Boyd, Huntsman lead drive-by deluge on $2.4 billion day; new Momentives up; funds also rise

By Paul Deckelman and Paul A. Harris

New York, Oct. 28 - The high-yield primary market saw its busiest day of the week by far on Thursday, syndicate sources said, both in terms of the number of new deals priced and the total tally of new bonds coming to market.

Anchored by such familiar junk names as Boyd Gaming Corp. and Huntsman International LLC, seven dollar-denominated deals carrying a total face value of nearly $2.4 billion priced. Many of these were quickly marketed offerings, including both Boyd's $500 million of eight-year notes and Huntsman's $180 million of 101/2-year paper, which came as an add-on to a deal the chemical company had priced in mid-September.

Also driving by were Rent-A-Center Inc. with $300 million of 10-year notes, Jabil Circuit, Inc. with $400 million of 10-years and M/I Homes, Inc. with $200 million of eight-year paper.

The Jabil and M/I deals were both upsized, as was the non-drive-by Carrizo Oil & Gas Inc., which priced $400 million of eight-year bonds, and the day's lone non-dollar deal, a €350 million transaction from Britain's R&R Ice Cream plc.

Also pricing was a dollar-denominated junk offering with some potential emerging market crossover interest: a $400 million deal from Chinese coal mining concern Hidili Industry International Development Ltd.

Recently priced offerings from corporate cousins Momentive Performance Materials Inc. and Hexion Specialty Chemicals Inc. as well as Berry Petroleum Corp. continued to add to their already sizable aftermarket gains. But MGM Resorts International's Monday deal remained an underachiever.

Traders saw a continued firm tone to the overall high-yield market.

And weekly reporting high-yield mutual funds - considered a reliable barometer of overall junk market liquidity trends - showed a $345 million net inflow, their eight-consecutive weekly gain.

Junk funds gain $345 million

The $345 million inflow followed the nearly identically sized $347 million cash infusion seen in the previous week, according to a Prospect News analysis of the figures provided by market sources. During that time, net inflows have totaled about $4.523 billion, the analysis indicated.

The latest week's inflow brought the year-to-date cumulative total for the weekly reporting funds to about $11.318 billion, a new peak level for 2010, according to the analysis.

Cumulative fund-flow totals may be rounded up or down and could include unannounced revisions and adjustments to figures from prior weeks.

Inflows have now been seen in 31 out of the 43 weeks since the beginning of the year, while there have been 12 outflows, the analysis indicated.

EPFR sees $717 million inflow

Another fund-tracking service - Cambridge, Mass.-based EPFR Global, whose methodology differs somewhat from AMG - meantime reported a $717 million inflow in the latest week, which followed a $616 million inflow the week before.

Its analysts said in a research note published Thursday night that flows intro the junk funds "were again steady but not spectacular, although default rates and funding costs have been dropping in tandem this year as interest rates in key markets, such as the United States and Europe, remain at historically low levels."

EPFR has seen generally stronger flows into some of the other categories of fixed-income funds it tracks, including emerging markets, non-emerging global funds and non-high-yield U.S. bond funds.

Reflecting the difference between the ways AMG and EPFR calculate their respective fund-flow totals - although the two services' numbers generally point toward the same trends - EPFR includes results from certain non-U.S. domiciled funds as well as the domestic funds, and its year-to-date net inflow total now stands at $25.6 billion, according to unofficial estimates, a new peak level for the year.

Analysts say the continued flow of fresh cash into Junkbondland - and the mutual funds represent but a small, though quantifiable, percentage of the total amount of money coming in - has fueled the sustained new-deal borrowing binge seen this year and last, as well as the robust secondary market.

Boyd Gaming prices $500 million

The Thursday primary market saw seven issuers, each bringing a single tranche of junk, raise $2.39 billion.

Boyd Gaming priced a $500 million issue of eight-year senior notes (Caa1/B) at par to yield 9 1/8.

The yield printed in the middle of the 9% to 9¼% price talk.

