Standard Pacific, IMS Health drive by; Intralot revives euro deal; Penney gyrates; funds lose $1.03 billion

By Paul Deckelman and Aleesia Forni

New York, Aug. 1 - The high-yield market kicked off the new month with a pair of dollar-denominated, fully junk-rated pricings totaling some $1.05 billion.

The smaller of the two offerings, from homebuilder Standard Pacific Corp., was by far the more visible of the two. It priced an upsized $300 million of 8.25-year notes in a quick-to-market transaction.

In contrast, the bigger deal - IMS Health Inc.'s $750 million issue of five-year senior PIK toggle notes done via holding company Healthcare Technology Intermediate, Inc. - had far less visibility. One trader opined that the drive-by deal had "slipped in under the radar."

Nonetheless, the notes were quoted firming in the aftermarket.

There was one other pricing: a euro-denominated issue of five-year notes from Greek international gaming services provider Intralot via a financing subsidiary. The company had originally shopped that deal around to potential investors in June, only to shelve it at that time due to unfavorable market conditions. The revived deal was also quickly shopped around.

Price talk emerged on cable, internet and phone service provider RCN Telecom Services LLC's planned $200 million offering of seven-year notes, which is scheduled to price on Monday.

Australian heavy equipment provider Orionstone Pty. Ltd. joined the forward calendar with a $200 million seven-year issue that is expected to price next Friday.

In the secondary market, JC Penney Corp. Inc. remained a topical name, its bonds attempting to rally after the retailer issued a denial of Wednesday's news report that a key lender had cut off further credit to some of the vendors who provide merchandise to the underperforming department store chain.

A key measure of overall Junkbondland liquidity trends - the flows of cash into and out of high-yield mutual funds and exchange-traded funds - was seen by a major fund tracking service to have turned decidedly negative in the most recent week, breaking a four-week streak of upside results.

Lipper funds lose $1.03 billion

As Thursday's activity was coming to a close, junk market participants familiar with the fund-flow statistics generated by AMG Data Services said that during the week ended Wednesday, some $1.027 billion more left those funds than came into them.

That snapped a month-long winning streak during which inflows had totaled some $6.408 billion, according to a Prospect News analysis of the figures.

That surge included the $3.278 billion cash injection to the funds seen during the previous week ended July 24 - the second-biggest since Arcata, Calif.-based AMG, a unit of the Lipper analytics division of ThomsonReuters Corp., began tracking flows of money into and out of the junk funds in 1992. It was surpassed only by the record $4.25 billion cash addition in the week ended Oct. 26, 2011.

For the year so far, inflows have now been seen in 18 weeks, against 13 weeks of outflows, but cumulative flows for the year as a whole are negative due to a skid of five consecutive large outflows in May and June, prompted by investor worries over whether the Federal Reserve would end its accommodative monetary policy.

That year-to-date net outflow figure grew to about $3.72 billion, according to the Prospect News analysis, from the previous week's $2.7 billion outflow figure.

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

The sustained flows of fresh cash into junk - and the mutual funds and ETFs represent but a small, though very observable and quantifiable percentage of the total coming into or leaving the roughly $1 trillion junk market - have been seen by analysts as a key element behind the high-yield secondary sphere's strong performance last year versus other fixed-income asset classes. The flows also drove a record active new-deal pace, which easily topped the $350 billion mark.

This was also seen as one of the major drivers behind the robust patterns of primary activity and secondary strength, which had continued for much of this year's first half, before fading in recent weeks on Federal Reserve-related investor worries before the four-week comeback.

Prior to the release of the figures, a secondary market trader speculated - correctly, as it turned out - that there could be a large outflow for the latest week, signaled by what he termed the "squishy" overall junk market.

Issuance slows down

Primary sphere sources noted a slowing the pace in the new-issue market on Thursday, with just two dollar-denominated, fully junk-rated deals from domestic or developed-country borrowers getting done.

That was in contrast to Wednesday's final session of July, when the junk market had seen a total of four new dollar deals price, collectively worth some $1.775 billion.

