Sealed Air, Alere price; new issues trade up in brighter market; funds lose $2.56 billion

By Paul A. Harris and Paul Deckelman

New York, June 11 – The high-yield primary market picked up its pace on Thursday, pricing a total of three deals, against only one the day before and none on Tuesday.

The day’s issuance came to $980 million of new dollar-denominated fully junk-rated paper from the trio of domestic borrowers, versus $230 million on Wednesday from one borrower.

Sealed Air Corp. did a two-part, $850 million equivalent dual-currency transaction. The regularly scheduled deal off the forward calendar consisted of $400 million of 5½% 10-year notes and €400 million of 4½% eight-year notes.

Coveris Holdings SA brought a quickly shopped $155 million add-on to its existing 7 7/8% subordinated 2023 notes.

Alere, Inc. priced $425 million of eight-year subordinated notes off the forward calendar.

Traders saw the Alere and Sealed Air new issues having firmed smartly on sizable volume when they were freed for secondary dealings.

Wednesday’s offering of eight-year secured notes from movie theater operator Carmike Cinemas, Inc. also traded up solidly on brisk volume.

The issues moved up amid a generally better tone in the market Thursday versus where they had been previously.

Statistical indicators of junk market performance accordingly rose across the board Thursday.

Sealed Air prices tight

Three issuers priced dollar-denominated tranches on Thursday, raising a total of $980 million.

One of the three came as a quick-to-market deal.

Executions were tight, with two of the three dollar tranches coming at the tight ends of yield talk and the other coming toward the rich end of price talk.

Sealed Air priced $850 million equivalent of senior notes (B1/BB) in two tranches.

The notes in both tranches priced at the tight ends of downwardly revised yield talk.

The deal included $400 million of 10-year notes that priced at par to yield 5½%. Final talk came in the 5 5/8% area, revised from earlier talk of 5 5/8% to 5¾%.

Joint global coordinator Morgan Stanley & Co. LLC will bill and deliver for the dollar-denominated notes. BNP Paribas Securities Corp. was also a joint global coordinator. BofA Merrill Lynch, Citigroup Global Markets Inc., Goldman Sachs & Co. and J.P. Morgan Securities LLC were the passive bookrunners.

Sealed Air also priced €400 million of eight-year notes at par to yield 4½%. Final yield talk was in the 4 5/8% area, a downward revision from earlier talk in the 4¾% area.

Joint global coordinator BNP Paribas will bill and deliver for the euro-denominated notes. Morgan Stanley was also a joint global coordinator. BofA Merrill Lynch, Credit Agricole, Goldman Sachs and JPMorgan were the passive bookrunners.

The Elmwood Park, N.J.-based packaging manufacturer plans to use the proceeds to fully refinance its 2021 senior notes.

Alere refinances bonds

Alere priced a $425 million issue of eight-year senior subordinated notes (Caa1/CCC+) at par to yield 6 3/8%.

The yield printed at the tight end of yield talk in the 6½% area; preliminary guidance was 6½% to 6¾%.

JPMorgan, Goldman Sachs, DnB NOR Markets Inc. and RBC Capital Markets were the joint bookrunners for the debt refinancing.

Coveris taps 7 7/8% notes

In the session's sole quick-to-market deal, Coveris priced a $155 million add-on to its 7 7/8% senior notes due Nov. 1, 2019 (existing Caa2/confirmed B-) at 99.875 to yield 7.905%.

The reoffer price came toward the rich end of the 99.5 to par price talk.

Goldman Sachs and JPMorgan were the joint bookrunners.

Proceeds will be used to finance the acquisition of Tampa-based plastics manufacturer McNeel International Corp., for general corporate purposes and to repay in full the BMO loan used to finance the acquisition of New Zealand-based Elldex Packaging Solutions.

Coveris, formerly Exopack Holdings SA, is a Chicago-based manufacturer of plastic packaging products.

ATS price talk

Only one dollar-denominated deal remained on the active calendar as business expected to clear the market by Friday's close.

ATS Automation Tooling Systems Inc. talked its $250 million offering of eight-year senior notes (B2/B+) to yield 6½% to 6¾%.

Talk comes slightly wider than preliminary guidance in the 6½% area, according to a bond trader.

The deal, which has been on an investor roadshow, is expected to price Friday.

JPMorgan and Goldman Sachs are the joint bookrunners.

Apart from the above-mentioned euro-denominated tranche from Sealed Air, the European primary remained quiet on Thursday.

Two deals – one a sterling-denominated offering, the other coming in euros – are on the active calendar as business expected to clear the market by the end of the week.

France-based Labco SA (Ephios Bondco plc) is in the market with an €800 million offering of seven-year senior secured notes (B3//B+) via JPMorgan, Barclays, Deutsche Bank, HSBC, Morgan Stanley, Natixis and UBS.