J.P. Morgan Securities LLC, Bank of America Merrill Lynch, Wells Fargo Securities, Deutsche Bank Securities Inc., RBS Securities Inc., Commerz Securities and Barclays Capital Inc. were the joint bookrunners for the quick-to-market debt refinancing and general corporate purposes deal.

Carrizo at tight end of talk

Meanwhile Carrizo Oil & Gas priced an upsized $400 million issue of eight-year senior notes (B3/B-) at 99.302 to yield 8¾%, at the tight end of the 8¾% to 9% price talk.

Credit Suisse Securities, Wells Fargo Securities and RBC Capital Markets Corp. were the joint bookrunners for the debt refinancing deal, which was upsized from $325 million.

Jabil upsizes

Elsewhere Jabil Circuit priced an upsized $400 million issue of 10-year senior notes (Ba1/BB+/BBB-) at par to yield 5 5/8%, at the tight end of the 5¾% area price talk.

J.P. Morgan, Bank of America Merrill Lynch, Citigroup and RBS Securities were the joint bookrunners for the bank debt refinancing.

Rent-A-Center drives by

In other quick-to-market action, Rent-A-Center priced a $300 million issue of 10-year notes at par to yield 6 5/8%.

The yield printed at the tight end of the 6¾% area price talk.

JP Morgan Securities LLC, Goldman Sachs & Co. and Bank of America Merrill Lynch were the joint bookrunners for the quick-to-market deal.

The Plano, Tex.-based rent-to-own company intends to use $200 million of the proceeds to repay bank debt and the remaining proceeds to repurchase shares of the company's common stock.

M/I Homes upsizes

M/I Homes priced an upsized $200 million issue of 8 5/8% eight-year senior notes (Caa1/B-) at 98.587 to yield 8 7/8%.

The deal was upsized from $150 million.

The yield printed in the middle of 8¾% to 9% price talk.

Citigroup and JP Morgan Securities LLC were the joint bookrunners for the quick-to-market deal.

Proceeds, along with cash on hand, will be used to fund the tender the 6 7/8% notes due 2012.

Huntsman taps 8 5/8% bonds

Huntsman priced a $180 million add-on to its 8 5/8% senior subordinated notes due March 15, 2021 (B3/B-) at 108.0 to yield 7.267%.

There was no official price talk.

Citigroup ran the books for the quick-to-market debt refinancing deal.

Hidili prices $400 million

Elsewhere in the dollar-denominated primary market, Chinese coal producer Hidili priced a $400 million issue of five-year senior notes (B1/BB-) at par to yield 8 5/8% on Thursday.

The yield printed at the tight end of the 8 5/8% to 8¾% price talk.

Citigroup, Bank of America Merrill Lynch, UBS Investment Bank and JP Morgan were the joint bookrunners.

Proceeds will be used for general corporate purposes, to upgrade existing production capacity in the company's network of mines and facilities in Southwestern China, for existing machinery and infrastructure and to repay existing debt.

In other news bearing upon Asian issuers in the dollar-denominated junk market, undersea cable network operator Pacnet set final price guidance for its $300 million offering of five-year senior secured notes (B1//BB+) at the 9 3/8% area.

That talk was revised lower from earlier talk of 9½% area.

Credit Suisse, Barclays, DBS and Standard Chartered are the bookrunners for the deal from the Hong Kong- and Singapore-based company.

R&R Ice Cream upsizes

The euro-denominated market also turned out news on Thursday.

England's R&R Ice Cream priced an upsized €350 million issue of seven-year senior secured notes (B2/BB) at par to yield 8 3/8% on Thursday, according to a market source.

The yield printed at the tight end of the 8½% area price talk.

Barclays Capital and Credit Suisse were the joint bookrunners for the debt refinancing deal which was upsized from €280 million.

Meanwhile Belgium's Telenet NV talked an upsized €500 million offering of 10-year senior secured notes (Ba3//) with a 6½% area yield on Thursday, according to a market source.

