BioScrip slates, but no pricings as stocks, weather chill primary; market anticipates Chrysler

By Paul Deckelman and Paul A. Harris

New York, Feb. 3 - February got off to a slow start in Junkbondland on Monday, with no new deals having priced and just one announcement of an upcoming issue surfacing. Health care credit BioScrip, Inc. was heard by syndicate sources to have hit the road with a $200 million seven-year offering.

Participants , meanwhile, were looking forward to other deals, which are expected to come to market later this week, most notably Chrysler Group LLC's $2.7 billion two-part behemoth of an offering.

Activity in both the primary and the secondary markets was considered lackluster, with several factors in play: personnel absences in the aftermath of this past weekend's New York-area Super Bowl festivities, a fast-moving snowstorm in the region that caused some participants to make an early exit, if they came in at all, and continuing carnage in the equity markets. All of the major indexes plunged more than 2% and pushed many wary investors to the sidelines.

In the junk world, losers included such liquid and normally actively traded names like Sprint Corp. and Caesars Entertainment Corp.

There were also some dealings in Texas Industries Inc., whose bonds have gyrated around at higher levels in the wake of last week's announcement that Martin Marietta Materials Inc. will acquire the construction materials provider and assume its $700 million of debt.

Statistical measures of junk market performance were lower across the board for a second consecutive session.

BioScrip starts roadshow

No new issues were priced on Monday, according to sources in Europe and the United States, but BioScrip began a roadshow on Monday for a $200 million offering of seven-year senior notes.

The deal is expected to price at the end of the present week.

Jefferies is the left bookrunner. SunTrust and Morgan Stanley are the joint bookrunners.

The Eden Prairie, Minn.-based provider of home infusion and other health care services plans to use the proceeds to repay certain amounts under its senior credit facility.

Turbulent weather, stocks

Apart from the news regarding BioScrip, the new issue market remained quiet.

Severe winter weather in the Northeastern United States prompted some market players to depart work early, ahead of expected challenging commutes, sources said.

Another factor contributing to Monday's lack of news was the turbulence that took hold of equities, with the S&P 500 sustaining a 2.28% drop on the day, a trader added.

The session brought no news on a calendar of deals carried over from last week, some of which are expected to price during the middle part of the present week.

Although there is no formal talk on the Micron Technology, Inc. $500 million offering of eight-year senior notes (/BB-/), a trader is looking for it to price with a yield in the 5% context.

The deal could come tighter because the company has a strong credit profile, the trader said, adding that the company is strongly capitalized, especially given that it is a high-yield credit.

Morgan Stanley, Credit Suisse and Goldman Sachs are the joint bookrunners.

In addition to Micron Technology, Chrysler Group LLC's $2.7 billion of two-part offering of senior secured notes (B1/B) is also scheduled to price mid-week. BofA Merrill Lynch, J.P. Morgan, Barclays, Citigroup, Goldman Sachs, Morgan Stanley and UBS are the joint bookrunners.

And Lansing Trade Group's $175 million offering of seven-year senior notes (B3/B+) via Macquarie is a deal also expected to price during the middle part of the week.

Recent deals retreat

In the secondary market, a trader saw some of the new deals that priced last week trading at slightly lower levels, in line with an overall easier market.

For instance, he saw both halves of Ardagh Group's two-part offering trading down about 5/8 of a point on the day, pegging its 6¼% notes due 2019 at 100¼ bid, 101 0ffered and its 6¾% notes due 2021 at 99¾ bid, 100½ offered.

Through its Ardagh Packaging Finance plc and Ardagh Holdings USA Inc. funding subsidiaries, the Dublin, Ireland-based glass and metal beverage, food and consumer products packaging company priced $830 million of bonds in a two-part offering on Wednesday - $415 million each of the 61/4s and 63/4s, both of which came at par.

He also saw Radio One Inc.'s 9¼% senior subordinated notes due 2020 trading at 102 5/8 bid, 103 offered, calling that a ¼ of a point dip. The Silver Spring, Md.-based broadcaster and diversified media company priced $335 million of the notes at par on Wednesday, and they were seen having firmed smartly in aftermarket dealings later Wednesday and on Thursday.

However, he also saw Westmorland Coal Co.'s 10¾% senior secured notes due 2018 unchanged on the day at 108½ bid, 109 offered, well up from the 106.875 level at which the Englewood, Colo.-based thermal coal producer and power generation company priced its $425 million of the notes as an add-on to its existing paper on Wednesday, yielding 6.975%, after the deal was upsized from an originally announced $400 million.

