Visteon, Claiborne shop deals; secondary steady; deals hold gains; market debates data

By Paul Deckelman and Paul A. Harris

New York, March 28 - A more sedate high-yield primary sphere kicked off the last week in March still recovering from the frantic pace seen last week, when some $10 billion of new dollar-rated junk, plus a sizable amount of euro and sterling issuance, had come clattering down the chute and into the hands of investors.

There were no pricings in the dollar market, although there was a considerable amount of forward calendar-building.

Auto components maker Visteon Corp. was heard by syndicate sources to be shopping around a $500 million offering of eight-year bonds, with pricing anticipated later in the week.

And fashion house Liz Claiborne, Inc. was seen hitting the road to market a $200 million issue of secured paper.

Besides those well-known names, real estate operator Kennedy-Wilson Inc. was said to be bringing an eight-year bond deal.

From the bubbling European bond market came word that German printing press manufacturer Heidelberger Druckmaschinen AG and Britain's Thames Water Utilities Ltd. are shopping around a euro-denominated deal and a sterling-denominated transaction, respectively. Also on the continent, Belgian disposable diaper manufacturer Ontex IV SA and French foods retailer Picard Groupe SAS were heard to have priced deals on Monday.

Back in the dollar market, traders saw a generally dull and lackluster secondary. Recent new deals, including James River Coal Co., NII Holdings Corp. and Aperam, were seen hanging onto the solid gains they had notched by the end of aftermarket trading last week.

Primary and secondary market participants meantime were continuing to puzzle over the revised high-yield mutual fund-flow figures released by Lipper FMI. While the new number shows a considerably smaller outflow from the funds than the whopping $2.8 billion cash hemorrhage first reported late Thursday, some in the market feel it's still too high, while others wonder whether there was really any outflow at all.

Visteon's $500 million

No issues were priced during the Monday primary market session.

However, the dealers rolled out a fistful of offerings to a buyside that continues to have plenty of cash to put to work, according to sources.

The dollar-denominated primary market saw three deals - each of them featuring Merrill Lynch as the bookrunner on the left - board the forward calendar.

Visteon plans to price a $500 million offering of eight-year senior notes later this week.

Merrill Lynch, Morgan Stanley & Co. and Citigroup are the joint bookrunners for the debt refinancing and general corporate purposes deal.

Kennedy-Wilson roadshow

Meanwhile, Kennedy-Wilson began a roadshow on Monday for a $200 million offering of eight-year senior notes (expected ratings B1/BB-/).

Merrill Lynch and Morgan Stanley & Co. are the joint bookrunners.

The Beverly Hills, Calif.-based real estate investment and services company also plans to use the proceeds to repay debt and for general corporate purposes.

Liz Claiborne $200 million

Elsewhere, Liz Claiborne began a roadshow on Monday for its $200 million offering of eight-year senior secured notes (expected ratings B2/B-/).

Merrill Lynch, J.P. Morgan Securities LLC, SunTrust Robinson Humphrey and Wells Fargo Securities are the joint bookrunners.

The New York-based designer and marketer of apparel and accessories plans to use the proceeds to fund the tender offer for its euro-denominated notes due 2013 and for general corporate purposes.

Thames Water starts Tuesday

The European primary market also generated news on Monday.

England's Thames Water plans to begin a roadshow on Tuesday in Edinburgh for a £400 million offering of eight-year senior secured notes (expected B1//confirmed BB).

Morgan Stanley & Co., which will bill and deliver, is a joint physical bookrunner for the debt refinancing deal. BNP Paribas and J.P. Morgan Securities LLC are also physical bookrunners.

The issuing entity, Thames Water (Kemble) Finance plc, is a financing unit of Kemble Water, a holding company of Thames Water Utilities, the regulated monopoly provider for water and wastewater services in London and surrounding areas.

Heidelberger €300 million

Meanwhile, Heidelberger Druckmaschinen began a roadshow on Monday in London for its €300 million offering of seven-year senior notes.

Deutsche Bank, Citigroup, BNP Paribas, Commerzbank and LBBW are the joint bookrunners for the debt refinancing deal from the Heidelberg, Germany-based manufacturer of offset printing presses.

Recent deals hold their own

Deals pricing towards the end of last week were seen pretty much staying around those same trading levels on Monday.

"We're holding gains," a trader declared. "It's not as if we're not holding gains. The market remains unchanged and holding their levels," but he added that there was "not a lot of new stuff to give you."

NII Holdings' upsized $750 million issue of 7 5/8% notes due 2021, which had priced at par on Thursday and then seen busily trading on Friday around the 102 bid area, were seen by a trader on Monday at 101 7/8 bid, 102 1/8 offered, essentially unchanged.

A second trader saw the Reston, Va.-based international wireless service provider's deal - greatly upsized from its originally announced $500 million - at 101 7/8 bid, 102 3/8 offered.

