Cequel, Seagate, Amkor drive-bys lead busy primary; DSW drops out; funds gain $220 million

By Paul Deckelman and Paul A. Harris

New York, April 29 - Emboldened by the seemingly endless supply of liquidity and insatiable demand for new-deal paper, a slew of suddenly-appearing issuers peppered the high yield market with opportunistically timed drive-by deals on Thursday, as for a second consecutive session, seven deals totaling more than $3 billion equivalent priced.

There was a pair of upsized $600 million drive-bys from cable and broadband operator Cequel Communications Holdings I, LLC/Cequel Capital Corp. and from disk-drive manufacturer Seagate HDD Cayman. Out of the latter company's high-tech sector came another rapidly marketed offering of $345 million, also upsized, from Amkor Technology Inc.

Las Vegas-based gaming concern Pinnacle Entertainment, Inc. weighed in with an upsized $350 million tranche of senior subordinated notes, while out of Europe chemical maker Rhodia Group contributed a quickly shopped €500 million bond deal.

Two deals priced which were not drive-bys but which had actually been on the forward calendar when the week opened - a $450 million transaction from vehicle components company Cooper-Standard Automotive Inc. and brokerage industry services provider Penson Worldwide Inc.'s $200 million second-lien senior secured notes deal.

The forward calendar grew as California-based government contractor Kratos Defense & Security Solutions Inc. announced plans for a $200 million seven-year offering. Talk emerged on convenience store/gas stop chain operator Susser Holdings Corp.'s $425 million of six-year notes, which is expected to price on Friday.

Amid all of the issuers clamoring to climb onto the primary market's bandwagon, one issuer - Atlanta-based bottled water company DSW Holdings Inc. - got off, postponing its $475 million offering of seven-year senior secured notes.

Trading in the new or recently priced primary issues took up most of the attention in the secondary market, which was seen generally firmer. Smurfit-Stone Container Corp. - clearly nearing the end of its Chapter 11 tenure - was one of the day's biggest movers, to the upside.

Junk funds gain $220 million

And as activity was wrapping up for the day, market participants familiar with the weekly high yield mutual fund-flow numbers compiled by AMG Data Services of Arcata, Calif. - considered a reliable barometer of overall junk market liquidity trends - said that in the week ended Wednesday, some $220 million more came into those weekly-reporting high yield funds than left them, a sign of continued investor support for the junk market.

It was the 10th consecutive weekly cash infusion. Since that winning streak started in late February, $4.443 billion has come into the funds in that time, according to a Prospect News analysis of the AMG figures, including the latest inflow and the $512.3 million cash injection seen in the previous week, ended Wednesday, April 21.

In the 17 weeks since the beginning of this year, inflows have now been seen in 14 of those weeks and outflows in just the remaining three, although these included two massive cash hemorrhages seen in mid-February, each north of $900 million, which totaled $1.9 billion, according to the Prospect News analysis.

However, the mutual funds have more than fully bounced back from that big cash exodus to show a year-to-date cumulative net inflow of around $4.086 billion, according to the analysis - a new peak level for the year, eclipsing the old mark of $3.866 billion seen the previous week.

The year-to-date fund flow totals have gyrated between that new peak cumulative inflow level and a net outflow of $357 million seen in the week ended Feb. 17, which had been the first such year-to-date net loss for the funds since early April of 2008, according to the analysis.

EPFR sees $876 million cash gain

Another fund-tracking service - Cambridge, Mass.-based EPFR Global, whose methodology differs somewhat from AMG - meantime reported that $876 million more came into the funds than left them in the latest week.

That cash infusion followed the $864 million inflow seen in the previous week. Following the pattern seen in the AMG figures, the EPFR statistics have now shown 10 straight weeks of inflows, lifting the funds from their two-week rut in the Feb. 10 and Feb. 17 weeks, which EPFR calculated to have produced $1.76 billion of combined outflows.

