Upsized Virgin Media prices, United Rental and Lamar drive-by; funds edge up $9.5 million

By Paul Deckelman and Paul A. Harris

New York, Oct. 25 - Virgin Media Inc. priced an upsized $1.54 billion equivalent 10-year dual-currency offering on Thursday, including $900 million of dollar-denominated bonds, in addition to a tranche of sterling-denominated paper.

Junk bond traders said the international phone, cable and internet provider's new bonds firmed smartly when they hit the aftermarket.

Out of that same communications sector, outdoor advertising concern Lamar Media Corp. priced a quick-to-market $535 million of 10.5-year subordinated bonds, which was quoted a little better in initial dealings.

And that sector saw a somewhat unusual deal - actually bigger than the Virgin transaction - from Clear Channel Communications Inc., which issued $2 billion of new seven-year bonds in an exchange for a like amount of term loan debt. Those notes traded in the low 90s, while the company's existing paper also traded off in busy dealings.

In the sole non-communications deal to come to market, United Rentals (North America), Inc. did a quickly-shopped $400 million of 10.5-year debt, which traded solidly higher on the break.

Shearer's Foods Inc.'s new seven-year deal was heard to have added to the initial gains notched after the snack-food maker's upsized $235 million deal priced on Wednesday.

Away from the new issues, PSS World Medical Inc.'s bonds zoomed nearly a dozen points in brisk dealings on the news the medical products distributor is to be acquired. Aircraft components maker Spirit AeroSystems Holdings Inc.'s bonds lost altitude as the company warned that it will have to take a sizable earnings charge.

The overall junk market was seen as unchanged, with statistical market performance indicators mixed.

High yield fund flows - a good barometer of overall junk market liquidity trends - showed a slight gain, according to a major observer of such data, although another service that tracks money flows into and out of mutual and exchange-traded funds saw a more substantial increase.

AMG: funds up $9.5 million

As things were winding down for the day on Thursday, market sources familiar with the weekly AMG high-yield mutual fund-flow statistics said that in the week ended Wednesday $9.5 million more came into those funds than left them.

It was the second consecutive relatively small inflow to be reported by Arcata, Calif.-based AMG, a unit of Thomson Reuters' Lipper/FMI division. It came on the heels of the only slightly less modest $52 million cash addition seen in the week ended Oct. 17. That inflow had broken a three-week string of outflows totaling $1.3 billion, according to a Prospect News analysis of the figures.

And that three-week losing streak, in turn, had brought an abrupt end to an amazing 15 straight weeks of inflows - dating all the way back to the week ended June 13 - which had dominated the market for the previous few months. Those inflows had totaled $13.6 billion in that time, according to the Prospect News analysis.

On a year-to-date basis, the cumulative net inflow figure held steady at an estimated $31.2 billion, off a little from the $32.4 billion total seen in the week ended Sept. 19 - the peak net inflow level for the year so far, according to the Prospect News analysis.

That year-to-date figure counts monthly-reporting funds as well as the weekly reporters, Lipper said, and includes exchange traded funds, which have emerged as a popular investment vehicle alongside more traditional mutual funds.

Inflows have now been seen in 35 out of the 43 weeks since the start of the year, against eight outflows, according to the analysis.

EPFR sees $1.43 billion inflow

However, another major fund-tracking service that uses a different methodology - Cambridge, Mass.-based EPFR Global - reported a considerably more formidable $1.43 billion inflow in the latest week. That was its third straight inflow, on top of the $1.29 billion seen the week before and a $952 million cash injection in the week ended Oct. 10.

The three inflows, totaling over $3.6 billion according to a Prospect News analysis of the data, represented a solid comeback from the week ended Oct. 3, when EPFR said $420 million more left the funds than came into them - the first such outflow recorded by the company after 16 straight weeks of inflows, dating back to the week ended June 13. During that long stretch, net inflows to those funds had totaled over $28 billion, according to the Prospect News analysis.

On a year-to-date basis, EPFR said that cumulative net inflows have now totaled $68.5 billion, a new peak level for 2012 so far. The agency has seen inflows in 37 weeks so far this year, against six outflows, the analysis indicated.

EPFR's calculation method differs from Lipper's, since the former includes non-U.S. domiciled mutual funds and ETFs in its tally, while Lipper is focused on domestic funds. The two services' numbers generally point in the same direction, although they diverge sometimes, including several times over the last few weeks when Lipper reported net outflows from the funds while EPFR saw net inflows.

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

The continued flow 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 money coming in - has been seen by analysts as a key element behind the high-yield secondary market's strong performance so far this year versus other fixed-income asset classes, and its active new-deal pace, which has recently surged past 2011's year-to-date totals.

