered MBIA Insurance Corp. subsidiary, at just over 86 bid. He pointed out, however, that culling out odd-lot trades, the bonds were going home at 82¾ bid, down from their earlier peak at 841/2, but still well up from Friday's close around 80 bid.

A week ago, the bonds were trading at 26½ bid. The big jump - from the 20s to around the 80 level - had taken place last Tuesday, and the notes continued to trade in that 80s context after that.

He also saw MBIA's 7.15% notes due 2027, which had been trading in the mid-80s a week ago, before jumping into the 90s last Tuesday and then pushing as high as 104 bid last week, heading for home Monday at 108¾ bid.

However, he noted that the round-lot trade pushing the bonds that high had taken place late in the day, with the bulk of Monday's action coming in odd-lots, ranging between 104 and 108.

The long-running dispute between MBIA and Bank of America settled last Tuesday arose from MBIA having insured billions of dollars of securities backed by mortgages written by BofA or Countrywide Financial, which was later acquired by the banking giant, only to see those securities turn sour as many of the underlying loans defaulted during the financial crisis that began in 2007.

In 2009, MBIA attempted to reorganize itself to segregate those toxic securities from the rest of its business, only to have that move legally challenged by BofA and 17 other banks. It eventually reached settlements one by one with the other lenders, and BofA was the last holdout until last week.

After that settlement was announced Standard & Poor's, which had dropped MBIA's ratings into Junkbondland four years ago, lifted those ratings by seven notches, to BBB from B-.

Moody's Investors Service continues to rate parent MBIA's bonds at Caa1, with the MBIA Inc. 14% notes carrying a single-C rating.

Market indicators weaker

Overall, statistical junk performance indicators continued the weaker trend, which they had established on Friday, when all of the major signposts were down across the board.

The Markit Series 20 CDX North American High Yield index lost a quarter-point on Monday to end at 106 7/16 bid, 106 9/16 offered, its third consecutive downturn. On Friday, the index had also been down a quarter-point.

The KDP High Yield Daily index, meanwhile, slid by 15 basis points on Monday - its third consecutive loss - to end at 76.55. On Friday, it had fallen by 6 bps. Its yield rose by 5 bps Monday to finish at 4.93%, its second consecutive widening.

The widely followed Merrill Lynch High Yield Master II suffered its second consecutive loss on Monday, as it was off by 0.226%. That followed Friday's 0.13% dip, which had snapped a string of 16 consecutive sessions on the upside dating back to April 18.

The second loss dropped the index's year-to-date return to 5.458%, down from Friday's 5.697%, and down as well from Thursday's 5.835%, its peak level for the year.

The index's yield to worst increased to 5.16% from Friday's 5.04% and from Thursday's 4.986%, its most recent new all-time low. Its spread to worst also widened on Monday to 438 bps over Treasuries from Friday's 428 bps and from Thursday's 427 bps, its tight level for the year.

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