High-yield primary looks to January deals; Friday's ConvaTec firms amid mostly quiet secondary

By Paul Deckelman and Paul A. Harris

New York, Dec. 20 - With a year of record new issuance under its belt, it looked on Monday as though the high-yield primaryside has already moved past this year and is looking ahead to the next.

No offerings priced during the session as none are being actively marketed.

The sole flurry among the new dealers came as syndicate sources heard of a pair of transactions expected to come as January business: a $2.25 billion behemoth of a secured notes offering from communications network infrastructure provider CommScope, Inc. and a $200 million issue from cruise ship operator Viking River Cruises, Inc.

The secondary market, meanwhile, was not much more lively. Friday's new deal from ConvaTec Healthcare was heard by traders to have moved up a little from its initial aftermarket levels, and recent new issues from Atkore International, Inc. and Syniverse Holdings, Inc. held onto the secondary market gains they notched after pricing last week.

But away from that, it was pretty much a snooze-fest. Although market indicators showed a generally firm tone, volume fell from Friday's already pretty sedate levels, with many participants choosing to take off for this holiday shortened week, which will see an early close Thursday and a full shutdown Friday.

Recently busy names like the Great Atlantic and Pacific Tea Co. and Motors Liquidation Co., the "old GM," saw what traders considered to be decent activity levels, but no real price change.

With the buyside in holiday mode, engaged in wrapping up 2010 business, the market is virtually closed for two weeks, sources said.

Given that timeline, it is unlikely that issuers and dealers will make any announcements ahead of Christmas, given the possibility that such announcements might be overtaken by market events or news events in the interim.

Nevertheless, January is expected to be a busy month in the primary market, sources said on Monday.

ConvaTec moves up

Among recently priced new deals, ConvaTec Healthcare's 10½% senior notes due 2018 were quoted by a trader as having moved up to 100¾ bid, 101¾ offered.

The Skillman, N.J.-based medical technology company's $750 million deal had priced at par on Friday as part of a larger $1.48 billion-equivalent three-part offering, which also included euro-denominated tranches of senior secured and unsecured notes.

When the new dollar bonds were freed to aftermarket trading late Friday, they were seen to have moved up slightly, going out quoted at 100¼ bid, 100½ offered, setting the stage for Monday's improvement.

Atkore, Syniverse hold their own

Among other transactions from last week, a trader saw Atkore International's 9 7/8% seven-year senior secured notes at 103 bid, 103½ offered.

That was around the levels seen on Thursday and Friday for the $410 million issue, well up from the par level where the Princeton, N.J.-based industrial manufacturer had priced its deal on Wednesday.

A trader said that Syniverse Holdings' 9 1/8% notes due 2019 were staying around the 102¼ bid, 102¾ offered level at which the deal had finished out last week.

The Tampa, Fla.-based provider of technology and services to the communications industry had priced the $475 million bond offering at par on Thursday.

A trader said that as had been the case on Friday, there was nothing going on in Thursday's other new deal. Louisville, Ky.-based home health care services provider Res-Care Inc.'s $200 million tranche of 10¾% notes due 2019 priced at par Thursday, then moved up in initial aftermarket trading to 102¼ bid, 103¼ offered and have not been heard from since.

A trader said that he had seen just "onesies and twosies" in terms of trades for the new issues, "no blocks of bonds. We have orders on this desk, but it's very illiquid stuff, very tough to get done."

Secondary indicators firmer

Away from the new deal arena, a trader saw the CDX North American Series 15 HY index up by 1/8 of a point on Monday to close at 102¼ bid, 102½ offered, after having eased by 1/16 of a point on Friday.

The KDP High Yield Daily index meantime rose by 3 basis points on Monday to end at 73.84, after having retreated by that same amount on Friday. Its yield went down by 1 bp to 7.49, after having gone up by the same amount on Friday.

The Merrill Lynch High Yield Master II index gained 0.084% on Monday on top of the 0.05% rise on Friday. That left its year-to-date return at 14.281%, up from 14.185% on Friday, although the index remains down considerably from the 2010 peak level of 15.602% recorded on Nov. 9.

Advancing names led decliners for a second straight session Monday, holding around a six-to-five edge versus Friday's difference of just a few dozen issues out of the almost 1,300 that traded.

Overall activity, represented by dollar-volume levels, was off by 7% on Monday, after having nosedived by 44% on Friday from the previous session's levels.

A trader said that there was "not much to report" about the day's dealings, while a second characterized it as "a nonevent."

The latter source also called the session "dead" and said that "there were no bonds that moved up, or bonds that moved down" on any kind of size. "It was very illiquid and very situational, nothing cooking."

He said that rather than concentrating on the here and now, with activity winding down before the year-end holidays, "the few analysts that are in are looking at strategies going into 2011, to see how they want to be in bonds versus equities and see how far they want to be hedged or not. That's what a lot of accounts are doing right now - trying to develop a strategy for next year, if they're even in."

A lot of accounts "have just closed positions and [are] doing cleanup there and there."

"There was really light volume everywhere," yet another trader said. "It seems like at whatever firm you're talking to, half [the people there] are taking this week off and the other half are taking next week off. And that half that's still in the office doesn't want to do anything because the other half is out."

He added, "There was no real theme or anything too hot on this cold December day."

"You've got to pay attention really closely this week," another trader opined, "because it's a disappearing week."

A&P hangs onto gains

He said that the Great Atlantic & Pacific Tea Co.'s 11 3/8% senior secured notes due 2015 "have been on a ride" of late, pushing up to around the 95 bid level.

"That's a big move over the last week," when the troubled Montrose, N.J.-based supermarket operator's paper started out the week dipping as low as 70 following its not-unexpected Dec. 12 Chapter 11 filing. It then quickly bounced back up to its prior levels, around 80, and then proceeded to move up all the rest of last week, reaching the mid-90s by Friday.

"They got here [the mid-90s] on Friday," he acknowledged, "so it's holding up at that 95 range."

He added that "it looks like there was a decent amount of trading" in the credit "not a whole lot, but a decent amount of trading."

In commenting on the bond's rise to current levels versus its pre-filing levels around 80, he noted that "they filed and, obviously, the second-mortgage people did a little work and thought 'gee, they must be worth something.' "

The trader also saw the company's convertible issues - the 5.125% notes due 2011 and 6.75% notes due 2012 - essentially unchanged on the session at 33 bid, 34 offered. The converts now trade like regular junk bonds now that the underlying equity is considered almost worthless.

However, he saw "no volume to speak of" in those two issues, in contrast to the senior bonds.

All three issues had fallen sharply ahead of the bankruptcy filing, with the converts having dropped by as much as 45 points into the mid-to-upper 20 ahead of the filing and the 11 3/8s having traded down into the 80s from prior levels in the low 90s.

All of the A&P bonds are now trading flat, or without their accrued interest, in the wake of the bankruptcy filing.

The company is expected to close as many as 100 of its more than 300 A&P, Pathmark and Waldbaum's stores in its territory in the Northeastern U.S.

Auto names mostly idling

Elsewhere, a trader saw Ford Motor Co.'s 7.45% bonds due 2031 up ½ a point at 107½ bid, 108½ offered.

He also saw Ford rival General Motors Corp.'s old 8 3/8% bonds due 2033 - now listed under the name of Motors Liquidation Co. - unchanged at 31¾ bid, 32¾ offered.

A second trader saw "decent volume" in that benchmark paper, calling the bonds unchanged at around the 32 bid area.

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