Reynolds leads $2 billion-plus pricing binge, new bonds move up; Cott deal on road; funds gain $207 million

By Paul Deckelman and Paul A. Harris

New York, Oct. 29 - According to the calendar, it was supposed to be a somber anniversary in the financial markets - exactly 80 years ago, on Oct. 29, 1929, "Black Tuesday" marked the culmination of a massive four-session stock market plunge which in turn is often blamed for plunging the U.S. into The Great Depression - but there were no long faces in Junkbondland on Thursday, as the high yield market batted out five deals collectively worth well over $2 billion - and those new deals were heard to have traded well in the secondary sphere, as investors snapped up the new paper.

The big deal of the day was Reynolds Group's $1.8 billion equivalent dual currency offering of seven-year senior secured notes. The Richmond, Va.-based consumer packaging producer's dollar- and euro-denominated tranches were later seen having risen about a point from their issue price.

Associated Materials LLC/Associated Materials Finance Inc.'s $200 million senior secured offering did even better after pricing, shooting up more than 3 points in the aftermarket.

Also bringing new deals in on Thursday were GCI Inc., Potlach Corp. and Scientific Games International Inc. - the latter an add-on to the company's existing issue of 9¼% senior subordinated notes due 2019. The new bonds priced more than 4 points above where the company's original bond issue had priced back in May, as the yield tightened more than a full percentage point.

Also on the new-deal front, Cott Beverages Inc. was heard to have hit the road to market a $200 million offering of eight-year senior notes, while its existing bonds - which are to be tendered for using the new-deal proceeds - firmed a point or so to around the anticipated takeout level.

Also starting a roadshow, syndicate sources said, was New York-based crude oil transportation company General Maritime Corp., which is selling $300 million of new paper.

Price talk meantime emerged on Cequel Communications Holdings I, LLC's upcoming $400 million of eight-year senior notes.

With most of the market's emphasis on the new-deal arena, traders saw generally better secondary levels, but observed few credits really standing out.

Junk funds up by $207 million

As trading was wrapping 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 $207 million more came into the weekly-reporting funds than left them.

It was the 10th consecutive gain, and followed the $329.4 million cash inflow seen in the previous week, ended Wednesday Oct. 21, and was the 17th week in the last 18 in which inflows were seen, dating back to mid-June. Some $6.427 billion of net inflows have been seen during that stretch, according to a Prospect News analysis of the AMG figures, interrupted only by a lonely $89.9 million outflow recorded in the week ended Aug. 19.

Counting the latest week's number, the year-to-date net inflow for the weekly-reporting funds rose to $17.98 billion, according to the analysis - a new peak level for the year so far, eclipsing the old mark of $17.773 billion recorded in the Oct. 21 week.

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

With 2009 now well into its fourth and final quarter, inflows, including the latest weekly gain, have been seen in 38 weeks out of the 43 since the start of the year, according to the analysis, against just five outflows - the Aug. 19 retreat, a $110 million outflow in the week ended June 24, and three weeks of outflows in late February and early March, totaling $969 million. The inflows, on the other hand, include an incredible 14-week run of consecutive gains, dating from mid-March through mid-June, during which time the funds grew by a record $9.1 billion.

Such sustained inflows have helped the junk market come roaring back from last year's staggering 25%-plus loss and sharply reduced primary activity totals. Total returns so far this year totaled an eye-popping 51.258% as of Wednesday's close, according to the authoritative Merrill Lynch High Yield Master II index, handily beating virtually every other major investment asset class. Meanwhile, the $118.452 billion of new high yield debt issued so far this year globally, as of Wednesday's close -- $99.818 billion of it domestic - is running 67.6% ahead of the anemic pace of last year's global primary tally. Domestic new issuance is about 72% ahead of its year-ago levels.

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.

Reynolds leads day

In the primary market, Thursday's big deal came from Reynolds Group.

The Richmond, Va., packaging and wraps company priced $1.125 billion and €450 million face amounts of 7¾% seven-year senior secured notes (B1/BB) at 98.695 to yield 8%.