Reflecting the difference in the way AMG and EPFR calculate their respective fund-flow totals, the latter - which includes results from certain non-U.S. domiciled funds as well as the domestic funds - said that on a year-to-date basis, the mutual funds are now showing a $8.59 billion net inflow, a new peak level for the year. That eclipsed the old mark of $7.7 billion seen the week before.

All cumulative fund-flow totals, whether for AMG or EPFR, can include unannounced revisions and adjustments to figures from prior weeks.

The flow of money into and out of the junk bond funds is seen as a generally reliable barometer of overall high yield market liquidity trends - although they comprise less of the total monies floating around the high yield universe than they did in the past. Last year's strong pattern of inflows - with AMG reporting over $20 billion having come in to the weekly-reporting funds over the course of the year, along with over $10 billion more into funds which report monthly, and EPFR posting similarly robust numbers - was seen as a proxy for the overall surge of liquidity into the junk market from all sources, which helped to fuel record 2009 new-issuance of over $160 billion and unprecedented secondary returns topping 57%.

On top of the mutual fund flows, investors that are somewhat novel to the high-yield space have lately shown up in the junk bazaar, according to a mutual fund manager.

Strategic income funds are lately playing the asset class, the source said.

In addition, sovereign bond investors are taking fresh looks at the risk-return picture in their accustomed asset class, the manager added.

Some of those are liking what they've seen lately in the U.S. high-yield bond market.

Cequel doubles issue size

Seven issuers combined to place $2.545 billion and €500 million of junk during the busy Thursday session.

Five of the seven brought drive-bys. Four of the deals were upsized.

Cequel Communications Holdings I, LLC and Cequel Capital Corp. priced an upsized $600 million add-on to its 8 5/8% senior unsecured notes due Nov. 15, 2017 (B3/B-) at 102.0, resulting in an 8.167% yield.

The yield printed at the tight end of the 8¼% price talk. The amount was increased from $500 million.

Credit Suisse and JP Morgan were joint bookrunner for the quick-to-market deal.

The St. Louis-based cable company will use the proceeds to repay its second-lien credit facility.

Thursday's add-on doubles the issue size.

The original $600 million priced at 98.58 to yield 8 7/8% on Nov. 1, 2009.

The add-on bonds, which priced at 102, were at 102½ bid, 103 offered late Thursday, according to a buy-side source.

Seagate upsizes

Meanwhile, Seagate HDD Cayman priced an upsized $600 million issue of 10-year senior unsecured notes (Ba3/B+) at par to yield 6 7/8%, at the tight end of the 6 7/8% to 7% price talk. The size was raised from the original $500 million.

Morgan Stanley and Bank of America Merrill Lynch were joint bookrunner for the quick-to-market deal.

The Scotts Valley, Calif.-based hard disk drive and storage products company will use the proceeds to take out a portion of its outstanding debt and for general corporate purposes.

Cooper-Standard brings $450 million

CSA Escrow Corp. and Cooper-Standard Automotive Inc. priced a $450 million issue of eight-year senior notes (B2//) at par to yield 8½%, on top of the price talk.

Deutsche Bank Securities Inc. was the left bookrunner. Bank of America Merrill Lynch, Barclays Capital Inc. and UBS Investment Bank are the joint bookrunners.

Proceeds will be used to repay the company's debtor-in-possession loan and other debt.

Pinnacle upsizes by $100 million

Pinnacle Entertainment, Inc. priced an upsized $350 million issue of 10-year senior subordinated notes (Caa1/B) at par to yield 8 ¾%.

The yield printed at the tight end of the 8¾% to 9% price talk. The quick-to-market deal was incrased from $250 million.

JP Morgan, Bank of America Merrill Lynch, Barclays Capital, Credit Agricole CIB, Deutsche Bank Securities and UBS Investment Bank were joint bookrunners.

The Las Vegas gaming company will use the proceeds to refinance its 8¼% notes due 2012.

Amkor sells $345 million

Amkor Technology, Inc. priced an upsized $345 million issue of eight-year senior unsecured notes (Ba3/B+) at par to yield 7 3/8%, on top of price talk.

Citigroup and Deutsche Bank Securities were joint bookrunners for the quick-to-market issue which was upsized from $300 million.

