Grifols, Laredo price, Laredo gains; market awaits Exide, Polymer, Arden; Catalyst up on call

By Paul Deckelman and Paul A. Harris

New York, Jan. 12 - The high yield primary market calmed down a little on Wednesday from the breakneck pace of the session before, when over $4 billion of paper priced. On Wednesday, instead of seven deals, there were just two - from long-time forward calendar fixture Grifols SA, which priced a $1.1 billion offering of seven-year notes, and from Laredo Petroleum, Inc., bringing an upsized $350 million of eight-year bonds.

For the first day since the new year began, no drive-by issues priced in Junkbondland.

When the new Laredo notes were freed for secondary dealings, traders saw them up more than 2 points, in line with the robust gains seen by most of the newly priced 2011 junk deals, with the possible exception of Level 3 Communications Inc., whose Tuesday tranche of new bonds still struggled on Wednesday just to stay at or slightly above issue. No aftermarket dealings were seen in the late-pricing Grifols paper.

The forward calendar grew, as California outsourcing services company iGate Corp. said it would bring up to $700 million of notes. Southeastern transportation company Florida East Coast Railway LLC was heard to be in the market with a $450 million bond offering.

American Standard Brands hit the road to begin marketing its five-year secured deal, while price talk emerged on several offerings that are expected to price by Thursday - Exide Technologies, Inc., Polymer Group, Inc., Elizabeth Arden Inc. and Columbus McKinnon Corp.

Apart from the new deals the junk secondary remained strong, according to various performance indexes. Catalyst Paper Co.'s bonds rose on news the Canadian paper producer plans to call an issue of outstanding notes.

Spain's Grifols prices $1.1 billion

The high-yield primary market saw two issuers raise a combined total of $1.45 billion on Wednesday, as winter weather in the Northeastern United States failed to meaningfully constrict activity in the junk market.

Issuers continued to see notable executions, with one of Wednesday's pair of deals pricing at the tight end of price talk, and the other actually pricing inside of talk.

Spain's Grifols priced a $1.1 billion issue of seven-year senior notes (B3/B) at par to yield 8¼%, at the tight end of the 8¼% to 8½% price talk.

Deutsche Bank, Nomura, BBVA, BNP Paribas, HSBC, Morgan Stanley and Scoita Capital were the joint bookrunners.

Proceeds will be used to help fund the company's acquisition of Talecris Biotherapeutics Holdings Corp.

Laredo beats talk

Meanwhile Laredo Petroleum priced an upsized $350 million issue of eight-year senior notes (Caa2/CCC) at par to yield 9½%.

The notes priced 12.5 basis points richer than the 9¾% area yield talk. The deal was increased from $300 million.

Bank of America Merrill Lynch, J.P. Morgan Securities LLC and Wells Fargo Securities were the joint bookrunners for the debt refinancing and general corporate purposes deal.

Talking the deals

Issuers and their bookrunners set the stage for what figures to be a busy Thursday session.

Exide Technologies talked its $675 million offering of seven-year senior secured notes (B2/B) with an 8¾% area yield.

Deutsche Bank Securities Inc. is the left bookrunner. Wells Fargo and Morgan Stanley & Co. Inc. are the joint bookrunners.

Polymer Group talked its $530 million offering of eight-year senior notes (B1/B) with an 8% area yield.

Timing on the deal was moved ahead. The books close at 3:30 p.m. ET on Thursday, and the notes are expected to price after that. Previously the deal had been expected to price on Friday.

Citigroup Global Markets Inc. is the left bookrunner. Morgan Stanley & Co. Inc., Barclays Capital Inc. and RBC Capital Markets Corp. are the joint bookrunners.

Elizabeth Arden talked its $225 million offering of 10-year senior notes (B1/B/) with a 7½% area yield.

J.P. Morgan Securities LLC, Bank of America Merrill Lynch and Wells Fargo Securities are the joint bookrunners.

And Columbus McKinnon talked its $150 million offering of eight-year senior subordinated notes (B1/B+) with an 8¼% area yield, at a discount.

Credit Suisse, Bank of America Merrill Lynch and J.P. Morgan Securities LLC are the joint bookrunners.

All of them are expected to price on Thursday.

In addition, DirectBuy is expected to price its $325 million offering of six-year senior secured second-lien notes (B2/B) on Thursday.

J.P. Morgan Securities LLC is leading that deal.

Although no official price talk had been circulated, the deal has been discussed with a 10% area yield, according to a trader from a high-yield mutual fund.

Florida East Coast plans deal

In addition to the handful of deals expected to price, the dealers are expected to announce two deals of significant size on Thursday, the trader said.

Meanwhile, Florida East Coast Railway began marketing a $450 million offering of six-year senior secured notes on Wednesday.

The deal is expected to price during the week ahead.

Bank of America Merrill Lynch is the bookrunner.

Proceeds, along with a $165 million equity contribution, will be used to repay existing debt and for general corporate purposes.

