Consolidated Container, Ceridian price; hospitals gain on court news; funds up $960 million

By Paul Deckelman and Paul A. Harris

New York, June 28 - Nearly $1 billion of new junk bonds priced for a second straight day, high-yield syndicate sources said on Thursday.

Most of that total came from one deal, late in the day, from business services provider Ceridian Corp.; it did $720 million of seven-year secured notes, which hit the marketplace too late in the day for trading.

The day's other pricing came from plastic packaging company Consolidated Container Co. LLC, which did a $250 million offering of eight-year notes. Those bonds were seen having firmed in the secondary market.

Books closed on two other deals that had been seen as possible Thursday pricings but turned out to be no-shows. Energy operator Halcon Resources Corp. is doing a $200 million eight-year offering, and precious metals producer Coeur D'Alene Mines Corp. plans to bring $350 million of eight-year notes. They're now seen as possible Friday pricings.

Another transaction that could take place Friday comes out of European high yield, with German industrial manufacturer Schaeffler Finance BV expected to price €200 million of five-year secured paper.

Back in the domestic market and away from the new deals, traders saw hospital names like Community Health Systems Inc. and HCA Holdings Inc. better following the Supreme Court's somewhat surprising decision to affirm most of the government's sweeping health-care law on the expectation that extending health-care coverage to the currently uninsured will cut down on the hospitals' bad-debt charge-offs.

Statistical market performance measures were mixed on Thursday after having been up across the board on Wednesday.

And another statistical measure - the flow of funds into and out of junk bond mutual and exchange-traded funds, seen as a good indicator of market liquidity trends - was sharply higher, its third consecutive weekly gain.

AMG up by $960 million

As things were finishing up in Junkbondland on Thursday, market participants familiar with the weekly AMG high-yield mutual fund flow statistics said that in the week ended Wednesday, about $960 million more came into those funds than left them.

It was the third consecutive strong showing by the junk mutual funds and ETFs in as many weeks. It came on the heels of the $1.2 billion cash injection seen the previous week, which ended June 20, and the $568 million cash addition the week before that, which ended June 13.

Those three inflows, collectively worth $2.73 billion, represented a considerable improvement over the weakness that the measure had shown earlier in the month. For instance, in the week ended June 6, the funds suffered a whopping $2.9 billion outflow - the third largest on record since Arcata, Calif.-based AMG, a unit of Thomson Reuters' Lipper/FMI division, began tracking fund flows.

The trio of inflows in the last three weeks snapped a four-week string of outflows dating back to the week ended May 16. During that stretch, which also included another mammoth outflow, the $2.46 billion cash drop seen in the week ended May 23, the junk funds saw an estimated $6.43 billion of outflows, according to a Prospect News analysis of the figures.

On a year-to-date basis, the latest inflow pulled the cumulative net inflow figure up to around the $20.3 billion mark from the $19.4 billion the week before, according to the analysis. The year-to-date figure counts monthly reporting funds as well as the weekly reporters, according to AMG.

However, it remains well below its peak level for 2012 of an estimated $24 billion seen in the week ended May 9, according to the analysis.

Including an outflow seen earlier in the year, the $1.29 billion recorded in the week ended April 11, there have now been just five outflows so far this year, while inflows have now been seen in 21 out of the 26 weeks since the start of the year.

EPFR: funds up $1.8 billion

The recent turnaround in the fund-flow trajectories was confirmed by a rival fund-tracking service, Cambridge, Mass.-based EPFR Global, which reported that in the week ended Wednesday, about $1.8 billion more came into the funds it follows than left them.

As was the case with the AMG Lipper numbers, EPFR - which uses a different methodology, but whose numbers usually point in the same direction as AMG - reported that this was the third consecutive large inflow number. It followed the $1.58 billion inflow in the week ended June 20 and the $391 million cash addition the week before that.

Those three inflows followed four straight weeks of sizable outflows, including the $3.6 billion that had left the funds in the week ended June 6.

