Revived American Equity caps $1.6 billion week; new Quiksilver, Post add-on up; Best Buy off

By Paul Deckelman and Paul A. Harris

New York, July 12 - American Equity Investment Life Holding Co., forced to withdraw its planned eight-year note issue last month due to unfavorable market conditions, triumphantly returned to the high-yield primary market on Friday with an upsized $400 million version of that same offering. The new bonds were quoted as having firmed solidly in the aftermarket following their pricing.

The financial firm's deal was the sole dollar-denominated, fully junk-rated offering from a domestic or industrialized-country issuer to price during the session and brought the week's total amount of such new paper to just under $1.6 billion in eight tranches, according to data compiled by Prospect News.

That made this past week one of the slowest seen so far this year, but it was still far busier than the week before, which, holiday-shortened as it was, saw no new deals of any kind pricing, the first such complete shut-out of the year.

The American Equity transaction meanwhile lifted the junk bond market's year-to-date tally of such paper to $173.73 billion in 390 tranches, according to the Prospect News data, running 20.7% ahead of the pace seen at this time last year, when Junkbondland was on its way to record heavy new issuance for the full year.

Syndicate sources meantime saw one deal price out of Europe, which lately has seen brisk new issuance topping the slower pace of the dollar-denominated bond market. Swedish food producer Findus did a two-part transaction consisting of euro- and sterling-denominated senior secured notes.

Back in the domestic market, traders saw Thursday's new junk issues trading better, including the unsecured tranche of Quiksilver, Inc.'s two-part offering as well as Post Holdings, Inc.'s upsized add-on offering.

However, they said that Best Buy Co. Inc.'s new five-year split-rated notes failed to excite either junk or crossover investors very much and were trading below their issue price.

As has been the case over the last few sessions, traders called Friday's junk bond market generally firm but also fairly quiet.

Statistical indicators of market performance were higher across the board for a fourth consecutive session this week and higher versus their levels at the end of last week, resulting in the first outright weekly gain after two previous weeks of mixed results.

American Equity returns

Only one dollar-denominated deal cleared the primary market during the Friday session.

American Equity Investment Life Holding Co. priced a $400 million issue of eight-year senior notes (/BB+/BB) at par to yield 6 5/8%.

The yield printed in the middle of the 6½% to 6¾% yield talk.

The par-pricing notes were at 102½ bid at the Friday close, according to an investor who did not play the in the deal.

J.P. Morgan ran the books.

The West Des Moines, Iowa-based underwriter of annuities and life insurance products plans to use the proceeds to repay debt and for general corporate purposes.

The company postponed a similarly structured $250 million offer on June 21 due to market conditions.

Findus finishes two-part deal

There was also activity on Friday in the European primary market.

Sweden-based frozen food company Findus priced £410 million equivalent of five-year senior secured notes (B3/B-/B+) in a dual-currency transaction.

In a euro-denominated tranche, the company priced €305 million notes at par to yield 9 1/8%. The yield printed at the tight end of talk set in the 9¼% area.

Findus also priced a sterling-denominated tranche of the notes, seeing £150 million price at par to yield 9½%, on top of price talk.

Both issues were wrapped around their new issue prices just after the New York market close on Friday, a buyside source said.

A proposed Swedish kroner tranche was withdrawn from the transaction.

Joint bookrunner JPMorgan will bill and deliver for the debt refinancing deal. Goldman Sachs, Nordea and SG CIB were also joint bookrunners.

Question mark for week ahead

The active forward calendar was thin heading into the weekend, with two offers on tap for the July 15 week.

RKI Exploration & Production is expected to price its $350 million offering of eight-year senior notes (B3/B-) on Monday.

The debt refinancing deal is talked to yield 8½%, in line with initial guidance.

Citigroup, JPMorgan and UBS are the joint bookrunners.

Also expected to price during the week ahead is TitleMax.

A roadshow is underway for the Savannah, Ga.-based auto title lending company's $500 million offering of five-year senior secured notes (B3/B+), a debt refinancing deal being led by Jefferies and Morgan Stanley.

Apart from those two, the week ahead in the primary market was something of an open question, an investor said on Friday.

One reason is volatility in Treasuries, the source said, noting that 10-year government paper was heading out at a yield of 2.55% on Friday but had been yielding as high as 2.7% on Wednesday.

Issuers are looking for some stability in Treasuries, because no one likes to bring a deal when rates are a moving target, and no one likes to pull a deal once it has kicked off, the investor said.

"Now that the Fed has assured the markets it won't take away the punch bowl anytime soon, Treasury yields appear to be coming back down," the buysider noted, referring to Federal Reserve chairman Ben S. Bernanke's assurance earlier in the week that the Fed would keep in place a "highly accommodative monetary policy for the foreseeable future."

Nevertheless, there was not a lot of deal buzz heading into the weekend, according to the buysider.