The deal, which was upsized from €350 million, is set to price on Friday.

BNP Paribas and Credit Suisse are the joint bookrunners for the quick-to-market debt refinancing and general corporate purposes deal.

And Siemens Enterprise Communications talked its €200 million offering of five-year first-lien senior secured notes (B3/B-) with an 11½% area yield.

That yield factors in an original issue discount of 2.75 points to 3 points.

Meanwhile, call protection is increased to four years from three years.

The Jefferies-led deal, which has been marketed via an investor roadshow, is set to price Friday morning.

Simmons Foods price talk

Looking ahead to the Friday session in the dollar-denominated market, Simmons Foods, Inc. talked its $250 million offering of seven-year second-lien senior secured notes (B3/B-) with a 10¼% to 10½% yield on Thursday.

That deal is also expected to price on Friday morning via Wells Fargo Securities and BMO Nesbitt Burns.

Spansion roadshow starts Friday

Spansion LLC will begin a roadshow on Friday in New York for its $200 million offering of seven-year senior notes.

Pricing is set for Wednesday afternoon or Thursday morning.

Barclays Capital and Morgan Stanley are joint bookrunners for the bank debt refinancing.

The deal comes concurrent with a $125 million follow-on offering of equity and a term loan amendment.

Seminole Tribe split-rated deal

Finally, Seminole Tribe of Florida announced plans to price a split-rated $330 million offering of first-lien Gaming Division Bonds, series 2010, due 2017 (expected Ba1/confirmed BBB-/expected BB+) during the middle part of the week ahead.

Bank of America Merrill Lynch has the books.

Proceeds will be used to fund capital expenditures and for tribal uses.

Carrizo Oil climbs

Most of the day's new deals, such as Rent-A-Center, Jabil and M/I Homes, priced too late in the session for any kind of aftermarket.

But a trader saw Carrizo Oil & Gas' 8 5/8% notes due 2018 up solidly at 101 3/8 bid, 101¾ offered.

At another shop, a trader said that the Houston-based energy exploration and production company's new deal "came, and it went well," estimating the $400 million offering - upsized from the originally envisioned $325 million - up by nearly 2 points from its par issue price.

Still another trader had the bonds going home at 101½ bid, 102½ offered.

Huntsman add-on no-show

Several traders said that they had not seen any trace of Huntsman International's $180 million of new 8 5/8% notes due 2021, which priced as an add-on to the chemical manufacturer's existing $350 million of those bonds priced in mid-September.

But one said that wherever the add-on bonds were trading after having priced Thursday at 108 to yield 7.267%, "it sure ain't par," where the original issue had priced on Sept. 14.

The trader said that the sharp jump in the Huntsman bonds to around the 108 level, after having priced at par barely six weeks earlier, is symptomatic of the market's current conditions, where "everything" is getting lifted and moving up by multiple points in a matter of weeks, or even, perhaps, days.

For instance, he said, steering away from the new-deal market for a few moments, General Motors Corp.'s benchmark 8 3/8% bonds due 2033 were trading up on Thursday at 36 3/8 bid,, well up from the levels around 34 bid seen earlier in the week.

Choosing another example, he said that Synovus Financial Corp.'s 5 1/8% notes due 2017 had been taking a wild ride from around 94 bid before the Columbus, Ga.-based financial services holding company had canceled a debt-for-equity exchange several months ago. He saw the bonds fall down into the 80s and continue sliding, hitting a nadir of around 77 bid "two or three weeks ago." Now, he said, those bonds had bounced off those lows and were trading 85 bid.

And Synovus is nothing special, "just a random issue," he added. "It's just stuff like that. Everybody's reaching for yield."

He said that this is all taking place against a backdrop of a dearth of paper for sale, forcing portfolio managers to buy whatever they can get their hands on, no matter how implausible the credit or its story.

"Look at these portfolio managers," he continued. "If you're running one of these funds, you're not getting paid to sit on cash and earn zero. You've got to earn something."