And he quoted the new Seven Generations Energy Ltd. 8¼% notes due 2020 at 107 bid, 108 offered, when the bonds began trading on Monday. The Calgary, Alta.-based company priced a $300 million add-on to its existing notes on Friday at 107 bid, to yield 6.652%.

The deal came to market too late in the session for any initial dealings on Friday.

'Go-go' names lower

Away from the recent deals, a trader said that "the selloff" consisted largely of "basically all of your go-go names, like the Sprints and CHK's of the world."

Both companies' names were seen among the day's busier issues.

Overland Park, Kan.-based wireless provider Sprint's 6% notes due 2022 racked up over $12 million of round-lot dealings on the day before ending at 98 bid, down 3/8 on the session.

A market source at another desk, however, saw the company's Sprint Capital Corp. 6 7/8% bonds due 2028 finishing down more than 3 points on the day, at 94½ bid.

Oklahoma City-based natural gas and oil operator Chesapeake's 9½% notes due 2015 were seen down slightly, ending just below 107¾ bid.

The busiest purely junk issue of the day was Caesar's 10% notes due 2018 - the legacy bonds issued by the Las Vegas-based gaming giant's predecessor company, Harrah's Entertainment Inc. They were seen down ¼ of a point on the day, at just a shade under 50 bid on volume of over $16 million.

Another busy issue was Denver-based kidney dialysis center operator DaVita Health Care Partners Inc.'s 5¾% notes due 2022, which lost around ¼ of a point on the day to end at 102 21/32 bid, on volume of over $9 million.

Even though many actively traded bonds were lower, the first trader said, "It still feels like there are buyers out there - accounts are still trying to figure out that they want to do."

Texas Industries trades around

The trader also said that Texas Industries' 9¼% notes due 2020 were moving around in a 116-to-116¼ bid context, adding "that seems to be the flavor of the afternoon."

Those bonds jumped more than 3 points last Tuesday in very active dealings of over $21 million, propelled upward by the announcement that Martin Marietta Materials will acquire the Dallas-based producer of cement and aggregates used in construction in an all-stock deal worth $2.06 billion, with Martin Marietta assuming $700 million of Texas Industries debt.

"So you are having guys [betting on] where these bonds will be taken out, so a lot of paper has been trading the past few days - at 116, at 116 1/8 and 1161/4," he said.

Senior analyst Vicki Bryan of the Gimme Credit independent investment research service is by no means a fan of Texas Industries, declaring in a research note that that its operating performance "remains disappointing and cash consumption excessive, with leverage on reported EBITDA still uncomfortably high at 5x (7.3x core EBITDA when we exclude boosts from variable nonoperating income and asset sales). Liquidity has become critically weak with cash disturbingly low and available credit limited."

However, the analyst said, as far as bondholders are concerned, "the cavalry has arrived" in the form of the buyout and debt assumption by Martin Marietta, "the best news for bondholders."

Looking ahead

A trader characterized Monday's market as being filled with "a lot more clutter out there, talking. Stuff is off definitely, but not as much as it probably should be just because there's so much out there.

"We'll see what happens. Hopefully we'll shake some stuff out the next couple of days," the trader said.

He predicted that after Monday's lackluster session, Tuesday "is going to be a very busy day in the market. Hopefully some things happen and shake out some bonds for sale."

Market indicators give ground

Statistical junk-market performance indicators were lower for a second consecutive session on Monday, deepening the retreat seen Friday after those market-performance gauges had been higher across the board on Thursday.

The Markit Series 21 CDX North American High Yield index fell by 9/16 of a point on Monday, its second straight downturn, to end 105 25/32 bid, 105 29/32 offered, after having eased by 1/16 of a point on Friday.

The KDP High Yield Daily index lost 8 basis points to close at 74.40, its second straight setback. It had also dipped by 2 bps on Friday.

The yield increased by 3 bps, to 5.61%, its second straight rise, on top of Friday's 1 bp gain.

And the widely followed Merrill Lynch High Yield Master II Index edged downward by 0.006%, its second straight decline. On Friday, it had retreated by 0.044%.

The latest doss dropped its year-to-date return to 0.733%, down from Friday's 0.74% and down still further from the 1.185% it had reached ion Jan. 22, its high point of the year so far.

The index's yield to worst rose to 5.685%, which was its new peak level for 2014 so far, up from 5.662%. Those levels remained well above the low yield for the year, 5.386% on Jan.22.

The spread to worst widened out to 441bps over comparable Treasuries - the new wide point for the year - from Friday's 434 bps, the previous wide spread. Those levels remained well above the tight spread for the year, the 398 bps on Jan. 22.

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