Quiet day ends $8.58 billion week, most new deals gain; WaveDivision, West for coming week

By Paul Deckelman and Paul A. Harris

New York, Aug. 3 - The high-yield primary sphere finished out the week Friday on a quiet note, in contrast to Thursday's session, which had been one of the heaviest new-issue days this year, approaching $3.7 billion.

No pricings of dollar-denominated, purely junk-rated paper took place on Friday, leaving the week's new-deal total at $8.587 billion in 13 tranches according to data compiled by Prospect News, somewhat above the $7.229 billion in 20 tranches which had priced the previous week, ended July 27.

For the year to date, the data showed, new junk issuance stands at $184.751 billion in 394 tranches, running about 11.7% behind the year-ago pace which saw $209.216 million having priced in 462 tranches by this point on the calendar.

High-yield syndicate sources heard of two prospective deals likely to price in the upcoming week. Broadband cable operator WaveDivision Holdings, LLC will hit the road on Monday to market $250 million of eight-year notes.

West Corp., a communications services provider, is meantime expected to bring a quick-to-market deal sometime around the middle of the upcoming week

Among the deals which have already priced, traders saw strong gains in such names as Steel Dynamics, Inc., Peninsula Gaming LLC, Ashland Inc. and Host Hotels & Resorts, LP, all of which priced on Thursday at par. They attributed the gains - which even included issues with relatively small coupons by junk market standards - to the need to put cash to work.

The market also got a boost from the gains seen in stocks on better-than-expected July U.S. jobs report.

Statistical performance indicators were up on both the session and versus a week earlier.

$10 billion-plus week ahead

No issues were priced during the quiet Friday primary market session.

That was because the dealers were preparing for what promises to be a very busy week ahead, sources said.

Forecasts on volume for the next five sessions varied somewhat.

One syndicate banker professed visibility on $5.5 billion, but believes volume will end up closer to $10 billion.

Only one of the deals in this source's count is a drive-by

However another syndicate banker has visibility on as many as a dozen deals to be rolled out during the week ahead, with as many as 10 of those coming as drive-bys.

One of those drive-by deals will come from West Corp., which is expected to come to market with a $250 million drive-by add-on to its 7 7/8% senior notes due Jan. 15, 2019 (B3/B) in the early to middle part of the week.

Deutsche Bank, Goldman Sachs, Morgan Stanley, Wells Fargo, Bank of America Merrill Lynch and Barclays are the leads.

The Omaha, Neb.-based voice-related communications services provider plans to use the proceeds, in addition with borrowings from a $720 million term loan, to refinance debt and fund a dividend.

WaveDivision to roadshow

For a week that figures to see $10 billion or more of volume, the active dollar-denominated forward calendar ended the July 30 week in a very inconspicuous fashion.

The only dollar deal aboard was one that was announced on Friday.

WaveDivision Holdings will begin what is expected to be a brief roadshow on Monday for a $250 million offering of eight-year senior notes (Caa1).

The deal is expected to price in the middle to late part of the upcoming week.

Deutsche Bank, Wells Fargo, RBC and SunTrust are the leads for the acquisition financing.

Beyond WaveDivision, there are at least a couple of deals coming into focus, sources said on Friday.

One of them is M*Modal Inc.'s planned $250 million offering of senior notes via Bank of America Merrill Lynch and RBC.

That deal could come in the week ahead, or in the Aug. 13 week, sources say.

The bank meeting for M*Modal's $515 million credit facility is set for Monday.

Also DaVita Inc. is expected to show up by mid-month with the bond portion of its financing for the acquisition of HealthCare Partners for about $4.42 billion.

The company launched its $1.65 billion seven-year term loan B-2 on Thursday, via J.P. Morgan.

The company's $3 billion of debt (BB-) also includes a $1.35 billion five-year term loan A-3.

Not your typical August

"We're not having a typical August," a debt capital markets banker conceded on Friday.

Several factors have conspired to activate the primary market during the typically dormant month of August, the banker said.

"You have strong technicals," said the source, recounting eight successive weeks of cash inflows to high-yield funds - exchange-traded funds conspicuous among them.

Counting the most recent week's $401 million inflow, as reported by Lipper-AMG on Thursday, the funds have seen a whopping $27 billion of positive flows year-to-date, according to a Prospect News analysis of the date.

"You also have rallying stocks," said the banker, making note of the 1.9% advance in the S&P 500 on Friday.

"And even though stocks are rallying Treasury rates remain low.

"That's a very positive combination for high yield," the banker asserted.

Hence the Aug. 6 week and the Aug. 13 week are apt to be busy to hectic, the sellsider said.

"People are going to want to take advantage of these strong technicals, and they are going to want to do it before fall, when attention will begin to shift toward politics and all of the uncertainties you have there."

Cash is king

With no new deals having priced during the session, secondary market players turned their attention to the flood of new paper that came to market on Thursday - $3.7 billion of it from six issuers in a total of seven tranches.

"There's a lot of cash out there," needing to be put to work, a trader said in explaining the strong performance of most of the issues that had priced on Thursday.

In fact, the two companies that watch the behavior of cash moving into or out of high yield mutual funds and exchange-traded funds as an indicator of overall junk-market liquidity trends, both saw an eighth consecutive week of net inflows to those funds.

AMG Data Services, an Arcata, Calif.-based unit of Thomson Reuters' Lipper analytics division, reported that in the week ended Wednesday $401 million more came into those funds than left them.

Cambridge, Mass.-based EPFR Global - whose methodology differs considerably from AMG's, hence yielding different numbers - estimated the net inflow at $1.43 billion.

AMG estimates year-to-date net inflows at more than $20 billion, and EPFR - which samples a broader universe of funds, including some domiciled outside of the United States - pegs the number north of $40 billion.

Thursday drive-by deals firm up

With that kind of cash sloshing around and waiting to be put to work, the obvious beneficiary was some of the new deals that priced on Thursday, some of which had come to market too late in the session Thursday and only began trading on Friday.

One such credit was Thursday's biggest deal, from Atlanta-based electronic transaction processor First Data Corp. That $3 billion drive-by offering of 6¾% senior secured notes due 2020, which was nearly doubled in size from $750 million originally, had priced at 99.193 to yield 6 7/8%.

When those bonds were freed for secondary market activity on Friday, a trader saw them having moved up by more than a point on the day to 100½ bid, 101 offered.

He also saw good gains in Fort Wayne, Ind.-based metals company Steel Dynamics, Inc.'s quickly shopped $750 million two-part transaction, consisting of $400 million of 6 1/8% notes due 2019 and $350 million of 6 3/8% notes due 2022, which both of which had come to market at par, too late in the day to trade.

On Friday, "they really took off," he said, seeing the 6 1/8s climb to 103¼ bid, 103¾ offered, while the 6 3/8s did almost as well, at 102¾ bid, 103¼ offered.

And he saw Thursday's other quick-to-market transaction - Bethesda, Md.-based lodging industry real estate investment trust Host Hotels & Resorts, LP's $450 million of 4¾% series C senior notes due 2023 going home firmly higher at 102¼ bid, 102½ offered.

That deal, upsized from $350 million, also came at par.

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