The paper drought, he said, comes down to one simple factor: "Nobody wants to sell."

He said that at his shop, "we've got guys who are lookin' - we're lookin' for stuff and we can't find it."

As to why that might be, he ventured that "nobody has a reason to sell until you start having redemptions."

With all of the recent inflows of money into high yield - Lipper reported its eighth straight weekly cash infusion Thursday - he noted: "If you're a portfolio manager, and nobody's taking money out of your funds and you've got money going in, you've got to do something with it."

He also said to pity the poor portfolio manager who may have decided as summer was ending that the market was overpriced and decided to sell some stuff, which then goes on a rocket ride.

"Look at this new Huntsman," he said. If an investor or a portfolio manger had sold his 8 5/8% bonds due 2021 weeks ago, when they were still trading around par, and now that they are trading up at 108, "now you look like a big dummy - you just left 8 or 9 points on the table."

"It's a seller's market right now."

He predicted, though, that "at some point, when the pendulum turns and everyone wakes up and decides 'you know, we should be selling some of this stuff,' it will be quite interesting to see how orderly or unorderly the whole situation changes."

However, he acknowledged: "We've been saying that for months - so we'll see."

Boyd dawdles in secondary

A trader saw the new Boyd Gaming 9 1/8% notes due 2018 offered at 1003/4, though with no bids seen.

A second said that the Las Vegas-based local gaming operator's bonds were unimpressive compared with the gains seen by many other recent new deals, "up maybe ¼ of a point,½ a point" from the par level where the $500 million offering had priced.

At another desk, a trader said that the deal was 100¼ bid, 100½ offered.

MGM continues to lag

Boyd's underwhelming aftermarket performance seemed to mirror that of another Las Vegas-based casino operator that came to market with a quickly shopped $500 million deal: MGM Resorts International, which ironically is Boyd's joint-venture partner in the big Borgata resort in Atlantic City, although it is in the process of shedding that 50% stake due to regulatory concerns.

A trader said that MGM's 10% notes due 2016 - which priced on Monday at 98.897 to yield 10¼% and then proceeded to trade the next several sessions in a 98 3/8- 98 5/8 context - had still not improved by Thursday

Momentive has momentum

But apart from such specific laggards, the traders saw most new-deal paper continuing to move on up.

One saw Hexion U.S. Finance Corp. /Hexion Nova Scotia Finance, ULC's new deal and that of new corporate cousin Momentive Performance Materials both having continued to climb on Thursday, adding on to the handsome gains they notched after pricing on Wednesday.

He saw both Hexion's $440 million of 9% second-priority senior secured notes due 2020 and Momentive's $635 million of 9% springing second-line secured notes due 2021 at 103¾ bid, 104 offered.

Both deals had priced at par on Wednesday and then shot right up to around 102¾ bid, 103 offered when they went into secondary.

And the trader likewise saw Denver-based energy E&P operator Berry Petroleum's $300 million of 6¾% notes due 2020 at 103¼ bid, 103¾ offered, after pricing at par on Wednesday.

Fortescue still forceful

A trader saw the 7% notes due 2015 priced on Tuesday by FMG Resources Pty. Ltd. (Fortescue Metals Group Ltd.) trading on Thursday at 102½ bid, 102 7/8 offered - not too much changed from the levels seen on Wednesday and on Tuesday in the deal's initial secondary trading after having priced earlier that session.

The Australian iron-ore mining company's $2.04 billion behemoth of a deal had come to market early Tuesday at par, after having been massively oversubscribed on the primaryside, playing to a reported $15 billion order book and resulting in meager allocations to interested parties.

"They didn't go anywhere," another trader said, "but they didn't go down either. They held their own."

Market indicators mixed

Away from the new-deal world, a trader saw the CDX North American Series 15 HY index unchanged Thursday at 100 3/8 bid, 100 5/8 offered, after having lost ¼ of a point on Wednesday.

