Junk market heads home for the holidays after short session; bonds quiet despite stock moves

By Paul Deckelman and Paul A. Harris

New York, Dec. 24 - The high-yield market sleepwalked through a greatly abbreviated pre-holiday session on Monday with nothing of any consequence happening in either the primary or the secondary spheres, market participants said.

The new deal realm remained in its traditional year-end shutdown mode, which actually began on Thursday of last week, with nothing heard having priced.

However, January figures to be a busy month, a syndicate official said.

The January deal pace is expected to approximate that seen in mid-December of 2012.

Thus far, however, there have been no formal announcements.

And the secondary market followed suit. Volume was light and little aftermarket activity was seen in any of the recent newly priced issues - even satellite TV broadcaster DISH DBS Corp.'s massively upsized 10-year mega-deal.

There was nothing of any size going on even in the familiar bonds of companies, which were seeing some activity over on the equity side of the fence. This applied to names such as J.C. Penney Co. Inc., which had some news out, and SuperValu Inc., which also saw some movement in its shares.

There was some trading, however, in Cenveo Corp.'s paper, although there was no fresh news out on the printing company.

Statistical indicators of secondary market performance were little changed on the session.

Nothing across

With the Securities Industry and Financial Markets Association having recommended an early market close for U.S. fixed-income markets on Monday, ahead of Tuesday's full shutdown in observance of Christmas Day, the reality was that the few people who were actually in were already closing up shop long before noon.

"There's nothing going on at all," a trader said, "nothing."

He added: "There were, like, three brokers in today. I didn't see anything."

Another trader said Monday's session was a replay of Friday's deadly-dull session - only quieter.

"It's ridiculous," he declared. "It's just a few bid-wanted that accounts want to clear up for year-end and stuff like that, which is going to continue on [Wednesday, Thursday and] Friday, but there's no real trading."

DISH goes nowhere

One of the traders said that nothing was happening with any of the recently priced junk issues - even including the ostensibly very liquid $1.5 billion issue of 5% notes due 2023 that Englewood, Colo.-based satellite television broadcaster DISH Network Corp. priced last Wednesday via its DISH DBS Corp. subsidiary.

He saw that megadeal offered at 100 5/8 without any bid, "about where they traded a few days ago, so that's probably within range."

DISH priced its drive-by deal at par, after upsizing it from the $1 billion size announced just a few hours earlier. The deal traded in a 100 3/8 to 100 5/8 context in initial aftermarket dealings and stayed there for the rest of the week.

Cenveo relatively active

Among the non-new deal names, there actually was some activity in Cenveo's 7 7/8% notes due 2013, even though there was no fresh news seen out on the Stamford, Conn.-based commercial printing company, which recently announced its plans to refinance those notes.

About $4 million of the bonds was seen to have changed hands on a round-lot basis, putting the issue right near the top of the Junkbondland most-actives list, and probably putting it right at the top if one were to knock out the various split-rated issues, financial hybrids and other credits mostly of interest to high-grade investors grabbing for yield as crossover plays (e.g., bonds from Ford Motor Credit, ArcelorMittals and American International Group).

The Cenveo bonds pushed as high as 103 during the session, although strictly on a round-lot basis. They finished around 1001/4, which was up from Friday's odd-lot final closing level around 99 5/8 bid, though actually a little off from the last previous round-lot transactions seen a week ago.

A market source saw Cenveo's 11½% notes due 2017 gain three-quarters of a point to finish Monday at 86 bid.

Cenveo last week announced plans to call the remaining $68 million of the 7 7/8% notes, financing the redemption via a supplemental secured loan of $15 million from its existing bank group and an unsecured $50 million loan due 2017 from Macquarie Capital.

No real pop for J.C. Penney

There was only sporadic trading of small pieces in J.C. Penney bonds, even though the Plano, Texas-based department-store retailer initially saw some solid gains - later yielded - in its New York Stock Exchange-traded shares following a favorable analysts' report from Oppenheimer & Co.

A market source said that only two Penney issues even saw a fair amount of odd-lot trading during the session - its 6 7/8% notes due 2015 and its 5.65% notes due 2020.

The 2015 bonds were seen going home a little above 97½ bid, actually down from the 99¾ level at which they ended on Friday, though up a little from their last known round-lot level just above 97, seen earlier last week.

The 2020 notes, meantime, moved up to 89 bid on Monday from prior levels around 86½ to 87, albeit, again, on just a bunch of odd-lot transactions.

The company's other bonds were little traded during the session.

Penney's NYSE-traded shares rose by 28 cents, or 1.43%, to end at $19.87, after at one point having been better than 4% higher after Oppenheimer analyst Brian Nagel said in a research note to the firm's clients, "We are increasingly optimistic that the more price promotional stance that J.C. Penney is now assuming will allow the chain to make the most of a challenging holiday selling season and position it well to re-accelerate its aggressive turnaround strategy in 2013."

SuperValu holds steady

SuperValu's bonds were seen holding steady on Monday, even though the underperforming Eden Prairie, Minn.-based supermarket operator's NYSE-traded shares were seen among the big losers on the day, plunging 22 cents, or 7.75% to end at $2.62.

A trader said that among bond investors, however, "there's starting to be belief that they'll be able to pay off" the company's $140 million of 7¼% notes due in May 2013 as well as its $490 million of outstanding 7½% notes due in November 2014.

"There wasn't such a belief about a month ago," he added.

He saw the 71/4s trading at "at least" 101 bid currently, while the 71/2s are hanging in around a 98-type bid.

"That shows you that they have some value."

The money-losing grocer has spent a number of months exploring potential strategic transactions, which could include the piece-meal sale of its various component store chains, such as Albertson's, Jewel-Osco and Bi-Lo, among others - or even the sale of the whole company in one transaction.

Management is said to favor the latter course of action, although analysts believe that such an all-in deal is not likely. The analysts tout the sale of individual units as more likely to happen.

SuperValu has recently been in talks with Cerberus Capital Management LLC, reportedly on selling the whole company, but its bonds recently backtracked a little on news reports indicating the big private-equity shop might have difficulty lining up financing for such a deal from skeptical bankers.

The trader said that junk market participants "don't have a lot of faith" in the company's longer-dated issues, like its 8.70% debentures due in 2030 or its 8% debentures due 2031, which currently trade in a 62-63 range.

"But people believe now that SuperValu is going to at least have enough money to pay off the short maturities," especially if it does manage some sort of asset sale, even if only one or two individual units, to Cerberus or some other interested buyer, the trader added. "So there's a little constructive trading going on there."

Indicators little changed

Statistical junk market performance indicators were little changed during Monday's hugely quiet session after having been mixed on Friday.

The Markit Series 19 CDX North American High Yield index edged off by about 1/16 of a point on Monday, to end at 100 15/16 bid, 101 3/16 offered, after having dropped by 25/32 of a point on Friday.

The KDP High Yield Daily Index was unchanged on Monday at 75.42, after having inched up by 1 basis point on Friday. Its yield was unchanged for a third straight session, staying at 5.66%.

The widely followed Merrill Lynch U.SA. High Yield Master II Index hovered near its Friday close, with a year-to-date return of 15.465%.

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