Virgin Media upsizes

Three issuers each priced one dollar-denominated tranche apiece on Thursday, for a combined total of $1.84 billion.

All of the action was quick to market.

Virgin Media Finance plc priced an upsized $1,544,000 equivalent of notes in a debt-refinancing transaction that was upsized from the equivalent of $1.25 billion.

The New York-based entertainment communications company sold senior notes due on Feb. 15, 2022 (Ba2/BB-/BB+) in dollar and sterling denominations.

A $900 million tranche priced at par to yield 4 7/8%, at the tight end of yield talk set in the 5% area.

The physical bookrunners were J.P. Morgan and Goldman Sachs.

In addition Virgin Media priced a £400 million tranche of notes at par to yield 5 1/8%, on top of price talk.

The physical bookrunners switched places for the sterling deal: Goldman Sachs was on the left and J.P. Morgan was on the right.

Lamar Media prices at 5%

Lamar Media priced a $535 million issue of senior subordinated notes due May 1, 2023 (B1/BB-) at par to yield 5%.

The yield printed on top of yield talk, but 25 basis point beneath the 5¼% initial guidance.

J.P. Morgan and Wells Fargo were the joint bookrunners.

Proceeds will be used to redeem up to $137.2 million of the company's series B and C 6 5/8% senior subordinated notes due 2015, to fund the acquisition of NextMedia, to fund potential future acquisitions or partially repay the existing term loan B, and for general corporate purposes.

United Rentals at tight end

In other Thursday drive-by action United Rentals priced a $400 million issue of senior notes due on June 15, 2023 (B3/B+) at par to yield 6 1/8%, at the tight end of the 6 1/8% to 6¼% yield talk.

Bank of America, Morgan Stanley, Wells Fargo, Barclays, Citigroup and Credit Suisse were the joint bookrunners for the debt refinancing.

Shale-Inland sets talk

Dealers set the stage for what market sources expect to be a relatively quiet Friday session.

Laureate Education, Inc. upsized its notes offer to $575 million from $350 million, talking the add-on to its 9¼% senior notes due 2019 (Caa1/CCC) with a yield in the 9¾% area.

J.P. Morgan, Barclays, Citigroup, BMO, Credit Suisse, Goldman Sachs, KKR and Morgan Stanley are the joint bookrunners.

And Shale-Inland Holdings, LLC and Shale-Inland Finance Corp. set yield talk for a $250 million offering of seven-year senior secured notes (B3/B) at 8¾% to 9%.

UBS is the left lead bookrunner. Barclays, Deutsche Bank and BMO are the joint bookrunners.

William Lyon starts roadshow

One deal took a place aboard the active forward calendar.

William Lyon Homes, Inc. began a roadshow on Thursday for a $300 million offering of eight-year senior notes.

The deal is set to price during the middle part of the week ahead.

Credit Suisse is the bookrunner for the debt refinancing.

Initial guidance is in the 8% area, according to a trader from a high-yield mutual fund.

Virgin is victorious

In the secondary market, the new Virgin Media Finance 4 7/8% notes were seen by traders to have moved up solidly after the offering priced at par.

One trader saw the bonds trading at 101¼ bid, 101½ offered, while a second had them in a 101½ to 102 bid range, with "a fair amount of trading between 101¼ and 1011/2. It's been creeping up a little bit, so 101 7/8 is the inside market."

Yet another trader source pegged the bonds at 101 3/8 bid, 101 7/8 offered.

United Rentals trade up

Another gainer on the day was familiar junk name United Rentals' drive-by offering of 6 1/8% notes.

The Greenwich, Conn.-based equipment rental company's deal was seen by one trader having moved up smartly to 101¾ bid, 102 offered, while a second saw them shoot right up to 101¾ on the break, "and right now, it's leading the bid. They've been trading up and down at 1013/4, so the market is probably 1013/4-101 7/8 right now. It looks like all of the trades took place right around 1013/4, up or down."

The company's existing 9¼% notes due 2019 gained ¼ point to end at 114 bid, a market source said. Volume was over $6 million.

Lamar prices late

Most of the traders saw no aftermarket in Lamar Media 5% senior subordinated notes, owing to the relative lateness of the hour at which the deal priced.

However, one trader did quote those bonds very late in the day at 100½ bid, 101¼ offered, versus the par level at which they came to market.

New Clear Channels rise, fall

The unusual transaction from Lamar rival Clear Channel Communications - which saw the San Antonio, Texas-based radio broadcaster and outdoor advertising giant issue $2 billion of new 9% priority guarantee notes due 2019 to holders of its term loan debt who had exchanged that debt for the new bonds - was also seen trading around at least a little on Thursday.