The KDP High Yield Daily index meantime gained 4 basis points Thursday to finish at 74.55, after having edged up by 2 bps onWednesday. Its yield fell by 1 bp to 7.17% on Thursday, after having risen by 1 bp on Wednesday.

The Merrill Lynch High Yield Master II index gained 0.112% on Thursday, after having risen by 0.059% on Wednesday. The latest advance pushed its year-to-date return up to 14.361%, its sixth consecutive new 2010 peak level, eclipsing the old mark of 14.234% recorded on Wednesday.

Advancing issues retook the lead on Thursday from the decliners, which had edged ahead on Wednesday for the first time in six sessions. The gainers led by a ratio of not quite seven to six versus Wednesday, when the margin of difference between the two groups was just a handful of issues - not even a dozen - out of the more than 1,400 tracked.

Overall activity, represented by dollar-volume levels, rose by 7% on Thursday, after having fallen by 16% on Wednesday versus the previous session.

OPTI bonds end strong

Among specific issues, there were "tons" of OPTI Canada Inc. bonds trading Thursday, a trader said, following the release of the company's third-quarter results.

The trader said that "well over $100 million of the three different issues" changed hands during the session, all up half a point to 3 points.

The 8¼% notes due 2014 were up the most, he said, at 75¾ bid, 76 offered. The 7 7/8% notes due 2014 gained 2 points, closing at 75 bid, 75½ offered, while the 9% notes due 2012 improved just half a point to 101½ bid, 102 offered.

Another trader called the 8¼% notes "up a couple" at 75¾ bid, 76¼ offered.

For the third quarter, the Calgary-based oilsands producer reported a net loss of $46 million. That compared to a loss of $152 million in the second quarter of 2010 and a profit of $12 million in the third quarter of 2009.

Revenues meantime gained year over year, but fell from the previous quarter. Third-quarter revenues came to $59 million, down from $61 million in the second quarter, but up from $38 million the year before.

As of Sept. 30, OPTI had $341 million of available cash on hand and $180 million available under its revolving credit facility. The company said it was continuing to review its strategic alternatives.

"After 10 months of solid ramp-up following our turnaround in September of 2009, we experienced operational interruptions in the third quarter, which affected production volumes and ramp-up," said Chris Slubicki, president and chief executive officer, in the earnings release.

"Third-quarter operations did not meet our expectations. The [Long Lake Project] is now back on-stream and our bitumen ramp-up continues.

"In our ongoing review, we recognize that we require time to demonstrate the value of OPTI through continued ramp-up of the project," Slubicki added.

"We expect that net proceeds from the successful sale of $400 million of first-lien notes during the third quarter will provide us with the liquidity necessary to further demonstrate this value. We remain committed to our strategic process as we move into the fourth quarter and next year."

Nebraska Book knocked around

Elsewhere, a trader said that Nebraska Book Co.'s 8 5/8% senior subordinated notes due 2012 traded in an 87-88 context, seeing that "down 5 or 6 [points] from the quotes - this was the first real trade in a while."

The Lincoln, Neb.-based new and used textbook supplier's bonds had previously traded around the 93 level, although the most recent previous round-lot transaction, back around the middle of the month, was at 94½ bid.

"There's probably a credit story there," he said, although he did not know what it was.

"There are not that many things that have down days like that in this market," which has mostly been to the upside.

Autosphere names mixed

A trader saw General Motors' benchmark 8 3/8% bonds due 2033 up 1 1/8 points, to 36¼ bid, 36¾ offered. However, he saw GM domestic arch-rival Ford Motor Co.'s 7.45% bonds due 2031 off by ½ a point at 113½ bid, 114½ offered.

Another trader saw GM at 361/4, citing it as an example of how "everything" is going up in the market -"earlier in the week, they were around 34."

He saw the Ford long bonds meantime gyrate between a low of 113½ bid and a high of 1141/2, pegging them going out at 114, "give or take a ¼ of a point to either side." He said this was "all on big trades."

Stephanie N. Rotondo contributed to this report.

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