The yield printed at the wide end of the 7¾% to 8% yield talk. The issue price came cheap to discount talk of zero to one points.

Credit Suisse ran the books for the acquisition deal.

GCI upsizes

Meanwhile GCI Inc. priced an upsized $425 million issue of 8 5/8% 10-year senior notes (B2/existing B-) at 99.17 to yield 8¾% on Thursday.

The yield printed at the wide end of the 8½% to 8¾% price talk while the amount was increased from $400 million.

Deutsche Bank Securities Inc., Calyon Securities, Morgan Stanley & Co. and RBC Capital Markets Corp. were joint bookrunners.

Proceeds will be used to retire the company's senior credit facility.

Associated Materials prices $200 million

Elsewhere Associated Materials, LLC priced a $200 million issue of 9 7/8% seven-year senior secured second-lien notes (B2/CCC) at 98.875 to yield 10 1/8%.

The yield printed in the middle of the 10% to 10¼% price talk.

J.P. Morgan Securities Inc., UBS Investment Bank and Wells Fargo Securities were joint bookrunners for the debt refinancing deal.

Potlatch comes atop price talk

From the four-B credit sector, Potlatch Corp. priced a $150 million issue of 7½% 10-year senior notes (Ba1/BB) at 98.284 to yield 7¾%.

The yield printed on top of the price talk.

Bank of America Merrill Lynch and Goldman Sachs & Co. were joint bookrunners for the bullet deal.

Proceeds will be used to repay $73 million of bank debt and for general corporate purposes.

Scientific Games drives by

Finally, Scientific Games International priced a $125 million add-on to its 9¼% senior notes due June 15, 2019 (Ba3/BB-) at 101.50 to yield 8.969%.

The deal priced in the middle of the 101 to 102 price talk.

J.P. Morgan, Bank of America Merrill Lynch, Credit Suisse and Goldman, Sachs & Co. were joint bookrunners for the quick-to-market deal.

Cequel for Friday

Looking toward Friday, Cequel Communications is expected to price its $400 million offering of eight-year senior unsecured notes (B3/B-)

Price talk of 8 7/8% to 9 1/8% was heard on Thursday.

The St. Louis-based cable company also introduced covenant changes to the deal. The total leverage covenant is reduced to 7.5-times leverage from 8.5-times. The restricted payments builder basket begins at $250 million, and the backdating concept is eliminated. Also an anti-layering provision has been introduced to restrict debt at the intermediate holding company.

Goldman Sachs & Co., Credit Suisse and J.P. Morgan Securities Inc. are joint bookrunners.

General Maritime starts Friday

Also on Friday, General Maritime Corp. will begin a roadshow that runs through Wednesday for a $300 million offering of eight-year senior unsecured notes (B3/B).

Pricing is set for Thursday.

JP Morgan and Goldman Sachs & Co. are joint bookrunners for the debt refinancing deal.

Cott Beverages to sell $200 million

Finally, Cott Beverages began a brief roadshow on Thursday for its $200 million offering of eight-year senior unsecured notes.

The deal is expected to price on Tuesday.

Barclays Capital is the left bookrunner for the debt refinancing. Deutsche Bank Securities and JP Morgan are joint bookrunners.

Reynolds deal trades firmer

A trader said that the new Reynolds Group transaction "was the big name of the day."

He saw its dollar-denominated 7¾% senior secured notes due 2016 "trading really tight," getting as good as 99 7/8 bid, before going out at 99¾ bid, par offered - up from the 98.695 level at which that $1.125 billion tranche priced earlier in the session to yield 8%.

"The bonds definitely were up," he said, "trading at a very tight spread, as you can imagine."

A second trader saw the bonds open at 99½ bid, par offered when they were freed to trade, and then straddle par at 99 7/8 bid,, 100 1/8 offered. He quoted them ending the session at 99 7/8 bid, par offered.

"We saw it quoted a few times, pretty actively," he said. "But then it was such a tight market that it took the trading profit out of it," causing activity to die down. "It's hard to get inside a 99 7/8-par market - but it was quoted quite often throughout the day."