Proceeds, together with cash on hand, will be used to redeem all of the company's outstanding 7 1/8% senior notes due 2011 and 7¾% senior notes due 2013.

Penson prices seven-year deal

Penson Worldwide, Inc. priced a $200 million issue of seven-year senior unsecured notes (B1/BB-) at par to yield 12½%, also on top of the price talk.

J.P. Morgan Securities Inc. and UBS Investment Bank were the joint bookrunners.

Proceeds will be used to repay the company's credit facility and to make a capital contribution to regulated subsidiaries.

There were covenant changes to the deal.

Rhodia brings €500 million

France's Rhodia priced a €500 million issue of eight-year senior notes (B1/BB-) at par to yield 7%.

The yield printed on top of the final guidance.

Credit Suisse and BNP Paribas were joint bookrunners for the quick-to-market deal.

Proceeds will be used to refinance a portion of Rhodia's outstanding senior floating-rate notes due 2013.

Susser talks six-year notes

Susser Holdings, LLC and Susser Finance Corp. talked their $425 million offering of six-year senior notes (B2/B+) to yield 8¾% to 9% on Thursday.

The deal is set to price on Friday.

Bank of America Merrill Lynch, BMO Nesbitt Burns and Wells Fargo Securities are the joint bookrunners for the debt refinancing deal.

Also, from the emerging markets/high-yield crossover sector, Thailand's Finspace SA began a global roadshow for its $460 million offering of five-year senior unsecured notes (B1/B+/B+) on Thursday.

Citigroup, Credit Suisse, Barclays Capital and Morgan Stanley are leading the deal.

Proceeds will be used to fund plate mill expansion, as well as to refinance debt, fund acquisitions and for general corporate purposes.

DSW pulls refinancing

Meanwhile DSW Holdings, Inc., a holding company for DS Waters of America, Inc., postponed its $475 million offering of seven-year senior secured notes (B3/CCC+), as well as its $400 million credit facility, on Thursday.

Market sources say the company abandoned its planned debt refinancing because prospective interest expenses became too high.

The notes had been talked to yield 9¾% to 10%.

Morgan Stanley & Co. Inc., J.P. Morgan Securities Inc. and Barclays Capital Inc. were the joint bookrunners for the notes.

Cooper-Standard drives higher

When Cooper-Standard Automotive Inc.'s new 8½% notes due 2018 were freed for secondary dealings, traders saw the Novi, Mich.-based automotive components manufacturer's $450 million issue moving solidly higher right from the get-go.

Within minutes of the bonds having priced at par, a trader said "they're already at 102 bid," and that was just the beginning. A second trader saw the bonds push up to 102¾ bid, 103¾ offered, while another one pegged them at bid levels in the 103-103 3/8 area.

A trader said that the others Cooper-Standard bonds, such as its 8 3/8% notes due 2014, last seen around 81½ bid on Wednesday, "are not trading, so it's all just the new bonds."

Penson pops up

A trader saw Dallas-based brokerage services provider Penson Worldwide, Inc.'s new 12½% second-lien senior secured notes due 2017 trading at 101½ bid after the $200 million issue had priced at par earlier, while a second trader saw them at 102 bid, 103 offered.

Yet another trader saw the bonds get as good as 102½ bid, 103½ offered.

Cequel seen better

Cequel Communications' new 8 5/8% notes due 2017 add-on notes were seen by a trader to be moving around in a 102-104 context, after having priced in an upsized $600 million drive-by deal at 102 to yield 8.167% - considerably tighter than the 8 7/8% yield at which the St. Louis-based cable and broadband company had priced its original $600 million of those bonds, back on Oct. 30, 2009.

Another trader saw the add-on bonds tighten up to 103 bid, 104 offered.

Amkor, Seagate not much moved

The two high-tech companies' new drive-by bond issues, in contrast, did not go very much of anywhere in the aftermarket.

A trader saw Chandler, Ariz.-based semiconductor packaging and testing services provider Amkor Technology's 7 3/8% notes due 2018 at 100 3/8 bid, 100 5/8 offered, while another pegged the upsized $345 million offering at 100 3/8 bid, 100 7/8 offered.