American Standard on the road

Finally, American Standard Brands began a brief roadshow for a $175 million offering of five-year senior secured notes.

The deal is set to price by the end of the present week.

Goldman Sachs & Co. is the left bookrunner. UBS Investment Bank is the joint bookrunner.

The notes will be issued via subsidiary AS America, Inc.

The Piscataway, N.J., manufacturer of bath and kitchen fixtures will use the proceeds to repay bank debt and for general corporate purposes.

SLM, Tuesday deals trade

A trader said that there "seemed to be a whole lot" of trading taking place among education lender SLM Corp., which brought a mega-deal-sized issue of split-rated bonds to market. He also saw "a lot of follow-through" in trading such Tuesday-pricing new deals as CommScope, Inc. and Verso Corp.

New Laredo deal does well

A trader said that Laredo Petroleum's new eight-year bonds were trading as well as 102½ bid, 103 offered, well up from the par level at which the Tulsa, Okla.-based oil and gas exploration and production company's upsized new issue had priced earlier.

Grifols a secondary no-show

The day's other pricing - Spanish healthcare company Grifols' seven-year mega-deal - came to market too late to have any meaningful aftermarket activity.

SLM has crossover appeal

Junk market players did pay some attention to another deal which priced on Wednesday, although the issuer is hardly a conventional junker.

A trader said that the new split-rated 6¼% notes due 2016 issued by SLM Corp. - the Reston, Va.-based student loan company better known as Sallie Mae - must have traded at "10 times the size" of anything else in the rest of the market on Wednesday following its pricing.

The company priced $2 billion of the notes at 98.939 to yield 6½%, or a spread of 453.8 basis points over comparable Treasury paper.

He said that while the new bonds carry a Ba1 rating from Moody's Investors Service - technically junk - "it is more of a crossover bond," having BBB- ratings from both Standard & Poor's and Fitch ratings.

At his shop, the high-grade guys have been trading it, and he said that it seemed like mostly high-grade accounts were playing in it. "I think that if there are any high yield accounts in them, they're going to the high-grade guys to trade them."

He further opined that "it just happens to be listed on Trace under high yield" because of the Moody's rating.

At another junk desk, a trader said that "this morning, a lot of them were trading right at the par level during the first part of the morning," - up from their issue price - "and then they worked their way up" to around the 100 3/8 level, and then later in the day to 100½ bid, 100 5/8 offered.

He estimated that by day's end over $230 million of the bonds had changed hands "and that may be even higher."

Level 3 struggles continue

Among the slew of new deals which had priced during Tuesday's $4 billion-plus session, traders said that most continued to trade strongly on Wednesday - 1 point, 2 points, or even 3 above their respective issue prices. But Level 3 Communications remained the exception to the rule.

A trader saw the Broomfield, Colo.-based telecommunications backbone service provider's

drive-by offering of 11 7/8% notes due 2019 settling in at 98 bid, 98 offered, still down from the 98.173 at which the $305 million issue had priced Tuesday to yield 12¼% and in line with the levels seen in Tuesday's aftermarket.

Level 3, another trader said, "had a hard time getting out of its own way." He saw the bonds in a 98-98½ context, declaring that they "couldn't seem to make any headway to being up much above the issue price."

In discussing why the new bonds were underperforming most of the other deals, he theorized that Level 3 - which will use the proceeds from the deal to take out its 5¼% convertible notes due later this year - "was competing with all of these larger deals. There has been a lot of telecom paper come to market - on Tuesday alone there was CommScope as well as internet service provider Cogent Communications Group, Inc. and, from last week, broadband and cable operator Charter Communications Inc.'s $1.1 billion behemoth of an offering.

"This comes behind all of that. CommScope is a new name. [Non-telecom issuer UCI International, Inc., issuing bonds under] Uncle Acquisition 2010 Corp. is a new name. So they probably generated more interest than the Level 3s."

He said further that Level 3 - a very familiar junk market name - "has kind of been beat to death, and they're still over-levered in the rest of the world of the telecom market. So you had a lot of telecom paper come, they're at the lower end of it - it wasn't a very big deal - and it didn't get a lot of hype" beforehand.

He said that the new Level 3 issue would "probably be something that kind of moves up as the market moves along, and the deal gets absorbed."

NRG inches up

The other deal which had struggled a little on Tuesday, from Princeton, N.J.-based power generating company NRG Energy, Inc., was seen having improved a little in Wednesday's dealings from where it finished on Tuesday right around its par issue price.

That quickly shopped $1.2 billion offering of 7 5/8% notes due 2018 was seen by a trader having edged higher on Wednesday to 100½ bid, 100¾ offered.

Verso off highs

Among the other deals which had all priced and then did pretty well in Tuesday's secondary, a trader saw Verso Paper Holdings, LLC/Verso Paper Inc.'s 8¾% notes due 2019 at 102¾ bid, 103 offered on Wednesday. That was in a little from the 103-area bids seen at the close of the previous session, after the Memphis-based paper manufacturer's $360 million deal had priced at 99.291 earlier Tuesday to yield 8 7/8%.

