Interactive Data prices to close holiday-shortened $6.15 billion week; funds lose $223 million

By Paul Deckelman and Paul A. Harris

New York, April 17 - The high-yield primary sphere closed out a holiday-shortened week on Thursday with just one new U.S.-dollar-denominated and junk-rated bond issue having come to market during the session - an upsized $350 million of five-year notes from Interactive Data Corp., a provider of financial market data to paying customers.

That closed out a week that was shortened by one trading day due to the market close for the Good Friday holiday observance and in which $6.15 billion of new junk paper had priced in 11 tranches, according to data compiled by Prospect News. That was well down from the week before, ended April 11, when $12.89 billion had come to market in 20 tranches - the heaviest new-issuance week so far this year.

As of the close Thursday, year-to-date issuance for 2014 so far stood at $92.6 billion in 190 tranches, down by 8.3% from the busy pace seen a year ago, when $100.87 billion had priced in 216 tranches by this point on the calendar, according to the data. However, junk's recently accelerated new-issuance pace - helped enormously by last week's nearly non-stop new-bond barrage - has been closing the year-over-year percentage gap markedly of late. The difference was 13.7% for the previous week and 21% two weeks ago.

With an abbreviated session ahead of Thursday's pre-holiday early close, traders saw little real activity in the secondary market. The one major exception was Wednesday's big new issue of eight-year notes from energy operator Denbury Resources Inc., which was by far and away the clear volume leader, racking up many times the volume of the next busiest junk issue. Denbury's bonds showed modest gains on the day amid that heavy trading.

Another notable name was Rice Energy Inc.'s new eight-year deal, which had also come to market on Wednesday and which had firmed smartly in initial aftermarket dealings. Rice continued to trade at those stronger levels on Thursday.

Overall, statistical junk performance indicators were mixed for a third straight session on Thursday, and they were also mixed versus where they have ended the previous week for a second straight time, which followed three straight weeks of weekly improvements all around.

Meanwhile, another indicator - the flow of fresh money into or out of high-yield mutual funds and exchange-traded funds, considered a good gauge of overall junk market liquidity trends - was lower for the first time in three weeks.

Junk funds lose $223 million

Near the close of Thursday's activity, market sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said that $223 million more left those funds than came into them during the week ended Wednesday.

That stood in contrast to the $640 million net inflow reported last week by Arcata, Calif.-based AMG, a unit of the Lipper analytics division of Thomson Reuters Corp., for the seven-day period ended April 9, which had been the second consecutive weekly inflow seen, coming on the heels of the $493 million cash infusion reported during the week ended April 2.

Those two inflows had thus totaled about $1.13 billion, according to an analysis of the data by Prospect News, and more than offset the $196 million net outflow that AMG/Lipper had reported during the week ended March 26, the last previous outflow before the latest week's cash loss.

The latest week's outflow was only the fourth such setback seen in the 15 weeks since the start of this year; besides this week and the week ended March 26, there were back-to-back cash bleeds in the weeks ended Jan. 29 and Feb. 5 totaling an estimated $1.88 billion. There have meanwhile been 11 net inflows since the start of the year.

The latest week's outflow dropped the year-to-date net inflow number down to an estimated $3.72 billion, according to the analysis, versus the previous week's figure of an estimated $3.95 billion, its peak level for the year so far.

Cumulative fund-flow estimates may be revised upward or downward or may be rounded off and could include unannounced revisions and adjustments to figures from prior weeks.

In 2013, inflows were seen in 33 weeks, versus 20 weeks of outflows, with total net inflows for the year tallying up to about $1.27 billion, according to the analysis.

Another fund-tracking service, the Cambridge, Mass.-based EPFR Global, meantime saw a net inflow for the week of about $200 million.

EPFR's methodology differs from AMG/Lipper's as its fund universe includes many non-U.S.-domiciled mutual funds and ETFs, including strictly European junk funds and broader global funds, versus AMG/Lipper's strictly domestic orientation, and the two services' weekly numbers usually are quite different. However, the results generally point in the same direction, with a rare divergence here and there.

EPFR's headline weekly number showed an inflow in the latest week versus AMG/Lipper's outflow, although EPFR's inflow was sharply reduced versus the one it calculated for the week ended April 9 - which it said was "almost double" AMG/Lipper's $640 million - essentially paralleling AMG/Lipper's shift from last week's sizable inflow to this week's outflow. It was EPFR's 13th such gain recorded in the 15 weeks since the start of the year, versus just two outflows, which were in the weeks ended Jan. 29 and Feb. 5.

