Pricing parade halts as primary silent; new VWR firms; DaVita gains; market quiet but firm

By Paul Deckelman and Paul A. Harris

New York, Aug. 21 - After roaring through the past two weeks at a red-hot pace, the high-yield primary parade stalled out completely on Tuesday, with some market participants believing that things won't start back up again till after Labor Day.

No deals priced in Junkbondland - the first time that's happened since back on Aug. 3. On Friday and Monday, however, only a single deal priced in each of those sessions.

The first two weeks of August saw $28.6 billion of issuance, surpassing the old record set in 2010 for that period by $7.2 billion.

The only nugget of news to emerge from the primary sphere was market scuttlebutt that Florida waste management firm Advanced Disposal Services, Inc. is expected to bring a sizable offering of senior unsecured notes to market as part of the funding for an acquisition the company is making - but that deal is seen as autumn business.

The one deal priced on Monday - for laboratory equipment company VWR Funding Inc. - was seen by traders to have moved up from its par issue price once it finally began trading around.

The traders said that not much was going on among other recently priced issues, although health care operator DaVita Inc.'s new bonds were seen having risen another point on top of the early gains they notched after pricing last week.

Away from the new-deal arena, ATP Oil & Gas Corp.'s bonds were again busy on Tuesday, although volume was considerably less than the amount seen on Monday, the first day of trading following the offshore energy company's bankruptcy filing. The bonds also came down from peak levels seen on Monday.

But overall, traders said that the junk market seemed firm. Statistical performance indicators were mixed, although one key gauge - the Merrill Lynch High Yield Master II Index - reported new highs for the year after having recently been quiet.

Names in the pipeline

Sources staffing the syndicate desks and trading desks, as well as the buyside accounts, report that they are catching up with tasks that tend to take a back seat when the market is rallying as hard as it has done thus far in 2012.

Tuesday conversations regarding a vaunted September deal pipeline - rumored to be vast - turned up some names, but so far no specific deal timing.

Among the names heard on Tuesday was Advanced Disposal Services, which is expected to bring $830 million of senior notes as part of financing for the acquisition of Veolia ES Solid Waste Inc.

The syndication of an $830 million six-year bridge loan backing the bonds wrapped up last week.

Deutsche Bank, Macquarie, UBS, Barclays and Credit Suisse led the bridge and will lead the bond deal.

Cequel Communications Holdings LLC is also coming with a bridged $500 million offering of senior notes via Credit Suisse, J.P. Morgan, Goldman Sachs and RBC to help fund the buyout of the company by BC Partners and CPP Investment Board.

FTS International Inc. is expected to bring a $400 million secured deal. The company is soliciting consents for indenture amendments from holders of its 7 1/8% notes due 2018. Bank of America Merrill Lynch and Citigroup are the solicitation agents.

And Getty Images Inc. is expected to bring new debt financing to help fund its acquisition by the Carlyle Group and management. J.P. Morgan, Barclays, Credit Suisse, Goldman Sachs and RBC will lead.

Sources following these deals declined to specify that any of them were certain to come during September, choosing instead to identify them as "likely fall business," or "probably coming in the late third quarter or early fourth quarter."

Finally, although the primary market is taking a breather, it's a different story for investors playing the high-yield market via mutual funds and exchange-traded funds.

The sleepy market notwithstanding, cash inflows continue to be strong, a high-yield mutual fund manager said on Tuesday.

VWR moves up

The new 78¼% notes due 2017 from VWR were seen having moved up a little on Tuesday after having priced at par late Monday - too late for any trading at that time.

A trader said that the Radnor, Pa.-based laboratory supply and distribution company's quick-to-market $750 mi8llion deal "traded a decent amount" when it was freed for secondary activity on Tuesday.

He saw the bonds trading in a context of 101 5/8 to 101 7/8.

A second trader pegged the bonds at 100½ bid, 101 offered, while at another desk, they were seen going home at 100¾ bid, 101 offered.

DaVita still doing well

Among other recently priced new issues, a trader said that DaVita's 5¾% notes due 2022 "are trading very well."

He saw the Denver-based kidney-health company's new issue having gotten as good as 102½ bid, "so that's a nice move."

The company priced its $1.25 billion offering - upsized from an originally announced $1 billion - at par last Tuesday. The notes moved up immediately to above the 101 level, but then "kind of stalled for a little bit [and] then added another point."

The bonds were up from the 101¼ bid, 102¼ offered at which they had been quoted on Monday.

He said that outside of the move in DaVita, he did not see anything else really standing out among the recently priced issues.

"Not really," he opined. "Things that had gains held their gains, clearly. The market remains firm - but nothing really stood out."

With the primary having had its big burst of activity over the past several weeks and anyone needing to do a deal having opportunistically done so, he predicted, "The new-issue is going to be quiet for the next two weeks."