A quieter day

In the secondary arena, a trader described the market's action as "very lackluster."

After having successfully re-established new issuance over the past two sessions following the long layoff since the June 28 pricing of the previous deals, the junk market "was taking a breather today," he said.

"But it was still pretty firm."

American Equity gains

The new issues that came on Thursday and Friday were all being quoted higher than their respective issue prices, although a trader said there wasn't all that much actual activity going on.

He agreed with the general observation that the deals were getting a boost at least in part because the market was so starved for new paper, having not seen any for nearly two weeks.

However, he added that "maybe we'll get a full run on Monday if this market doesn't peter out too much."

He saw American Equity Investment's 6 5/8% notes due 2021 get as good as a 102 to 102¼ bid context, quoting them generally at between 101¾ and 102¼ bid.

Quiksilver catches the wave

Traders saw the week's biggest dollar-denominated deal -for Huntington Beach, Calif.-based surf, beachwear and outdoor sports apparel and accessories company Quiksilver - doing better, or at least the unsecured seven-year portion of that deal.

One trader said that he "didn't think the bonds had traded too much" on Friday, when they were freed for aftermarket dealings. The company had priced its $505 million two-part offering too late in the session on Thursday for any kind of aftermarket activity at that time.

He saw the $225 million of 10% unsecured notes due 2020 trade up to bid levels around 100 3/8 to 100¾ - up smartly from the 98.757 level at which the tranche had priced to 10¼%.

But a little later in the day he commented that "the market has gotten weaker" and adjusted those levels down to a little more realistic bid range of par to 100 3/8.

The trader meantime saw the company's 7 7/8% senior secured notes due 2018 at par bid, not much changed from 99.483, where the $280 million issue had priced on Thursday to yield 8%.

A second trader said he "didn't see much in terms of trading." He said that the 2020 notes were offered at 100 1/8, cautioning, however, that "I don't know where they really were trading; I don't think they Trace, but they look to be a couple of points higher."

Post Holdings pops up

A trader said that Post Holdings, Inc.'s 5% notes due 2018 "were doing okay" on Friday, seeing the St. Louis-based breakfast cereal manufacturer's 7 3/8% notes due 2022 at 107¾ bid, 108¼ offered.

That was well above the 105¾ level at which the quickly shopped $350 million add-on transaction had priced on Thursday to yield 5%. The deal was upsized to $350 million from an originally announced $300 million.

Best Buy bedeviled

Thursday's split-rated (Baa3/BB/BB-) offering from Best Buy "didn't do that well," a trader declared. "They're trading below their issue price."

The underperforming Richfield, Minn.-based consumer electronics retailer had priced its $500 million of 5% notes due 2018 on Thursday at 99.997 to yield 5%, and the new bonds had been seen later Thursday trading in a range from 99¼ or 99½ up to par.

On Friday, the first trader said, the bid levels were between 99 and par, with "lots of trades at 99 1/8, 991/4, 99 3/8. They were pretty active."

A second trader, who had seen the bonds at 99½ bid, par offered on Thursday afternoon, said they had retreated ¼ point, to 99¼ bid, par offered.

Market indicators up on day, week

Statistical junk market performance indicators were higher for a fourth straight session on Friday and were up across the board versus the previous week as well - the first such weekly gain after two previous weeks of having been mixed.

The Markit Series 20 CDX North American High Yield index was up by 7/32 point to end Friday at 105¼ bid, 105 3/8 offered. It was the index's second straight gain, having risen by 29/32 point on Thursday after having been unchanged on Wednesday.

The index was well up for the week versus the 102 13/16 bid, 102 15/16 finish seen at the close the previous Friday, July 5.

The KDP High Yield Daily index jumped by 25 basis points on Friday to go out at 73.68. It was its fourth consecutive rise and second straight really large advance, having zoomed by 43 bps on Thursday.

Its yield meantime came in by 12 bps to 6.11%, also its fourth straight narrowing. On Thursday, it had closed 14 bps lower.

Those results stacked up favorably against the previous Friday's 73.01 index reading and 6.36% yield.

And the widely followed Merrill Lynch High Yield Master II index saw its fourth straight gain on Friday as it rose by 0.261%. That followed Thursday's 0.606% advance.

The latest gain raised the index's year-to-date return to 2.74% from 2.473% on Thursday - the year-to-date return's first time above the psychologically significant 2% mark since June 19, when it stood at 3.139%.

Friday's yield to worst was 6.242%, and its spread to worst over Treasuries was 488 bps, the latter performance measure's tightest level since June 4, when it was also at 488 bps.

On the week, the index gained 1.267%, its first gain after eight consecutive weeks on the downside, dating back to the week ended May 17. It was also the biggest single-week gain for the year, eclipsing the 1.002% weekly rise recorded in the week ended May 3.

Last week, the index had eased by 0.006%, ending last Friday with a 1.455% year-to-date return.

© 2015 Prospect News.
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