A trader saw those bonds initially trading as high as 93¼ bid, before going home at 91 bid, 92 offered.

A second trader quipped that "it's not clear to me what Clear Channel did," but he said that although the transaction was basically an exchange rather than a traditional junk market new issue, "there was a market out there," also seeing the bonds at 91-92.

At the same time, he noted, the company's existing 9% notes due 2021 were very busy, with over $590 million of those notes changing hands at levels in the upper 80s. It was, in fact, the single busiest issue in Junkbondland on Thursday.

He said that the bonds had traded over the last couple of days around an 89-90 context, and were "all over the lot" on Thursday, trading as low as 88½ bid and as high as 911/2. However, he said that the latter level - several trades late in the day - had been cancelled, "so it looks to me like they're unchanged."

He saw most of the trades right around 88¾ bid, 89 offered, which he called about unchanged.

"All of the trades that were higher than that - and there were a few of them - were cancelled. So that's kind of odd."

Shearer's deal still popping

Among the bonds which came earlier in the week, a trader saw Shearer's Foods Inc.'s new 9% senior secured notes due 2019 "kind of active today," trading between 102 ¼ and 102 ¾ and going out around 102 1/2-to-103 late in the session.

He called the Brewster, Ohio-based snack-foods company's $235 million offering deal - upsized first from an originally announced $210 million and after that, from $215 million - a nice deal."

Those bonds had priced Wednesday at par and were seen having moved up to a 102 bid late in that session.

"It's not a big deal," he opined. "I think the guys that own them, want to own them, so you're not going to see much trading in them going forward."

He added that the bonds have "an attractive coupon for this market."

Traders saw a substantial falling-off of activity in Plains Exploration and Production Co.'s $3 billion two-part deal, which had priced on Tuesday and which saw very heavy trading on Wednesday, over $100 million for each tranche.

"I didn't see a lot of trading in those, nothing that was out of whack," one of the traders said.

A second said that both of the Houston-based energy company's two tranches - its $1.5 billion of 6 ½% notes due 2020 and $1.5 billion of 6 7/8% notes due 2023 - were still relatively busy Thursday, trading over $20 million apiece, although well down from the previous day's gigantic volume.

"But they were still up there."

He saw both issues trading in a 100 1/4-to-100 5/8 bid context/. While the bonds traded as high as 100 ¾ at one point during the day, "they were back down," with the 2020 bonds around the 100 1/4-to100 ½ level at the end of the day, and the 6 7/8s were at 100 3/8 bid, 100 5/8 offered.

PSS sizzles, Spirit fizzles

A trader said that away from the new or recently priced deals, PSS World Medical's bonds zoomed by at least 11 points on the day, on the news that the Jacksonville, Fla.-based medical products supplier has agreed to be acquired by larger rival McKeeson Corp. for $1.62 billion. McKeeson's planned debt assumption in connection with the deal boosts the size of the transaction to $2.1 billion.

PSS World Medical's 6 3/8% notes due 2022, which had closed at 107.5 the previous day, opened at 118¼ bid right out of the gate, eventually finishing at 118 5/8 bid, on round-lot volume of over $7 million.

Going the other way were the 7½% notes due 2017 from Spirit AeroSpace, which fell 1 7/8 points to 106 3/8 bid, on volume of over $13 million.

That slide followed the news that the Wichita, Kan. supplier of wings and other assemblies to major aircraft manufacturers like Boeing Co. plans to take an earnings charge of about $371 million, or $1.82 a share, in the third quarter due to Spirit's problems in keeping up with orders from Boeing and other planemakers.

Market indicators mixed

Statistical indicators of junk market performance were mixed on Thursday for a second straight session.

The Markit Group CDX North American Series 19 High Yield Index saw its first gain after having fallen for four sessions before that, adding 3/16 point to close at 99 7/16 bid, 99 9/16 offered, after having lost 5/8 point Wednesday.

The KDP High Yield Daily Index, though, turned downward after having risen on Wednesday, falling by 9 basis points to close at 74.48. It had firmed by 2 bps on Wednesday.

Its yield was up by 3 bps to 6.04%, after having been unchanged Wednesday.

The widely followed Merrill Lynch U.S. High Yield Master II Index remained choppy in posting a second straight gain, of 0.02%, on top of Wednesday's 0.034% rise. That had followed Tuesday's 0.263% loss, which in turn had followed a gain on Monday and a loss on Friday. The latter downturn snapped a streak of six consecutive winning sessions.

The latest gain raised its year-to-date return to 13.178% from Wednesday's 13.156%. Those levels also remain l down from last Thursday's 13.455% - the peak level for the year so far.

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