Associated Materials moves up

A trader saw Associated Materials' new 9 7/8% senior secured notes due 2016 jump to 101 bid "right out of the gate" after the Cuyahoga Falls, Ohio-based building materials maker's new issue priced at 98.757 to yield 10 1/8%.

After that, he said, the bonds moved progressively higher - to 102, and then to 102½ bid, 103 offered. "Then they quieted down," he said.

"They came out, had a nice pop, and then kind of quieted down, with a 3½ point pop" from issue.

He further opined that "it looks like [the company and its underwriters] did a good job in not putting it into a lot of flippers' hands" - although he pointed out that "flippers tend to like the bigger, more liquid deals" - while the $200 million offering was anything but.

Another trader said that his shop "was active in SIDE," referring to the company's market nickname, derived from one of its major products, exterior vinyl and aluminum siding. He pegged the new bonds at 102¼ bid, 103¼ offered.

GCI posts gains

A trader said that Alaska telecommunications operator GCI's new $425 million of 8 5/8% senior notes "obviously did very well."

He quoted the bonds at 99¾ bid, par offered, up from 99.17, where the issue priced.

Another trader saw those bonds "right around" par bid, 100¼ offered.

Potlach pops up

A trader saw Spokane, Wash.-based timberland real estate investment trust Potlatch's new $150 million of 7½% notes move up to 99 bid, par offered, up from its pricing level of 98.284. "It was kind of the first thing and last thing we saw.

"It looks like people got their allocation, a 99 bid popped up, then after a few minutes, we had a par offering, and that was all she wrote."

Scientific Gaming deal not seen

Traders saw no immediate aftermarket activity in New York-based gaming and lottery technology provider Scientific Games' new $125 million add-on offering of 9¼% senior subordinated notes due 2019.

Cott climbs on deal news

Also on the new-deal front, a trader saw Cott Beverage's 8% senior subordinated notes due 2011 trade up to 100½ bid from prior levels at 99½ bid, 99¾ offered.

That's about the level at which the Toronto-based private label soft-drink bottler's existing bonds are to be taken out under a tender offer announced early Thursday, to be paid for using the proceeds of Cott's upcoming new deal.

At another desk, a trader said that the existing Cott bonds were trading at 100¼ bid, 100½ offered. He said the bonds had been trading at 99½ bid, par offered pre-news, and had been above the 99 level "for the last two months" in apparent anticipation that the company would move to take out the issue.

Market indicators bounce back

Back among the existing bonds not connected with the new-deal market, a trader saw the CDX Series 13 index up over a point on Thursday at 93.25 bid, 93.75 offered, after having fallen by 1 point on Wednesday.

Meanwhile, the KDP High Yield Daily Index rose by 3 basis points on Thursday to end at 69.63, after having lost 29 bps in Wednesday's dealings. Its yield tightened by 1 bp to 8.62%, after having gapped upward by 10 bps the previous session.

In the broader market, advancing issues regained their lead over decliners Thursday, though by only a narrow margin of a couple of dozen issues out of more than 1,500 tracked.

Overall market activity, as measured by dollar-volume levels, was up 13.5% from Wednesday's pace.

But there was not much going on, with a trader noting that "people were focused on the new issues. It's hard to get people excited about the secondary, when they are being flooded with new deals."

"Nothing was going on" outside of the new-deal arena, another trader said.

But he did see "a firmer tone - [Wednesday], there was some pressure on prices, but it was firmer [Thursday], especially with all the money that keeps coming into the market."

Little CIT action seen

A trader said that "I think [activity in CIT Financial Group Inc.] has all died down. I really didn't see any activity at all today," ahead of the expiration of the troubled New York-based commercial lending company's offer to swap new debt for existing bonds, in the hopes of cutting its onerous debt burden by as much as $5.7 billion.

"Everybody is just waiting to see what the final is on the exchange." He added that "there was news that they still think they might have to file for bankruptcy.

"I guess we'll know by tomorrow [Friday]."

He said the levels on the company's paper were for the most part unchanged, "or maybe they're quoted lower, but there's no activity, so what's the real levels? Who knows?"

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