Dole deal drops out; new Olin bonds active in otherwise quiet session; secondary in retreat

By Paul Deckelman and Paul A. Harris

New York, Aug. 17 - No sooner had it arrived in Junkbondland than Dole Food Co., Inc.'s proposed $325 million offering of senior secured notes - just announced on Friday afternoon, with pricing expected Monday - was gone, heard by junk market syndicate sources to have been postponed due to "market conditions." That left the high yield primary sphere - which had been a hotbed of activity pretty much all of last week - high and dry, with no near-term deals sitting on the forward calendar.

The most recent deal to come out of the primary arena, Olin Corp.'s smallish offering of 10-year senior notes, which priced Friday, was meantime heard to have been busily trading around still hovering at levels a point or so above par.

One trader estimated that with well over $30 million of those bonds changing hands, Olin was probably the busiest bond of the day. Other new issues were considerably less busy, with no activity seen in Sirius XM Radio Inc.'s new six-year senior secured notes, while DISH Network Corp.'s new 10-year mega-deal continued to lose ground, now trading well below issue price.

Back among the established bonds, traders said the secondary was pretty much struggling, dragged lower by equities, which fell the most in six weeks on investor fears that the hoped-for consumer spending rebound will be less of a boost to the economy than previously expected. Among the major losers was Texas Competitive Electric Holdings Co.

Heading toward the Monday close, the CDX High-Yield 12 index had given up 1 3/8 points, while cash bonds were 1 to 3 points lower on the day, said an official on a syndicate desk.

"The market is off across the board," said an asset manager from a high-yield mutual fund a little later.

"The high-beta leveraged buyouts traded off pretty hard," the buy-sider remarked, adding that TXU Corp. bonds were off 4½ to 5 points.

Those bonds rallied when investors were "chasing beta," the investor said.

"Now they're selling off because people are staying away from beta."

Dole pulls $325 million

Weakness in the high-yield secondary market also impacted the new issue market, sources said.

Dole Food postponed its $325 million offering of seven-year senior secured notes on Monday due to market conditions.

The Westlake Village, Calif.-based fruit and vegetables company planned to use the proceeds to fund the redemption at par of its 7¼% senior notes due 2010.

Deutsche Bank Securities, Bank of America-Merrill Lynch and Wells Fargo Securities were joint bookrunners.

Market-watchers will recall that One Communications Corp. recently pulled its deal, according to information from a ratings agency, which appeared one week ago. Moody's Investors Service issued a statement saying that it had withdrawn the B2 rating it had previously assigned to the deal, declaring that the company "has elected not to proceed with the note issuance due to inopportune market conditions."

That deal had been in limbo since late June, according to market sources.

Meanwhile, although requests for initial guidance levels on Dole's proposed seven-year secured paper garnered no responses, one informed source said that Dole came with a very aggressive view on where the new paper should price.

Those pricing expectations withered as the company's existing bonds traded off 1 to 1½ points on Monday, the source added.

Elsewhere, a sell-side source not in the deal recounted that Dole launched the bond offer last Friday, and said that it never appeared to really gain any traction.

Meanwhile Dole Foods is also planning a $500 million initial public stock offering, proceeds from which will be used to pay down debt, with the remaining proceeds, if any, earmarked for general corporate purposes.

Dog days at last

As Dole canned its proposed bond deal due to market conditions, other potential issuers were likely headed toward the sidelines as well, investment bankers said on Monday.

The sell-off in high yield appears to be sidelining at least three potential "price-sensitive" issuers who were set to come this week, according to a syndicate source.

Another banker, from a different syndicate desk - recounting that last week was the busiest week in the primary market since June 2007 - suggested that the rally in junk seems to be coming to an end for the summer.

This official knew of a pair of issuers that were initially thinking about coming last week, but ultimately elected to hold off until the present week.

Either they were not completely ready, or else they thought conditions were going to improve, and did not want to jam the deals into the market, the banker said.

Their situations weren't dire, but rather they were opportunistic issuers, the source added.

"Last week was a big week, and typically August is slow," the syndicate banker reasoned.

With the notable burst of issuance during the first half of August, the annual slow-down seems to have arrived a little later than usual, the source added.

"But it appears that people have run out of gas until post-Labor Day," the official said.

Meanwhile a mutual fund manager suggested that "price sensitive" issuers, walking the sidelines in hope of sunnier days ahead, might care to re-think their positions.

