Boyd, Comstock drive-bys price; Bon-Ton up on sales; Ford busy again; funds lose $382 million

By Paul Deckelman and Paul A. Harris

New York, May 31 - The high-yield primary market closed out May with a pair of quickly shopped, upsized new issues on Thursday.

Familiar borrower Boyd Gaming Corp. priced a $350 million eight-year offering. Traders saw the casino company's new deal initially a little firmer, but the bonds were quoted straddling their par issue price by the end of the day.

Also bringing an upsized eight-year deal to market was energy operator Comstock Resources, Inc. That $300 million deal, which priced at a steep discount to par, was not seen in Thursday's aftermarket.

The new-deal arena was quiet other than those two deals and syndicate sources hearing that Las Vegas-based Boyd's cross-town sector peer, American Casino & Entertainment Properties LLC, was shopping a $310 million issue of seven-year secured notes. They are expected to price next week.

Away from the new-deal realm, it was another busy day for Ford Motor Co.'s bonds and especially for the paper of its loan-financing arm, Ford Motor Credit Co. LLC. The latter name, even more so than its famous parent, completely dominated the high-yield most-actives list even as traders suggested that both Ford entities - now equipped with investment-grade ratings from two out of the three major agencies - will soon migrate over to the high-grade side in terms of being listed in indexes.

Apart from Ford, Chesapeake Energy Corp.'s bonds rose even as Moody's Investors Service warned that the embattled natural gas producer will have to sell at least $7 billion of assets this year in order to avoid breaching a loan covenant. There were also news reports painting the embattled company as a potential takeover target for one of the oil majors.

Bon-Ton Stores Inc.'s bonds rose after the department store retailer reported better sales in May versus a year ago.

Statistical measures of junk market performance were meantime pointing lower on the day.

And another indicator - high-yield mutual fund flows, which are seen as a reliable barometer of overall junk market liquidity trends - recorded its third consecutive weekly outflow, according to both major tracking services, although the cash loss was nowhere nearly as large as the one suffered last week.

AMG posts $382 million outflow

As activity was coming to a close on Thursday, market participants familiar with the weekly AMG high-yield mutual fund flow statistics said that in the week ended Wednesday, $382 million more left those weekly reporting funds than came into them.

It was the third consecutive outflow from those funds. It followed the mammoth $2.46 billion hemorrhage seen last week by Arcata, Calif.-based AMG, a unit of Thomson Reuters' Lipper/FMI division, and the $689 million cash loss seen the week before, which ended May 16. Last week's loss was one of the largest outflows ever reported by AMG; only a $3.43 billion cash bleed seen in the week ended June 22, 2011 and the nearly identical $3.42 billion lost during the week ended Aug. 10, 2011 were larger.

Over the latest three-week stretch, the funds have seen an estimated $3.53 billion in outflows, according to a Prospect News analysis of the figures.

On a year-to-date basis, the latest outflow pulled the cumulative net inflow figure down to around the $20.6 billion mark, according to the analysis. The year-to-date figure counts monthly reporting funds as well as the weekly reporters, according to AMG.

That puts it well below its peak level for 2012 of an estimated $24.15 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 four outflows so far this year, while inflows have now been seen in 18 out of the 22 weeks since the start of the year, the analysis said.

EPFR sees $1.1 billion loss

The other major fund-tracking service, Cambridge, Mass.-based EPFR Global, whose methodology differs from AMG's, saw a bigger outflow in the latest week - $1.1 billion.

That was the third straight loss of cash from the funds. It followed the giant-sized $3.05 billion outflow recorded last week and a $433 million downturn in the May 16th week. EPFR, like AMG, had also seen another outflow earlier in the year, for four outflows on the year so far, versus 18 weeks in which there were inflows.

The latest week's outflow left the year-to-date cumulative net inflow figure at $33.16 billion, EPFR said.

EPFR's figures and those of AMG generally point in the same direction, although their actual numbers usually differ since they calculate their respective fund-flow totals very differently. EPFR, for instance, includes results from some non-U.S. domiciled funds which are excluded from the more narrowly focused AMG tally of domestic junk mutual funds and exchange-traded funds.

Cumulative fund-flow estimates, whether of the AMG numbers from Lipper/FMI or those from 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 strong performance so far this year and its active new-deal pace, with issuance volume remaining near last year's totals.