Standard Pacific to market

One of Thursday's deals came from familiar junk issuer Standard Pacific, which was heard by high-yield market sources on Thursday to have priced a $300 million issue of 6¼% senior notes due Dec. 15, 2021 (B2/B+).

The quick-to-market offering priced at par after having been upsized from an originally announced $250 million.

Citigroup Global Markets Inc. and Credit Suisse Securities (USA) LLC were the joint bookrunners for the Securities and Exchange Commission-registered deal.

The Irvine, Calif.-based homebuilder plans to use proceeds from the new issue for general corporate purposes, including land acquisitions and development, home constriction and other related purposes.

Standard Pacific's deal priced fairly late in the session, with traders seeing no immediate aftermarket activity in the new bonds.

IMS 'under the radar'

The day's other deal was more of a mystery, with one trader opining that IMS Health's $750 million of five-year senior PIK toggle notes (Caa1/B-) "really slipped in under the radar," in contrast to the Standard Pacific transaction, which had been formally announced and widely expected during the day.

The IMS deal, on the other hand, came with no advance notice and little ballyhoo.

The bonds priced via an affiliated holding company, Healthcare Technology Intermediate Inc. They came at par to yield 7 3/8% on a cash interest basis, with a 75 basis points step-up to 8 1/8% on a payment-in-kind basis.

A market source said that Goldman Sachs & Co. had been the bookrunner on the quick-to-market deal.

IMS Health, a Danbury, Conn.-based provider of information and technology services to the pharmaceutical and healthcare industries, plans to use the new-deal proceeds to fund a cash distribution to IMS's management team and to the private equity investors TPG Capital, Leonard Green Partners and CPIBB.

Despite the new deal's relative anonymity, several traders quoted the bonds having firmed smartly when they were freed for trading.

One pegged the notes at 101¼ bid, 102¼ offered, while a second trader saw the paper going home at 101 7/8 bid, 102¼ offered.

Intralot returns

One other pricing was seen during the session, this one in the euro-denominated segment of the junk

Greek gaming services company Intralot priced €325 million of 9¾% senior notes due 2018 (B1/B+/BB-) at 99.027 to yield 10% via its Intralot Finance Luxembourg SA financing subsidiary.

The deal was notable in that Intralot had planned a similar bond issue back in mid-June, but it was forced to postpone the €300 million Regulation S/Rule 144A issue, citing unfavorable market conditions at that time.

There was little or no advance word on the optimistically timed and quickly shopped Greek revival

The offering came to market via active bookrunners Citigroup, which handled the billing and delivery, and HSBC Securities.

Barclays Capital Inc. and Societe Generale were also passive bookrunners on the deal.

The notes will have three years of call protection.

The Athens-based international gaming services provider plans to use the proceeds of the new deal to refinance debt.

RCN talks upcoming deal

Elsewhere in the new-deal world, price talk emerged on Thursday on the $200 million offering of seven-year senior notes that RCN Telecom Services and its RCN Capital Corp. financing subsidiary are marketing to investors, a high-yield syndicate source said.

The talk calls for a yield of 8¼% to 8½%.

Books on the deal are scheduled to close on Monday at 10 a.m. ET, with pricing expected thereafter.

Credit Suisse and SunTrust Robinson Humphrey Inc. are the joint bookrunners for the Rule 144A and Regulation S for life notes offering.

The cable company plans to use the proceeds to fund a shareholder dividend.

RCN operates in Boston, Chicago, Washington, D.C., Lehigh Valley, Pa., New York City and Philadelphia.

Orionstone markets deal

The forward calendar grew a little on Thursday, junk market sources said, as Orionstone Pty Ltd. got ready to start selling $200 million seven-year senior secured notes.

The Australian provider of heavy equipment to that country's mining and construction industries is scheduled to kick off the marketing for its deal on Monday with a conference call, a net-roadshow and investor lunches in New York and Boston.

The issue is expected to price next Friday.

Morgan Stanley & Co. Inc. will be the sole bookrunner for the Rule 144A for life deal.

The company plans to use the proceeds from the new deal to repay existing debt plus applicable fees.

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