And England-based apparel and footwear company New Look is marketing £1.2 billion equivalent notes in four tranches.

New Look Secured Issuer plc is selling £1 billion equivalent of senior secured notes due 2022 (B2/B/B), which are coming in tranches of sterling- and euro-denominated fixed-rate notes as well as a tranche of euro-denominated floating-rate notes. Tranche sizes remain to be determined.

In addition, New Look Senior Issuer plc is selling £200 million of senior unsecured notes due 2023 (Caa2/CCC+/CCC).

Joint global coordinator and joint bookrunner Goldman Sachs International will bill and deliver. JPMorgan and Nomura are also joint global coordinators and joint bookrunners. Deutsche Bank, HSBC, Lloyds Bank and Royal Bank of Scotland are joint bookrunners.

Day’s new deals firm

In the secondary market, traders saw the day’s two scheduled forward deals shoot up on active volume when they hit the aftermarket.

A trader said that “Sealed Air did well,” pegging the plastic packaging maker’s dollar-denominated 5½% notes due September 2025 at 101¼ bid, 101½ offered, versus their par issue price earlier in the day.

Two other traders at different shops also saw the bonds ending around that level.

And yet another market source quoted the notes at 101 3/8 bid, on volume of more than $56 million, putting the paper high up on the day’s Most Actives List.

One of the traders also saw good market response to Alere’s 6 3/8% senior subordinated notes due 2023 after the Waltham, Mass-based medical diagnostic services provider’s offering had priced at par, locating the bonds at 100 7/8 bid, 101 1/8 offered.

A little later on, a trader saw those bonds a little higher at 101 1/8 bid, 101½ bid.

At another desk, the bonds were seen at 101¼ bid, with over $58 million having changed hands.

There was no immediate activity seen in the day’s third pricing, packaging products manufacturer Coveris’ add-on to its 7 7/8% notes due 2019, owing to the lateness of the hour at which it had appeared and its small size, $155 million.

Carmike climbs

One of the traders also saw good activity in Carmike Cinemas’ 6% senior secured notes due 2023, calling them “well-received.”

He saw the Columbus, Ga.-based movie theater operator’s paper at 101½ bid, 101¾ offered, well up from the par level at which the company’s $230 million scheduled forward calendar offering had priced on Wednesday, that session’s only new deal.

A trader at another desk called the bonds up more than ½ point at 101 5/8 bid, with more than $17 million having traded.

Things are looking up

After several straight sessions where everything seemed to be widening out and falling in price, a trader said that on Thursday, “the market was better. I think that ETFs stopped selling. There was some general buying.”

A second source said that “the market overall had a much better tone to it, the best tone it’s had all week, with Treasuries rallying the way they did.”

The government paper shrugged off positive retail sales and initial jobless claims data and firmed off its recent lows, with the longer end of the curve particularly strong.

Asked whether it could be definitively stated that the junk market had broken out of its prolonged skid, the latter trader laughed and replied, “At least today. We’ll see what happens tomorrow [Friday]. It’s been a roller coaster.”

Indicators dump slump

Statistical indicators of junk market performance were higher across the board on Thursday after having been mixed on the day on Wednesday and lower all around for seven sessions before that.

The KDP High Yield Daily index gained 4 basis points on Thursday to close at 70.81, its first advance after seven straight losses, including Wednesday’s 5-bps drop.

Its yield tightened by 1 bp on Thursday to finish at 5.60% – the first time the yield had come in after six straight widenings, including Wednesday’s 2-bps rise.

The Markit Series 24 CDX North American High Yield index gained 1/16 point on Thursday, its second straight advance. It ended at 106 9/32 bid, 106 19/32 offered. The index had risen 7/32 point on Wednesday, its first gain after six straight losses.

And the Merrill Lynch North American Master II High Yield index was back in the black for a second straight session. It gained 0.168% on the day, on top of Wednesday’s 0.049%, which had been the first upturn after seven straight sessions on the slide.

Thursday’s gain raised the index’s year-to-date return to 3.187% from 3.049%. However, those levels remain well down from the 4.062% reading, the index’s peak level for the year so far, recorded on May 29.

Fund flows nosedive

But high-yield mutual funds and exchange-traded funds, considered a reliable barometer of overall junk market liquidity trends, diverged from the other indicators and returned to their recent mostly negative pattern this week, posting a huge outflow, their second such loss in the past three weeks and their sixth downturn in the past eight weeks.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said that $2.56 billion more left those weekly-reporting-only funds than came into them during the week ended Wednesday – the second biggest outflow seen so far this year. (See related story elsewhere in this issue.)

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