The flow of money into or out of the funds occurs on a daily basis, and those daily changes could be seen as a proxy for overall market movements. When junk is up, the funds see inflows that day or the next. When junk is off, the funds seen outflows.

A mutual fund manager whose portfolio includes junk bonds and bank loans noted that "today was positive, as was Wednesday, but we're bracing for a big outflow on Friday."

Boyd Gaming upsizes

Two drive-by issuers, each bringing a single, upsized tranche, raised a combined total of $636 million on Thursday.

Boyd Gaming priced an upsized $350 million issue of eight-year senior notes (B3/B) at par to yield 9%.

The yield printed at the wide end of the 8¾% to 9% yield talk.

Bank of America Merrill Lynch was the left bookrunner for the debt refinancing and general corporate purposes deal, which was upsized from $300 million.

J.P. Morgan Securities LLC, Deutsche Bank Securities Inc. and UBS Securities LLC were the joint bookrunners.

Comstock yield prints mid-talk

Comstock Resources priced an upsized $300 million issue of 9½% eight-year senior notes (B3/B-) at 95.304 to yield 10 3/8%.

The yield printed in the middle of the 10¼% to 10½% yield talk. The reoffer price came in line with discount talk of about five points.

Bank of America Merrill Lynch, BMO Capital Markets and JPMorgan were the joint bookrunners for the debt refinancing deal, which was upsized from $250 million.

American Casino starts Friday

The Thursday session saw one new roadshow announcement.

American Casino & Entertainment Properties, in conjunction with its subsidiary ACEP Finance Corp., will begin a roadshow on Friday for a $310 million offering of seven-year senior secured notes, which are expected to price mid-to-late in the week ahead.

Goldman Sachs & Co., Wells Fargo Securities LLC and Deutsche Bank are the joint bookrunners for the debt refinancing deal.

American Casino has the high-yield road all to itself in a market that has gone notably quiet, sources said on Thursday.

Less appetite for risk?

With the high-yield index down another half point and fund-trackers Lipper-AMG and EPFR Global both reporting negative flows, the appetite for risk may be diminishing, according to a mutual fund manager whose portfolio includes both high-yield bonds and bank loans.

A $200 million deal is in the wings from a first-time issuer that provides transportation services to the energy industry sector and is seeking to refinance bank debt and take out preferred shares, said the investor, who would not disclose the issuer name.

Although the deal, should it come, would represent the issuer's debt, the issuer is a subsidiary of an investment grade-rated, publicly traded company, the buysider added.

"It should get a decent reception," the source added, "but I can't imagine why they would come to market now."

The appetite for bridge risk is also diminished, according to the fund manager.

Sellside sources, who are traditionally reticent to discuss bridge loan syndications, confirm that bridges tend to be hoeing a tougher row these days.

Appetite notwithstanding, LIN Television Corp. launched a $265 million senior unsecured bridge loan for syndication on Thursday, the investor said.

JPMorgan is leading the effort. An investor call is set to take place on Monday.

Proceeds, along with a revolver draw, will be used to fund the purchase of broadcast and other related assets for 13 network affiliates owned by New Vision Television for $330.4 million and the assumption of $12 million of debt.

"Right now the market is weak," a trader from a high-yield mutual fund matter-of-factly stated.

However there are not a lot of bonds actually offered, the source said, adding that what is for sale tends to be distressed paper, which a lot of accounts' charters prohibit them from owning.

Nor has the recent primary market been much to this trader's liking.

"Deal size is down and quality is down," the source lamented. "You saw the big guys come earlier this year."

New Boyd bonds better

When the new Boyd Gaming 9% notes due 2020 were freed for secondary trading, a market source said that they had firmed to bid levels between 100¼ and 1003/4, up from the par level at which the Las Vegas-based casino company's upsized, $350 million drive-by deal priced earlier.

However, a second trader, later in the day, pegged the bonds at 99¾ bid, 100¼ offered.

Boyd's outstanding 9 1/8% notes due 2018 were seen off by about a point, going home at 102½ bid, on volume of about $3 million.

Comstock unseen in secondary

The day's other pricing, Comstock Resources' upsized, quickly shopped $300 million of 9½% notes due 2020, came to market too late in the session to trade around.