James River Coal's 7 /78% notes due 2019 were seen by a trader continuing to trade north of the 103 bid level at which the Richmond, Va.-based coal operator's $275 million deal - upsized a little from the originally announced $250 million - had traded at going home on Friday. That deal had priced at par on Thursday afternoon, then shot right up above 102 in initial aftermarket dealings and added to those gains on Friday top reach the 103 level.

A trader saw European steelmaker Aperam's $500 million two-part issue trading well above the par level where those tranches had priced on Friday, and while people had seen isolated bids and offers for that paper on Friday, actual two-sided markets emerged on Monday.

The trader saw Aperam's $250 million of 7 3/8% notes due 2016 at 101¾ bid, 102¼ offered, while seeing its $250 million of 7¾% notes due 2018 at 102 3/8 bid, 102 7/8 offered.

A trader saw Plains Exploration & Production Co.'s upsized $600 million of 6 5/8% notes due 2021 trading just above its par issue price at 100¼ bid, 100½ offered, off a little from Friday's levels around 100 3/8 bid, 101¼ offered.

A second trader located those new bonds at 100 1/8 bid, 100 3/8 offered.

At another desk, a trader called the Houston-based oil and gas operator's deal "another heavily allocated transaction that went to crossover guys, hedge funds and a limited high-yield audience."

He called it "one of the top four names" seen trading around, volume-wise.

CIT Group, Inc.'s two new Series C second-priority senior secured bond tranches, which had both priced at par on Wednesday, continued to trade at a premium.

The New York-based commercial lender's $1.3 billion of new 5¼% notes due 2014 were seen on Monday at 100 5/8 bid, 101 1/8 offered. Meantime, its $700 million of 6 5/8% notes due 2018 were being quoted at 100¾ bid, 101¼ offered, a trader said.

Among the company's existing series A senior secured second-priority notes, its 7% paper due 2017 were seen actively trading around at 100 1/8 bid, up 1/8 point on the session.

Indicators steady to firmer

Away from the new deal world, a trader saw the CDX North American HY index, which completed its semi-annual changeover on Monday by rolling into the new Series 16 index, starting off the new cycle at 102 bid, 102¼ offered, after having been down 3/16 of a point on Friday. It ended Friday at 103¼ bid, 103¾ offered.

The KDP High Yield Daily Index meantime was unchanged on Monday to end at 75.66, after having risen 3 bps on Friday. Its yield was unchanged at 6.73% after having come in by 1 bp on Friday.

The Merrill Lynch High Yield Master II index rose for a ninth consecutive session on Monday, by 0.07% on top of Friday's 0.019% gain. That lifted its year-to-date return to 3.77% - a new peak level for 2011 - from Friday's 3.697% and up from the previous high point for the year so far, the 3.73% set on March 9.

Advancing issues led decliners on Monday for a third consecutive session, although as had been the case in each of the previous two sessions, their winning margin was a relative handful of issues - a couple dozen at most - out of the over 1,300 tracked.

Overall market activity, as measured by dollar-volume levels, fell by 16% on Monday, after having fallen by 22% on Friday from the prior session's levels.

A trader said during the last hour of the session that he saw Trace system volume "well under $1 billion," estimating it in the high $800 million range, "so it's one of the quietest days that I can recall."

He noted, for instance, that when it came to issues on Trace trading more than $10 million during the day, "you've only got about 10 names."

He continued, "There was no trend today. I was talking to a lot of people on the account side and they said 'I'm not doing anything.' "

"It's a yawn today. It's really dull - D-U-L-L."

The trader further said: "[I] didn't see much price movement in anything. Stuff that we've been working on for a couple of days, we're still working on, with bids 1/8 to ¼ of a point below where we're offering and on stuff we've been trying to buy, offerings 1/8 or ¼ of a point above where we've been bidding for three days."

"Today's trading," he concluded, "is about as quiet as it gets."

He also acknowledged that with the end of the month and the end of the quarter both coming up this week, many players have presumably already done their window-dressing transactions so as the be able to close out their books for the period looking good, and those accounts will not be back in till the new month and quarter being on Friday.

A second trader allowed that "there's always excuses [not to trade] if you want 'em."

Despite the end-of- month/quarter effect, he said, "It was light today, but I don't think it will continue to be like this [Tuesday]. We should see volumes pick up pretty nicely [Tuesday] and Wednesday, I would think."

Kodak holds Friday gains

Among specific non-new deal credits, a trader said that Eastman Kodak Co.'s 7¼% notes due 2013 remained around the same 99½ bid, par level to which they had moved on Friday in anticipation of what turned out to be a favorable ruling from federal regulators keeping Rochester, N.Y.-based photographic and imaging products maker Kodak's patent-infringement lawsuit against the makers of the popular Blackberry and iPhone devices alive.

A second trader saw Kodak at 99½ bid, 100½ offered. "They were really unchanged, with light volume in the name, despite the news from Friday," the trader said.