The latest inflow lifted EPFR's year-to-date total return to about $32.9 billion, the company said.

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

Analysts say the continued flow of fresh cash into junk - and the mutual funds represent but a small, though observable and quantifiable percentage of the total amount of money coming in - fueled the record new-deal borrowing binges seen in both 2009 and then in 2010, as well as the robust secondary market seen both years, and continued to be the driver behind 2011's near-record issuance.

Those fund flows are also seen as the key element behind the high-yield secondary market's relatively strong performance during the first few months of this year versus other fixed-income asset classes and its relatively active new-deal pace, with issuance volume remaining not too far behind last year's totals.

Ceridian brings $720 million

The primary market saw a pair of issuers raise $970 million on Thursday. Each came to the market with a single-tranche deal.

Ceridian priced a $720 million issue of seven-year senior secured notes (B1/B-) at par to yield 8 7/8%.

The yield printed at the tight end of price talk that had been set in the 9% area.

Deutsche Bank Securities Inc., Credit Suisse Securities (USA) LLC and Bank of America Merrill Lynch managed the sale.

Proceeds will be used to pay down a portion of the company's extended term loan. Ceridian has extended roughly $1.8 billion of its term loan by 2½ years to May 2017.

Consolidated Container prices

Consolidated Container and Consolidated Container Finance Inc. priced a $250 million issue of eight-year senior notes (Caa1/CCC+) at par to yield 10 1/8%.

The yield printed at the tight end of price talk that was set in the 10¼% area.

Citigroup Global Markets Inc. was the lead left bookrunner for the leveraged buyout deal. Bank of America Merrill Lynch, RBC Capital Markets and Credit Suisse were the joint bookrunners.

Schaeffler plans €200 million

Germany's Schaeffler Finance plans to price a €200 million offering of five-year senior secured notes (existing ratings B1/B) on Friday.

Global coordinator Deutsche Bank will bill and deliver for the debt-refinancing deal.

Barclays Capital Inc., BayernLB and Citigroup are the joint bookrunners.

In addition to Schaeffler, deals on tap for the Friday session include Halcon Resources Its $500 million offering of eight-year senior notes (B3/CCC+) is talked with a yield in the 9% area.

Barclays, Goldman Sachs & Co., J.P. Morgan Securities LLC, Wells Fargo Securities LLC, BMO Capital Markets and RBC are the joint bookrunners.

Also, Coeur d'Alene Mines is set to price its $350 million offering of eight-year senior notes (B3/BB-), which were talked with a yield in the 8½% area on Wednesday.

Barclays is the lead left bookrunner. Wells Fargo is the joint bookrunner.

And Xtreme Drilling and Coil Services Corp. is marketing a $170 million offering of five-year first-lien notes with guidance of 8¾% to 9¼%.

The debt-refinancing deal is being privately placed with institutional investors by Pareto Securities and could price before the Friday close, according to a market source.

ConCon bonds climb

When the new Consolidated Container bonds were freed for secondary dealings, a trader saw them around 101¾ on the break, up from the par level at which the Atlanta-based producer of plastic bottles and other rigid containers priced its $250 million issue.

"I'd say they did pretty well," a second trader said, also seeing the bonds at 1013/4, although he said he had not seen a right side on that.

But at another desk a little later on, yet another trader did see two-sided dealings in the new paper at 101¾ bid, 102½ offered.

Ceridian comes too late

Traders saw no aftermarket activity in Ceridian's new 8 7/8% senior secured notes due 2019.

The Minneapolis-based business services provider's $720 million issue priced at par but came too late in the day to trade around after that.

Wednesday deals trade actively

The two deals that priced on Wednesday were among the most active issues in Thursday's market, a trader said.

He saw Dollar General Corp.'s new 4 1/8% notes due 2017 trading up around 101 3/8 bid, with mid-afternoon volume of over $30 million, placing it high on the list of the busiest junk bonds of the session.