Analysts said that the sustained flows of fresh cash into junk - and the mutual funds and ETFs represent but a small, though very observable and quantifiable percentage of the total amount of investor money coming into or leaving the more than $1 trillion junk market - has been a key catalyst behind the relatively strong performance seen by both the junk primary and secondary markets over the past two years and which has mostly continued on into this year as well.

Interactive Data upsizes

Interactive Data priced Thursday's sole dollar-denominated deal, an upsized $350 million issue of five-year senior notes (Caa2/B-) that came at par to yield 5 7/8%.

The yield printed in the middle of the 5¾% to 6% yield talk.

The deal was upsized from $200 million. Along with the upsizing of the bonds, the company downsized its term loan.

Barclays was the lead left bookrunner. Goldman Sachs & Co., BofA Merrill Lynch, Credit Suisse Securities (USA) LLC, UBS Securities LLC, Deutsche Bank Securities Inc., Morgan Stanley & Co. LLC and Wells Fargo Securities LLC were the joint bookrunners.

The Bedford, Mass.-based provider of financial market data plans to use the proceeds to refinance its term loan B and senior notes and to fund a dividend.

Alain Afflelou two-part deal

In the euro-denominated market, France-based optical and eyewear company Alain Afflelou priced €440 million of five-year notes in two tranches through two special-purpose vehicles.

3AB Optique Developpement SAS priced €365 million of senior secured notes (B2/B/BB-) at par to yield 5 5/8%, at the tight end of yield talk in the 5¾% area.

Lion/Seneca France 2 SAS priced €75 million of senior unsecured notes (Caa2/CCC+/CCC+) at par to yield 7 7/8%, in the middle 7¾% to 8% yield talk.

Global coordinator J.P. Morgan Securities plc will bill and deliver. Credit Suisse Securities (Europe) Ltd., UniCredit Bank AG, Credit Agricole CIB and BNP Paribas were the joint bookrunners.

Proceeds will be used to refinance debt.

The week ahead

The Easter holiday weekend carries through the Monday session in London, where markets will be closed on Easter Monday.

When the primary market reopens in the week ahead, it will do so to a whopping €10.2 billion equivalent of proposed issuance coming in eight tranches of notes that are expected to price.

All of it is related to the acquisition of SFR by French telecom operator Numericable Group SA and its parent company Altice SA.

Altice is on the road with €4.15 billion equivalent of eight-year senior notes (B3/B), which are being sold in dollar- and euro-denominated tranches via left joint global coordinator Goldman Sachs.

Numericable is marketing €6.04 billion equivalent of first-lien notes (/B+/) in six tranches.

The deal includes €500 million and $920 million tranches of five-year notes, €1 billion and $2 billion tranches of eight-year notes and €1 billion and $2 billion tranches of 10-year notes.

Global coordinator JPMorgan will bill and deliver. Deutsche Bank and Goldman Sachs are also global coordinators.

The Altice and Numericable deals are going well, according to a New York-based high-yield investor who participates in dollar-denominated and euro-denominated deals.

'Pretty quiet'

In the secondary market, a trader observed that "it's been pretty quiet," with most of what little activity there was going on centered around the week's new and recently priced deals, which he said were pretty much "hanging around where they were for the last couple of days."

A second trader agreed that things were very slow and that virtually all of the investors' focus was on the new issues. Away from those new deals, he opined that "it's almost like [the non-new-deal secondary market] doesn't exist anymore. It's deadski."

Denbury dominates trading

The one name that stood head and shoulders above the other credits in Thursday's market was Plano, Texas-based independent oil and natural gas exploration and production company Denbury Resources' 5½% senior subordinated notes due 2022. The company had priced $1.25 billion of that paper at par in a quick-to-market deal on Wednesday, after upsizing the transaction from an originally announced $1.1 billion. They had traded slightly above par in initial aftermarket dealings.

During Thursday's session, a trader suggested that "DNR didn't move too much - up 1/4, down 1/4, up 1/8, down 1/8." He finally saw the bonds between 100 1/8 and 1001/4.

But a second trader said the new Denburys "picked up a little momentum. They started doing a little better," getting as high as 100¾ bid before coming off those highs to trade around 100½ to 100 5/8.