However, another market source, who pegged the bonds at 99 5/8 bid, said they were up 7/8 point on the day.

General Maritime righting ship

General Maritime Corp.'s debt has made a heady comeback since dropping nearly 20 points earlier this month.

On Monday, a trader called the 12% notes due 2017 up "another 3 and change" at 953/4, with $20 million to $25 million trading.

"That's pretty good volume for them," he said. "They've come all the way back."

A second trader pegged the notes at 95½ bid, 96½ offered, "up a good bit."

"They are right back to where they started, probably even higher," the second trader said.

The bonds had initially traded down when the New York-based crude oil and products tanker company said it was in talks with lenders and other creditors on a possible restructuring and that it would therefore delay filing its 10-K.

GenMar, as it is commonly referred to, previously said it would file its quarterly report by March 31.

"I think the initial fear was overstated," the first trader said, explaining the bonds' several-session-long gains.

Harry & David gets hammered

From deep in the distressed-debt precincts, traders saw activity in Harry & David Operations Corp.'s 9% notes due 2013. One saw the bonds having fallen to a wide 20 bid, 24 offered context from prior levels in the mid-to-upper 20 on news of the Medford, Ore.-based gift fruit and gourmet foods basket distributor's Chapter 11 filing, even though this will ultimately leave bondholders in control of the company.

A second trader saw the bonds trading around the 23 bid level "at least a couple of times," comparing that to Friday's levels around 27-271/2.

"It wasn't a surprise," he said - the troubled company was long seen headed for bankruptcy - "but still, the bonds were down."

Auto names off slightly

A trader said that Motors Liquidation Co.'s benchmark 8 3/8% bonds due 2033 down 3/8 of a point at 29 3/8 bid, 29 7/8 offered.

The company had issued the bonds when it was still known as General Motors Corp., before its 2009 Chapter 11 reorganization split the profitable car making operations into a "new GM" and left the debt and other liabilities and useless assets with the old company.

GM's domestic arch rival Ford Motor Co.'s 7.45% bonds due 2031 were meantime off ¼ of a point at 107¾ bid, 108¼ offered.

Clear Channel in late climb

Clear Channel Communications Inc.'s 11% PIK notes due 2016 were one of the more actively traded issues on the day, a market source said, with over $10 million of the San Antonio, Texas-based media company's bonds changing hands.

On a strictly round-lot basis, which accounted for most of the early trading in the credit, the bonds were actually off about 5/8 of a point on the day, ending just below 93, but they moved up to around the 95 bid level later on in the session on busy odd-lot trading.

There was no fresh news out about the company that might explain the activity.

Leap bonds trade actively

A trader said that Cricket Communications Inc.'s 7¾% notes due 2020 were "up a little bit" in the par area on busy volume of up to $25 million.

There was no fresh news seen out on the pre-paid wireless company, a subsidiary of San Diego-based wireless operator Leap Wireless International Inc.

Fund flow numbers baffle

With not much in the way of real trading going on during Monday's generally quiet session, traders said that there was a lot of discussion about the kerfuffle that arose from the release last Thursday of high-yield mutual fund flow numbers by Lipper FMI, whose AMG analytical unit said that the funds - seen as a reliable barometer of overall junk market liquidity trends - showed a record $2.8 billion outflow in the week ended this past Wednesday.

One trader said that "more and more people" were asking about that and discussing it in critical fashion on Monday.

After questions were raised by market participants late Thursday about how that figure was arrived at, Lipper explained that it involved the demise of two mutual funds, each with a little under $1 billion of assets, which were being counted for now as outflows.

There was talk in the market that absent the nearly $2 billion from those two funds, the "real number" was something closer to around $830 million - and Lipper itself backtracked late Friday, releasing a revised figure.

A trader opined, "Quite honestly, I don't think the market traded like an outflow of $800 million even. The market wasn't trading that way. So even if you X-out the $2 billion [from the two failed funds], I still have a hard time with the number."

He agreed that for even as large an inflow as the $800 million range, it would have required several strongly down days in trading last week, and "we clearly did not see that, no."

Another trader flatly declared that "we all know that [Lipper/AMG's] numbers were wrong."

He said: "Even if you back out the $2 billion [from the two funds], realistically, myself and everybody else you might talk to, we're still having a hard time coming up with the $800 million. There was selling - but was it $800 million? It sure didn't feel that way. You're not seeing price movements that would correspond to that. As far as I'm concerned, the market is still relatively firm."

Market participants told Prospect News on Monday that that the new AMG figure was for an outflow around $677 million, but there was even skepticism in some quarters that there had been that much selling by the funds.

One of the traders speculated that "it will be interesting to see when we get to this [Thursday afternoon]. If you get a plus $3.2 billion [inflow] number, it might sound completely ludicrous, but for the last two weeks to end up net $300 million to $400 [million of inflows], it's not that hard to perceive."

Stephanie N. Rotondo contributed to this report

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