"They can be cute," said the buy-sider. "But at some point they need capital.

"To me it seems crazy that investors have been giving it to them at 8%," the investor added.

$400 million for Tuesday

Having said as much, this investor professed visibility on a $400 million deal expected to come on Tuesday. The source declined to furnish an issuer name, however.

Further calls to sources failed to produce any namers of names.

However one syndicate official volunteered that such a deal could come from either a telecom or a natural resources name.

Olin bonds busy and better

Traders said that Olin Corp.'s new 8 7/8% notes due 2019, which priced on Friday, were busily traded during Monday's session.

One saw the Clayton, Mo.-based chemical and firearms ammunition manufacturer's new bonds at 100 3/8 bid, and estimated that turnover in the issue hit $34 million, making it the most active high yield issue of the day.

The company had priced $150 million of those senior notes on Friday at 99.19 to yield 9%, and they had been seen on Friday trading as high as 101½ bid, 102½ offered.

Another trader said that he saw a 101¼ bid get hit in the morning, "and the market was bracketing [101] most of the day."

He said that there had been "a lot of trading in the morning between 101 and 1011/2, a lot of trades around 101, with a low tick of 1003/4." He said that activity in the bond on the Trace bond tracking system ran to "two pages of trades. It looks like $30 million is a decent number." He added that "given the size of the issue, there weren't many" trades in it that were more than $2 million or $3 million at a time."

At yet another desk, a trader said that new Olin bonds had firmed to 102 bid, from 101 previously

DISH decline continues

A trader said that DISH Network's new 8¼% notes due 2019 were trading at 95¾ bid, 96¾ offered, continuing their deterioration from their pricing levels.

The Englewood, Colo.-based satellite TV broadcaster priced $1 billion of those bonds late last Wednesday - although the terms were not heard until Thursday - at 97.467 to yield 8 ¼%. Those bonds were seen languishing around the issue price late last week.

Dole delay has little impact on '10 bonds

Apart from Olin on the upside and DISH on the downside, the new bonds that priced last week "were asleep today," a trader said.

Even though Dole Foods was heard to have postponed its planned bond issue, a trader said that its 7¼% notes due 2010 - the issue which was supposed to have been redeemed using the proceeds of that now-delayed deal - was holding their own and then some, quoted at par bid from 99 7/8 last Thursday, though on only $2 million of turnover.

Nobody saw Sirius

Several traders said that they did not see any trading on Monday in Sirius XM Radio's new issue of 9¾% senior secured notes due 2015; the New York-based satellite radio broadcaster priced $257 million of the bonds - slightly upsized from the originally announced $250 million - on Thursday at 97.248 to yield 10 3/8%, and those bonds had firmed to 99¼ bid on the break, before settling in on Friday at 981/2.

One of the traders said that he did see the company's outstanding 9 5/8% notes due 2013 firm to 89 bid from prior levels at 88 1/8, on $2 million traded.

Market indicators head south

Back among the established issues, the CDX Series 12 High Yield index, after having fallen ¾ point on Friday, capping a week-long slide, took its negative momentum into Monday's market, with a trader seeing the market measure down another 1¼ points on Monday, finishing at 86¾ bid, 87¼ offered.

The KDP High Yield Daily Index, which had lost 18 basis points on Friday, lost another 36 bps on Monday to end at 66.09, while its yield widened by 11 bps to 9.35%.

In the broader market, advancing issues - which had led declining issues for an amazing 21st straight session on Friday - finally threw in the towel on Monday, falling behind the losers by a nearly seven-to-four margin.

"The market was heavy today," a trader said, adding that "some bids were down one point and more from last week's levels. We saw some sellers looking to move decent-sized positions in a variety of names."

However, a second trader said there was "not a lot to report" on Monday. "It was pretty quiet, pretty much like a vacation day, or a holiday."

Yet another trader agreed, saying "I don't really recall seeing something flashing by on a regular basis today, which leads to being a lack of interest, a lack of focus, a lack of activity." The last couple of weeks in August," he said, "are always ugly," in terms of the market sliding into inactivity in anticipation of the approaching Labor Day holiday. Against that kind of background, with people taking off for vacations during the normally quiet time in the junk market, "there's a lack of people, and reduced staffs.

"With just a couple of trades, it's pretty tough to prove" where a given bond really is, he said.

