Primary falls quiet as year-end lull begins; Rite Aid up after results; funds lose $281 million

By Paul Deckelman and Paul A. Harris

New York, Dec. 20 - The long-awaited traditional year-end lull in the high-yield market appeared to have finally begun on Thursday, as the primary sphere fell silent.

No new deals priced for the first time in more than a month - nor were any deals even announced. A trader heard that primaryside players are now setting their sights on the busy calendar that is expected to be in place following the new year.

Although many players on the buyside and sellside were in place during the session, fielding telephone calls, the chances that anymore deals will price for the remainder of the year are remote, they said.

Traders saw a limited amount of activity in some of the new bonds, which have priced this week, including DISH DBS Corp., U.S. Foodservice Inc., IAC/InterActiveCorp. and Oil States International Inc.

Away from the new-deal arena, Rite Aid Corp.'s bonds were seen better after the big drugstore chain operator reported fiscal third-quarter numbers, including better leverage measures and its first profit in nearly five years.

Movements of cash into and out of high-yield mutual funds and exchange-traded funds - considered a reliable barometer of overall junk market liquidity trends - saw their first outflow in four weeks.

EPFR's $281 million outflow

As Thursday's activity was winding down, Cambridge, Mass.-based EPFR Global said that in the week ended Wednesday, $281 million more left the junk mutual funds and ETFs than came into them.

It was the first outflow after three consecutive weeks of inflows totaling some $4.55 billion, according to a Prospect News analysis of the data. The service had reported a $1.68 billion inflow in the week ended Dec. 12.

So far this year, inflows have been seen in 41 weeks and outflows in 10 weeks, according to the analysis. The year-to-date cumulative net inflow totaled around $73 billion, the analysis said.

Market participants reported seeing no trace of the fund-flow statistics compiled by the other major fund-tracking service, AMG Data Services of Arcada, Calif., a unit of ThomsonReuters' Lipper analytics unit, which normally circulates in the market on Thursday afternoons.

The patterns of inflows and outflows seen by EPFR are similar to those seen by Lipper, although the numbers for individual weeks and cumulative totals are quite different due to the differing methodologies the two services use in compiling their numbers.

EPFR, for instance, includes the results of some non-U.S.-domiciled funds in its tally, while Lipper focuses solely on the domestic funds. However, their respective numbers generally do point in the same direction.

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

The continued flow of fresh cash into junk - and the mutual funds and ETFs represent but a small, though very observable and quantifiable percentage of the total amount of money coming in - has been seen by analysts as a key element behind the high-yield secondary market's strong performance this year versus other fixed-income asset classes and its active new-deal pace, which surged past 2011's year-to-date totals some weeks ago.

Wednesday deals quiet

A secondary market trader described Thursday's session as extremely quiet.

He said that he was hearing from buysiders that "nobody wants to do anything for the next couple of days, but the new-issue calendar is building for next year."

He said that there would be "a big calendar" in the first part of January.

With no real activity of more immediate consequence happening in the primary sphere, traders saw only restrained dealings in recently priced high-yield issues.

A trader saw DISH DBS' 5% notes due 2023 at 100 5/8 bid, 100 7/8 offered, noting that the Englewood, Colo.-based satellite television broadcaster's megadeal-sized offering "stayed around that level all day."

That was up from 101 1/8 bid, 101½ offered, where the notes had been quoted late Wednesday after pricing at par. That quick-to market deal had been sharply upsized to $1.5 billion from an originally announced $1 billion.

At another desk, the bonds were seen having moved up to 100 3/8 bid, 100 5/8 offered from 101 1/8 bid, 101½ offered.

U.S. Foodservice's add-on to its 8½% notes due 2019 was seen by a trader at 102½ bid, 103½ offered, not much changed from their late-Wednesday level at 102½ bid, 103 offered.

Another trader likewise called them about unchanged at 102¾ bid, 103¾ offered.

The Columbia, Md.-based provider of cafeteria services and food products had priced the quick-to-market $175 million add-on to its existing $800 million of those bonds on Wednesday at 101.5 for a yield to worst of 8.098%. The issue had been upsized from $100 million originally.

Petroleum Geo-Services ASA's $150 million add-on to its $300 million of existing 7 3/8% notes due 2018 was quoted down a quarter-point on the day at 107¾ bid, 108¼ offered.

The Norwegian provider of seismic and other geothermal services to the energy industry had priced the same-day add-on deal at 107.5 for a yield to worst of 5.868%. The bonds had firmed to 108 bid in initial secondary trading.

Two traders said they had not seen any trace of Dispensing Dynamics International's new 12½% senior secured notes due 2018.

The City of Industry, Calif.-based producer of restroom soap, toilet tissue and paper towel dispensers had priced its $130 million offering at 98 on Wednesday to yield 13.055%, after the deal was slightly upsized from $125 million originally.

Earlier deals also quiet

Going back to Tuesday's session, a trader saw Landry's Holdings II Inc.'s 10¼% notes due 2018 Thursday at 100 1/8 offered, with no bid seen.

A second trader quoted the Houston-based restaurant and gaming company's upsized $250 million issue at 99½ bid, par offered, which he called unchanged on the day.

That deal had priced on Tuesday at 99, to yield 10.509%, after being upsized from the originally shopped $210 million. The new bonds bounced around in the secondary market falling to 98¾ bid on Wednesday morning, before coming off that low to end at 99½ bid, 993/4, up a half-point on the day.

IAC /InterActiveCorp's new 4¾% notes due 2022 were trading at 100 3/8 bid, 100 5/8 offered on Thursday, up from Wednesday's levels around 100¼ bid, 100½ offered.

The New York-based media and internet website company's $500 million of those notes had priced at par on Tuesday in a quick-to-market transaction and then were quoted around fractionally higher.

A trader said that Oil States International's 5 1/8% notes due 2023 traded at 101¼ bid, 101¾ offered "very early in the session, maybe around 8:30 a.m. ET," but did not trade after that as far as he could see.

The Houston-based oilfield services company's quickly shopped $400 million deal had priced at par on Tuesday after having been upsized from the originally announced $300 million size. The notes moved up to the 101 region in initial secondary dealings and stayed up there afterward.

Rite Aid rallies after numbers

Away from the new deals, a market source quoted Rite Aid's 9¼% notes due 2020 at 105¾ bid, up 1½ points on the session.

The source also saw the company's 7½% notes due 2017 up a half-point, at 103½ bid.

The bonds firmed after the Camp Hill, Pa.-based drugstore posted positive results for its fiscal 2013 third quarter ended Dec. 1.

Rite Aid not only reported its first quarterly net profit since the first quarter of fiscal 2008, but also showed solid progress in bringing down its net debt and leverage ratios from their year-earlier levels, helped by improved cash generation and adjusted EBITDA.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.