That Goodlettsville, Tenn.-based deep-discount retailer's quickly shopped $500 million five-year issue priced on Wednesday at par after being upsized from $450 million. It proceeded to quickly move above the 101 bid level when it hit the aftermarket and stayed up there on Thursday.

In fact, said a trader, "it's still going." He quoted the bonds in a 1011/4-to-101½ bid range. Several other traders saw the bonds trading within one-eighth point of that level.

Meanwhile, a trader said that Houston-based energy exploration and production operator Oasis Petroleum Inc.'s new 6 7/8% notes due 2023 - a 10.5-year issue - "traded all day right around the par level," where that $400 million deal priced on Wednesday after the quick-to-market offering was upsized from the $300 million announced when the bond deal launched just a couple of hours before.

A second trader said that the bonds were trading with a tiny pop-up that put it around a par bid and 100 1/8 offered "for most of the day."

That left them little changed from where the bonds had traded after their Wednesday debut.

A market source said that mid-afternoon volume in the new issue was almost $17 million, although that paled in comparison with their $47 million of round-lot deals seen in the new credit on Wednesday.

Hospital names higher

Away from the new deals, the news that the U.S. Supreme Court had fundamentally upheld most of the provisions of the sweeping government health-care law popularly known as "ObamaCare" sent hospital bonds a little higher on the session.

A trader said that Nashville-based hospital giant HCA "was up slightly, but not a huge amount of trading."

He quoted the credits up anywhere from a quarter to a half-point on the day.

"At one point during the day, the insurers were down, the hospitals were up, medical devices were down and testing services were up, at least in equityland," although he saw far less activity in the junk bonds of any of those sectors or individual names than there was on the stock side.

He noted that "everyone keeps saying that health care is 20% of the economy, but if you go on your Bloomberg to sort Trace reports, it doesn't give you health care, or medical, as one of them - and that's supposed to be 20% of the economy."

A second trader said that Community Health Systems' 8% notes were up by three-quarters of a point, "but I would say there was a little bit less activity than I expected."

He saw HCA's 5 7/8% notes due 2022 move up to 104¼ bid at midday, up around a point from Wednesday's levels, "but on not much activity."

He also noted that "the equities of all of the hospitals were better."

He suggested that sector-wide, "these guys suffer from a significant amount of bad-debt expense, and if a much higher percentage of their customers are now insured, that's going to go down, so they'll get more money, which is why the stocks and the bonds traded up."

Also in that sector, a market source saw Vanguard Health Holding Co. II's 7¾% notes due 2019 rise 1 3/8 points to 100 7/8 bid. Its 8% notes due 2018 were up 1¼ points at 102½ bid, while Iasis Healthcare's 8 3/8% notes due 2019 rose a point to 98½ bid.

The first trader said that "it seemed like it was quiet until the health-care news came out. Then everybody reacted with shock and awe and asking 'what happened?'"

But even after the news had sunk in and been digested, there seemed to be no great rush of investors into the sector, or any other for that matter.

The trader said that it seemed like "a lot of people were out shopping for their fireworks for next week."

Market indicators turn mixed

Continuing their recent pattern of choppiness, statistical market performance measures turned mixed on Thursday after having been on the upside on Wednesday, mixed on Tuesday and down on Monday.

A trader saw the Markit Group CDX North American Series 18 High Yield index down 1/8 point on Thursday to end at 95 1/16 bid, 95¼ offered after having been up 3/8 point Wednesday.

The KDP High Yield Daily index, though, posted its second straight gain on Thursday, finishing up 7 basis points on top of the 10 bps gain seen Wednesday. Its yield came in by 2 bps to 6.75% after having narrowed by 4 bps on Wednesday.

And the widely followed Merrill Lynch U.S. High Yield Master II index notched its third consecutive gain following two successive losses. It rose by 0.105% on Thursday after Wednesday's 0.147% gain.

Thursday's advance lifted its year-to-date return to 6.673%, up from Wednesday's 6.561%. It was the highest level the index had seen since the 6.762% reading of May 11, though it's still off from the peak level for 2012 so far, 6.80%, set on May 7.

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