And a trader saw Scotts Valley, Calif.-based computer disk drive maker Seagate's new $600 of 6 7/8% notes due 2020 at par bid, 100½ offered, while several others did not see it at all.

Both offerings had earlier priced at par.

AK Steel strengthens

A trader saw AK Steel Corp.'s new 7 5/8% notes due 2020 as "just beyond logic, that they're trading at 103, with investment-grade covenants. It's unbelievable."

The West Chester, Ohio-based steelmaker had priced its $400 million of those bonds on Wednesday at par, but they had only moved up modestly in the initial aftermarket activity to 100½ bid, 101 offered, before surging forward on Thursday.

Reynolds rallies

Reynolds Group Issuer LLC's new 8½% notes due 2018 were seen by a trader at 100¾ bid, 101¼ offered - up from the par price at which the food packaging company's $1 billion offering had come to market on Wednesday.

Another trader saw the bonds even higher and tighter, at 100 7/8 bid, 101 offered.

Market indicators turn upward

Among bonds not connected with the new-deal market, a trader saw the CDX Series 14 index gain ½ point for a second consecutive session on Thursday to end at 100 3/8 bid, 100 7/8 offered.

The KDP High Yield Daily Index was meantime up 14 basis points on Thursday to 73.15, after having lost 6 bps on Wednesday.

Advancing issues broke a two-session losing streak to move back ahead of the decliners on Thursday by a better-than seven-to-six margin.

Overall market activity, represented by dollar-volume levels, rose by 4% Thursday from the levels seen the previous session.

Smurfit-Stone breaks par

From out of the distressed-debt precincts, a trader said that Smurfit-Stone Container Corp.'s bonds "swooshed up, and it's over par," seeing the bankrupt Chicago-based paper-based packaging company - nearing the end of its tenure in Chapter 11 - as having moved above par across the board, "so that's up another few points."

He saw its short paper like the 8¼% notes due 2012 trading at 101, up 3 points on the day.

"Pretty soon, I'm going to take that one off my list," he quipped, noting the issue's ascent into premium territory.

He also saw the 8% notes due 2017 up 4 or 5 points on the day in "size trading," going out at 102½ bid.

At another desk, a market source saw the 8¼% notes going home up more than 4 points on the session, just below 102, while the longer 8% notes were also four-point gainers at 102.

Among other paper names, a trader said that Catalyst Paper Corp. paper - which had lost anywhere from 3 to 5 points on Wednesday on investor response to the Richmond, B.C.-based paper producer's fourth-quarter and full-year red ink - were quoted in a 69-70 context for the 7 3/8% notes due 2014, little changed from Wednesday. He saw only one trade, at 69, "so no big deal." He said that its 11% senior secured notes due 2016 continued to hover around the 98 bid, level.

Catalyst, another trader said, "got whacked down Wednesday on their earnings, and held their lows [Thursday] around 97½ bid, 98½ offered for the 11s.

Company executives meantime told investors that the coming year will likely see not much improvement in sales in the wake of the continued soft economy as well as an overall secular decline in paper usage, so Catalyst will stay wary and focused on further cutting costs.

A trader said that NewPage Corp.'s 10% notes due 2012 traded around the high 60s, going out at 69 bid, which he called up a point on the day.

A second trader said that NewPage's bonds "had a 4 point swing," gyrating between 66 bid, where the paper began the day, and 70½ near the close. "It got lifted all day," he declared.

At another shop, a market source quoted the Miamisburg, Ohio-based coated-paper maker's bonds up 1½ points at 68½ bid.

A trader noted that Appleton Papers Inc.'s 10½% senior secured notes due 2015 were "like a rock," at 102 bid.

It was a remarkable comeback for the Appleton, Wis.-based paper maker's $3905 million of those bonds, which priced at 98.035 to yield 11% back on Jan. 29 - but then drifted steadily lower, bottoming down around 89-90 in February, before gradually clawing their way back up to current levels.

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