Little activity in barometer issues

A trader saw relatively restrained activity, and mostly to the downside, in the large, liquid credits whose movements are sometimes considered by investors to be barometers measuring the overall market tone. For instance, he saw Franklin, Tenn.-based hospital operator Community Health Systems Inc.'s 8 7/8% notes due 2015 off by ½ point at 99½ bid, on $5 million traded.

That's also how much trading there was in Greenwood Village, Colo.-based financial transaction processor First Data Corp.'s 9 7/8% notes due 2015. Those bonds dropped to 83 3/8 bid from Friday's level at 843/4.

He saw no dealings in Aramark Corp.'s 8½% notes due 2015. The Philadelphia-based food service company and uniforms provider's paper had last traded in size at 98½ on Friday, though turnover then was only $2 million.

He did see a fair amount of trading in Freeport McMoRan-Copper & Gold Corp.'s 8 3/8% notes due 2017, which is usually one of the more actively traded bonds in the junk market on a day-in, day-out basis. The Phoenix-based metals mining company's notes had in fact moved up to 103 3/8 bid from 102 7/8% on turnover of $26 million - the most for any established junk bond and the most for any junk bond, period, other than the new Olin Corp. notes.

He said that Freeport's bonds were "definitely bucking the trend, because we certainly have a negative tone out there, obviously, with equities getting smacked around."

Another trader agreed that the weakness in the equity market was pulling junk bonds lower "right off the bat." The bellwether Dow Jones Industrial Average plunged by 186.06 points, or an even 2%, to close at 9,135.34, while the broader market indexes like the Standard & Poor's 500 and Nasdaq composite followed suit, down 2.43% and 2.75%, respectively.

Among the more actively traded junk issues, he saw BB rated names down ¼ to ½ point, "decent" single-B names down "more like a point," while CCC or "weak" B names were down "even more than that".

However, he said that among the bonds that weren't so active, "if anybody bid down for it, they weren't going to see an offering on it if it wasn't there before - and the volume was very light today [Monday] overall. After the Top Ten names, volume was well under $10 million per name, and they were pretty much DirecTV [Holdings, LLC] and TXU."

The latter name "seemed to be down a bit today - though last week, it was down a lot." He added that he did not know what was causing the activity in the Dallas-based power generating company and utility operator, having seen no fresh news about it.

He saw TXU unit Texas Competitive Electric Holding's 10¼% notes due 2015 trading around the 67-68 level, down from levels in the 70s last week.

Another trader agreed that the bonds had fallen to around 67, pegging that as a 6 point drop on the day. He said about $18 million of the bonds had changed hands.

DirecTV trading actively

That trader also saw no small amount of activity in DISH Network competitor DirecTV's bonds, with the 7 5/8% notes due 2016 down 3/8 point at 105, on volume of $13 million, while its 8 3/8% notes due 2013 also traded in volume of $13 million, losing ¼ point to 1021/4.

There was no immediate fresh news out about the El Segundo, Calif.-based satellite TV broadcaster.

Ply Gem pop fizzles out

Elsewhere, a trader said that Ply Gem Industries Inc.'s bonds - which had shot up smartly on Friday after the Cary, N.C.-based building products company's favorable quarterly numbers and a positive conference call - were so inactive on Monday that "I don't even recall seeing a quote" on them. The 11¾% senior notes due 2013 had one trade at 84, "about where they were" on Friday, while "there was some activity" in its 9% subordinated notes due 2012, which traded up to 39 bid, "up a little higher than where they were" on Friday. But activity in the credit, he said, was "not robust, just a couple of trades."

Also in the homebuilding and real estate sphere, a trader said that shopping center operator Rouse Co.'s 7.20% notes retreated to 76½ bid from 78 at the tail end of last week. He said that $9 million of the bonds of the General Growth Properties unit had changed hands.

He also said that Realogy Corp.'s notes "look unchanged, maybe quoted a little lower, but with no activity" with the 10½% notes due 2014 at 53-55.

CIT activity trails off as tender finishes

A trader said that CIT Group Inc.'s bonds "did not seem terribly active."

Now that the bonds that were scheduled to mature Monday have been either tendered to the company or the remainder are being taken out at full value, he said that among its short-dated issues, the 4 1/8% notes coming due on Nov. 1 were at 72 bid, 74 offered, "pretty unchanged" on the day, on "not much activity." He also saw "no activity" in the New York-based commercial lending company's 7 5/8% notes due 2012, leaving them unchanged around the 58 mark.

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