Verso "kind of backed off," said another trader, who saw the bonds retreat from their highs to around the 102½ bid, 102¾ offered level. However, still later in the session, he saw the bonds firm off those lows climb back to 103 1/8 bid, 103 3/8 offered.

CommScope moves up

CommScope's $1.5 billion offering of 8¼% notes due 2019 was doing better Wednesday than its closing level on Tuesday, a trader said. He saw the Hickory, N.C.-based telecommunications infrastructure services company's new issue having firmed a bit to 103 bid, 103¼ offered, improved from Tuesday's late aftermarket level of 102¾ bid, 103 offered. The bonds had priced at par earlier on Tuesday.

He said that the bonds "were stuck at that price [103-1031/4] all day."

Cogent climbs

A trader said that Cogent Communications' new 8 3/8% senior secured notes due 2018 had moved up to 102¾ bid, 103¾ offered.

He said that was up from the 101½ bid, 102½ offered level where the bonds finished trading Tuesday after the Washington D.C.-based internet service provider's $175 million issue priced at par.

Indicators stay strong

Away from the new-deal realm, a trader saw the CDX North American Series 15 HY index up by ¼ point on Wednesday, finishing at 103 7/16 bid, 103 9/16 offered, on top of the 5/8 point gain tallied on Tuesday.

The KDP High Yield Daily index meantime gained 7 basis points on Wednesday to close at 74.87, after having merely inched up by 1 bp on Tuesday. Its yield came in by 3 bps to end at 7.14%, after having risen by 3 bps in each of the previous two sessions.

The Merrill Lynch High Yield Master II index gained 0.155% on Wednesday, to end at a year-to-date return of 1.109% - the first time this year that figure has been above 1%. It was also a new peak level for so11. On Tuesday, the index had risen by 0.086% to end at a cumulative return of 0.953% - the year's previous high-water mark.

Advancing names topped decliners for a 12th straight session on Wednesday, and held an advantage over them of nearly seven to six, versus the almost eight-to-five edge seen on Tuesday.

Overall activity, represented by dollar-volume levels, rose by 16% on Wednesday, on top of the 31% jump seen on Tuesday versus the previous session.

Despite the statistical gain, a trader said he "didn't see it that active today," suggesting that the overnight storm which dumped anywhere from eight to 12 inches of snow on the New York metropolitan area may have been a factor, although he later allowed that "it probably doesn't mean anything - there were plenty of people to trade paper."

Another trader said that in the morning Wednesday, "you just had a ton of new-issue flipping and jockeying going around, re-allocating new issues for people."

After the first 1½ to two hours of that, he continued, things just "kind of quieted down, to 'OK, back to conference calls for deals that are getting priced Thursday'."

He predicted that with several smaller deals on tap for Thursday from issuers like Columbus McKinnon ($150 million) and Elizabeth Arden ($225 million), "you won't see that much activity" in them .

At another desk, a trader said that for yet another day, "the market was up another ½ point on average. I would say the stuff that wasn't active [Tuesday] is probably up more like 1 point, while the stuff that was trading is up maybe ¼ to 1/2. But generally, it's a good tone - up more and hard to get people to sell anything."

He did see "a little bit of a slowdown" after the previous session's intense trading in more than a half-dozen new deals.

Catalyst paper on fire

A trader saw Catalyst Paper Corp.'s bonds having "moved up a few points" on the news that the Richmond, B.C.-based paper manufacturer plans an early redemption for its outstanding 8 5/8% notes coming due on June 15. The company will now redeem that paper at par on Feb. 11.

He said that the company's 7 3/8% notes due 2014 - which had risen several points on Tuesday to end at 81 bid, 82 offered - got as good as 86 bid. Meanwhile, its 11% senior secured notes due 2016, which on Tuesday had firmed up to par bid, kept on rising on Wednesday, "also up a few points" to around 101½ bid, 102 offered.

Another trader said that the Catalyst 7 3/8s were up by 4 points on the day, around 86 and "were probably the highest volume bond in Trace today other than Sallie Mae."

He said that not all that much debt is actually being called - just the last $26.27 million of the issue. "That had to get paid down anyway" come June, he said, "so I'm not sure of what the market was expecting there."

He also saw the 11% notes - which had been issued by Catalyst last March as part of an exchange offer that took out most of the then-outstanding 8 5/8s - "up a couple of points" to end at 102 bid.

"I don't know if the Street was expecting this or not," he continued, noting that the just last week, the 11s had been trading at 97-98, and "the 7 3/8s really popped today. So I'm not sure if there was more to it, or the Street was really down on them, but that paydown got a big pop in the rest of the market. But it didn't seem like as big a deal as the trading sort of warranted."

The first trader meantime saw sector peer NewPage Corp.'s 11 3/8% senior secured notes due 2014 up as well, by 1 point. The Miamisburg, Ohio-based coated paper company's bonds ended at 97½ bid, 98 offered.

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