He quickly added, "I am sure that volume was pretty light."

A market source at another desk said that when the dust had settled, more than $100 million of the new bonds had changed hands in furious dealings, crammed into the shortened pre-holiday session. He quoted the Denbury bonds up 3/8 point on the day at 100 5/8 bid.

Rice on a roll

One of the traders saw another one of the slew of oil and gas company new deals that had priced on Wednesday, Canonsburg, Pa.-based Rice Energy's 6¼% notes due 2022, "hanging in there" at around the higher levels it had traded at on Wednesday after the $900 million offering had priced as a scheduled forward calendar deal. Those bonds came to market at par after the company had upsized its deal from $750 million originally, and they had moved up to 101¼ bid, 101¾ offered when they were freed for aftermarket activity.

On Thursday, the trader said, the bonds were about unchanged at 101¼ bid, 101½ offered.

A second trader initially pegged them in that same 101¼ bid, 101½ offered area, although he later quoted them at 100¾ to 101 bid, but he dismissed the level as atypical. "Maybe someone's just trying to fish" to get the bonds at a lower price, he theorized.

Among Wednesday's other energy names, a trader saw Endeavor Energy Resources, LP's add-on to its existing 7% notes due 2021 up around a 105¾ to 106 bid context, attributing the gains to "better buyers."

The Midland, Texas-based E&P company, along with its EER Finance, Inc. subsidiary, had priced its $250 million add-on off the forward calendar at 104.75 to yield 5.942% after the deal was more than doubled in size from an originally shopped $100 million.

A second trader located the bonds at 105¼ bid, 106 offered, calling them unchanged.

Traders saw no activity either Wednesday or Thursday in Fort Worth, Texas-based Athlon Energy Inc., which had priced a quickly shopped $650 million of 6% notes due 2022. The notes came to market at par after the deal was upsized from $500 million originally. "I haven't seen it," one acknowledged.

Rail bonds take a ride

Among the non-energy new deals, a trader said that both tranches of Tuesday's megadeal from Florida East Coast Holdings Corp., a Jacksonville, Fla.-based freight railroad operator, firmed on Thursday.

Along with its Florida East Coast Industries, LLC subsidiary, it priced $1.5 billion of new paper in two tranches off the forward calendar after having upsized the offering from $1.1 billion originally.

The deal consisted of $875 million of 6¾% senior secured notes due 2019, which priced at par after upsizing from $850 million, and $275 million of 9¾% senior unsecured notes due 2020, which priced at par after upsizing from $250 million.

The secured bonds moved up to 102 bid, 102¾ offered on Thursday, a trader said, while the unsecured notes firmed to 101¼ bid, 102 offered.

Interactive hits aftermarket

A trader at mid-afternoon saw Interactive Data's new 5 7/8% notes due 2019 quoted at 100 1/8 bid on the break, although he did not see any right side on that trade.

However, he predicted that "it sounds like this one is going to do very well."

Indicators mixed on day, week

Statistical junk performance indicators were mixed for a third straight session on Thursday, and they were also mixed versus where they have ended the previous week for a second straight time, which followed three straight weeks of weekly improvements all around.

The Markit Series 22 CDX North American High Yield index gained 1/32 point on Thursday to finish at 107 bid, 107 1/16 offered, its second consecutive rise. It had moved up by 9/32 point on Wednesday.

The day's closing level was up from the 106½ bid, 106 5/8 offered at which the index had closed out the previous week on Friday, April 11.

The KDP High Yield Daily index gained 3 basis points to end at 74.99, its first improvement after two consecutive losses, including Wednesday, when it had dropped by 4 bps.

Its yield, meanwhile, was unchanged for a second consecutive session, closing at 5.20%.

The index reading was thus down from the 75.03 seen last Friday, although the yield had come in slightly from 5.21% the week before.

The widely followed Merrill Lynch High Yield Master II index suffered its first loss after three consecutive gains, dipping by 0.016%, versus Wednesday's 0.019% strengthening.

Thursday's loss dropped the index's year-to-date return to 3.349%, down from Wednesday's 3.366% and down as well from its peak levels for the year so far of 3.399%, which was set last Thursday, April 10.

However, it was up from the 3.262% reading seen the previous Friday, marking a fifth straight week-over-week gain.

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