New deals fall silent

Among other new deals, there really was not much movement seen.

One market source, for instance, quoted Sprint Nextel Corp.'s 7% notes due 2020 at 101 3/8 bid, 102 1/8 offered - about the same level where he had seen the Overland Park, Kan.-based wireless carrier's $1.5 billion offering on Monday. Those bonds had priced at par on Aug. 9 and gradually moved up over the next few sessions to above the 101 level before leveling off.

He also saw Community Health Systems Inc.'s 5 1/8% senior secured notes due 2018 unchanged at 102½ bid, 103 offered. The Franklin, Tenn.-based hospital operator had priced its $1.6 billion issue - upsized from $1.2 billion originally - at par on Aug. 8.

The notes almost immediately jumped to above the 102 level when they began trading the following day and have held those levels ever since then.

At another desk, a trader said that movement in last week's deals was "strictly situational - onesies, twosies. Nothing was really trading."

He said: "The last two weeks of the summer are never eventful - and this week has been pretty quiet. [Wednesday] and Thursday are really it. Friday's a no-brainer, and next week's as slow as can be. That doesn't pay the bills for any of us, but it is what it is. August is over.

"We're babysitting until after Labor Day," he added.

Firmer tone seen

Away from the nearly comatose new-issue market, the trader said that "nothing specific" was going on, "just a few clean-ups here and there, but the market definitely felt firm, up by a quarter-point or so. Buyers were filling in.

"It wasn't name-specific - just better buyers," the traded noted.

Indicators turn mixed

Statistical indicators of junk market performance, which strengthened on Monday after having been mixed for two sessions at the end of last week, once again went back to being mixed as derivatives faltered, although performance measures in the cash market held up.

The Markit Group CDX North American Series 18 High Yield Index dropped back by 3/16 point on Tuesday, finishing at 98½ bid, 98 5/8 offered. It had been up by 5/16 of a point on Monday.

But the KDP High Yield Daily Index, meanwhile, posted its second straight gain, shooting up by 12 basis points to end at 78.90. On Monday, it firmed by 4 basis points - its first positive session since Aug. 7. Its yield, meantime, was likewise lower for a second consecutive day, coming in by 5 bps to end at 6.20%.

On Monday, the level had dipped by 2 bps - its first narrowing in nine sessions.

And the widely followed Merrill Lynch U.S. High Yield Master II Index notched its third straight gain on Tuesday, moving up by 0.146%, on top of the 0.117% advance seen on Monday.

That lifted its year-to-date return to 9.954%, up from Monday's 9.794% and a new peak level for 2012. This surpassed the old high-water mark of 9.838%, set on Aug. 8. The index is now at its highest level since the last session of 2010, when it closed that year with a 15.19% return.

The yield to worst, meanwhile, came in to 6.77%, which marked a new low for 2012, narrowing from the previous low point of 6.808% set on Aug 8 and matched on Monday.

ATP active again

Among specific names, ATP Oil & Gas' 11 7/8% second-lien senior secured notes due 2015 were once again the busiest junk issue, with a market source seeing some $38 million of those bonds changing hands - although that was only about half of the more than $75 million seen to have traded in round lots on Monday.

The open of the week was the first session after the Houston-based energy offshore exploration and production company's late-Friday Chapter 11 filing with the U.S. Bankruptcy Court for the Southern District of Texas.

But while those bonds were seen up by anywhere from 2 to 3 points on Monday and trading as high as 32½ bid, they came back in on Tuesday for most of the session, at some points even dipping below 30 bid and trading for much of the day around 311/2.

In its bankruptcy filing, the company blamed much of its troubles on the April 2010 Deepwater Horizon accident in the Gulf of Mexico. Although ATP was not involved in that disaster, it said that the resulting federal moratorium on new deepwater energy drilling in the Gulf severely affected the company's oil production and finances.

Coal climbs on court case

Also in the energy sphere, bonds of some coal operators were seen higher, in line with a rise in the sector's stocks following a favorable court ruling against government efforts to impose new restrictions on the coal industry.

Among the gainers were Peabody Energy Corp., whose 6½% notes due 2020 gained a half-point, to 104¼ bid, while cross-town St. Louis rival Arch Coal Inc.'s 7¼% notes due 2021 were up by 1 point, at 91 bid. Alpha Natural Resources Inc.'s 6¼% notes due 2021 gained 1¼ points to close at 92 bid.

The coal paper rallied after the U.S. Court of Appeals for the District of Columbia overturned a regulation clamping down on power plant pollution blamed for unhealthy air in neighboring states.

The appeals court ruled 2 to 1 that the Environmental Protection Agency's cross-state air pollution rule had exceeded the agency's statutory authority.

The judicial panel criticized what they called EPA's "massive emissions reduction requirements," which the judges said it had imposed on plants in upwind states without regard to permitted legal limits.

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