A trader called the Frisco-based energy operator "an old favorite of mine" but noted that the price talk on the deal had been envisioning a yield at swollen levels between 10¼% and 10½%, adding that "that's what happens when you're almost all natural gas and you don't believe in hedging."

However, he quickly added that management "knows what they're doing. It's a well-run company. They're just suffering from the natural gas market, I guess."

Rivers Pittsburgh rises, again

Among other recently priced deals, a trader saw Rivers Pittsburgh Borrower LP's 9½% senior secured second-lien notes due 2019 having moved up by a half-point on Thursday to close at 102¼ bid, 102¾ offered.

The Pittsburgh-based casino operator priced $275 million of those bonds off the forward calendar on Wednesday at par after the deal was downsized from its original $300 million size.

When they were freed for secondary trading late Wednesday, Rivers' new bonds firmed smartly to a 1011/2-to-102 context and then continued to rise on Thursday.

A second trader said the deal "has done pretty well," seeing the bonds trading around 101½ bid, 102½ offered in the morning and then pushing up to around the 102 mark later on.

Ford dominates

Away from the new-deal world, a trader said that for the latest in a string of days, Ford's bonds and those of the Dearborn, Mich.-based No. 2 U.S. carmaker's auto loan-financing arm, Ford Motor Credit, topped the Junkbondland most-actives list. The Trace system, for instance, showed that nine out of the top 10 most active issues were Ford Motor Credit paper.

He noted, though, that "they're definitely in transition" from the junk world to the high-grade world following Moody's Investors Service's recent upgrade of the company's ratings to Baa3. That put Ford solidly on the high-grade side of the ledger since Fitch Ratings also recently upped those ratings to BBB-, leaving only Standard & Poor's - at BB+, just a small step away from investment grade - assigning a junk rating to its bonds.

A second trader saw "a ton" of Ford Motor Credit's 5 7/8% notes due 2021 trade. "The first thing this morning, they were already active," on their way to turnover of more than $160 million. "They started right out of the gate trading a lot of bonds."

Despite the intense activity, he said that "they weren't changed much," finishing at 113¾ bid.

At another shop, a trader saw parent Ford's 7.45% benchmark bonds due 2031 up 1 1/8 points at 130 5/8 bid, 131 1/8 offered. More than $100 million of those bonds were seen having traded heading into the final hour of dealings - making the 7.45% bonds the busiest of all parent Ford's bonds and the only one to break Ford Motor Credit's monopoly on the top 10 slots, volume-wise.

Ford's 6 5/8% notes due 2028 knocked down about $10 million of bonds, rising 1¾ points to 118½ bid.

Chesapeake climbs

Away from Ford, a trader saw Chesapeake Energy's 6.775% notes due 2019 as one of the most active non-Ford junk issues of the day on more than $15 million of dealings.

"Wow, they moved up nicely," he said, seeing the Oklahoma City-based natural gas company's paper having jumped to 96¼ bid from their 94½ start and up as well from 94½ bid, 94¾ offered at Wednesday's close.

A trader said the bonds rose even as Moody's warned that Chesapeake could violate a loan covenant if it does not manage to sell at least $7 billion of assets this year.

He cited takeover buzz in the financial press, which has been reporting that such energy heavyweights as Exxon Mobil Corp, Chevron Corp. and Royal Dutch Shell might see a deal for Chesapeake as a relatively cheap way to obtain quality natural gas and gas liquids assets.

Bon-Ton sales, bonds boosted

Bon-Ton Stores reported improved monthly sales for May on Thursday, giving its bonds a boost.

One trader said the 10¼% notes due 2015 gained as much as 3 points, closing around 691/2. Another trader said the debt was "better by a few points" at 69 bid, 70 offered.

The second trader noted that the bonds had gotten as good as 74 before coming back to settle in the 70 ZIP code.

More than $20 million of the bonds changed hands, one of the biggest non-Ford issues.

For the four weeks ended May 26, same-store sales rose 1.5%, the company said in a press release. Total sales increased 1.2% to $183.1 million.

The York, Pa.-based retailer also said that it had gained borrowing capacity under its credit facility. The company had $423 million available, it said, compared to $400 million available at the end of April.

Stephanie N. Rotondo contributed to this report

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