Primary pauses, no dollar deals price; Community Health downsizes deal; new Laredo notes firm

By Paul Deckelman and Paul A. Harris

New York, Jan. 14 - The high-yield primary sphere's activity level was down a notch or so on Tuesday, syndicate sources said, reporting that for the first time in more than a week, no new dollar-denominated, junk-rated paper priced.

The only issue that actually came to market was a €350 million four-year deal from Italian property-management firm Beni Stabilli SpA.

Back in the dollar market, the sources heard that hospital operator Community Health Systems Inc. had downsized its $4.58 billion two-part blockbuster deal to $4 billion, although it upsized one of the two tranches.

The sources also heard Waterjet Holdings Inc. getting ready to hit the road to market a $200 million secured deal.

And they heard some price talk out on Goldman Sachs-affiliated funds' secondary offering of $725 million of First Data Corp.'s bonds that they currently hold.

Among the deals that have actually priced, they saw late Monday's eight-year note offering from energy operator Laredo Petroleum, Inc. having traded a little higher when the notes were freed for aftermarket dealings.

Away from the new-deal world, NII Holdings, Inc.'s bonds continued to be among the more active issues in the junk market, traders said, although their volume paled in comparison with levels reached on Monday, particularly in the company's 2016 notes. They were seen trading around, or just slightly below, the gains racked up on Monday on the news that the seller of Nextel wireless service in Latin America will be able to use Telefonica SA's networks in Mexico and Brazil to reach their customers in some remote locations, thus eliminating the need for a costly infrastructure buildout.

And Thompson Creek Metals Co. Inc.'s bonds were seen firmer, in line with its shares, which surged after an analyst upgraded the molybdenum-mining concern's stock.

Statistical market performance measures turned higher across the board on Tuesday after having been mixed on Monday.

Beni Stabili at the tight end

Italy-based Beni Stabili launched and priced a €350 million issue of non-rated four-year senior notes at par to yield 4 1/8%.

The yield printed at the tight end of initial guidance that was set in the 4¼% area.

Credit Agricole, J.P. Morgan, Mediobanca and UniCredit were the joint bookrunners.

The Rome-based property management firm plans to use the proceeds to refinance debt and for general corporate purposes.

Meanwhile the dollar-denominated market saw no new issuance on Tuesday, and an investor agreed that the early 2014 primary market has been on the quiet side.

Some companies have financial numbers that are stale, or about to go stale, which makes it a challenge to issue, the investor said. And people are not expecting as big a year as last year in the new issue market.

Community Health downsizes

Community Health Systems downsized its two-part notes offer to $4 billion from $4.58 billion on Tuesday.

At the same time the company upsized its seven-year term loan D to $2,925,000,000 from $2.26 billion.

The bond deal now includes a downsized $1 billion tranche of 7.5-year senior secured notes (Ba2/BB/). The tranche was downsized from $1,705,000,000. Unofficial talk is in the low 5% area, according to a buyside source.

Meanwhile the company upsized its eight-year senior unsecured notes (B3/B-/B) to $3 billion from $2,875,000,000. The unofficial yield talk is in the high 6% range, the buyside source said. That's lower than the low 7% area talk heard late last week.

Official price talk has yet to be heard, a market source said late Tuesday.

The deal is expected to price before the end of the week.

BofA Merrill Lynch, Credit Suisse, Citigroup, Goldman Sachs, JPMorgan, RBC, SunTrust, UBS and Wells Fargo are the joint bookrunners.

Waterjet starts Thursday

Waterjet Holdings plans to start a roadshow on Thursday for a $200 million offering of six-year senior secured notes (B2//).

The deal is expected to price late in the week ahead.

Goldman Sachs and Morgan Stanley are the joint bookrunners.

Proceeds, together with sponsor equity and proceeds from the Advanced Systems transaction, will be used to finance the merger with Flow International Corp., pay off Flow's revolver and repay other debt.

Secondary offer from First Data

Talk firmed at 94 to 95 on a $725 million secondary offering of First Data Holdings Inc. 14½% senior PIK notes due 2019, an investor said on Tuesday afternoon.

That talk is richer than the 94 price talk heard earlier in the day.

The notes are being offer by funds affiliated with Goldman Sachs.

An investor lunch is set for Wednesday, and the 100% non-cash interest notes are expected to be priced later on Wednesday or Thursday.

Proceeds from the private offer will go to the affiliates of Goldman Sachs.

First Data, a Greenwood Village, Colo., provider of electronic commerce and payment services will not receive any proceeds.

Meanwhile the market awaits price talk on the above-mentioned deal from Community Health Services as well as several other transactions now in the market.

CBS Outdoor Americas Inc. is expected to price its $800 million two-part senior notes offer before the end of the week.

The eight-year notes are unofficially talked to yield 5¼% to 5 3/8%, according to a buyside source. That's down from early guidance in the high 5% range.

The 10-year notes are unofficially talked to yield 5 5/8% to 5¾%, down from early guidance in the low 6% range.

Deutsche Bank, Citigroup and Wells Fargo are the active bookrunners.

And BlueLine Rental Finance (Volvo Rents) is in the market with a $760 million offer of five-year second-lien notes (B3/expected B) that are unofficially being talked in the 7½% area, the buysider said.

That deal, via BofA Merrill Lynch, Goldman Sachs, Morgan Stanley and Barclays, is also expected to price before the end of the week.

Laredo level rises

In the secondary market, a trader said that Laredo Petroleum's new 5 5/8% notes due 2022 were quoted during the morning at 100¾ bid, 101offered, "but we haven't seen them quoted since."

A second trader pegged the new bonds at 100½ bid, 101 offered, while a third had them at 100½ bid, 100¾ offered.

The Tulsa, Okla.-based oil and gas exploration and production company priced $450 million of those notes at par on Monday in a quick-to-market offering, after the deal was upsized from the originally announced $350 million.

The bonds priced very late in the day on Monday and were not freed to trade until Tuesday morning.

'Buy-side bias'

A trader said Tuesday that "all of the bias is to the buy-side today."

Demand for bonds among investors, he declared "is far outpacing supply. We're seeing 10 buyers to every one seller."

He suggested that the hunger for fresh paper was being magnified because, in many cases, "underwriters are keeping [new-deal] bonds for themselves," or doling them out to selected buyers - a situation, he said, that has left some funds that are looking for bonds coming up empty.

The strength in the market, he said, was all the more notable, "when you consider what stocks have been doing." While the major Wall Street indexes all ended higher on Tuesday, on Monday, they had been lower across the board.

And he said that a recently emerging trend has been "a lot of accounts are feeling comfortable about adding a little duration risk by going longer - they're getting out of callable, or soon-to-be callable bonds, and getting into longer maturities, like the seven-to-10-year range."

He acknowledged that "all of that could change very quickly, and people could get cautious again," should conditions appear to take a turn for the worse.

And even amid the current strength, he noted, "people still have to choose carefully, and if there is a hint of bad news, they'll stay away" from a particular credit.

For instance, he said, Neiman Marcus Group's 8% notes due 2021 have recently come under pressure; he said that investors "are nervous about the Target situation" involving hackers breaking into the retailer's transaction processing system and stealing data. On Friday, Neiman Marcus confirmed that it, too, had suffered a similar data breach that extended throughout at least part of December. The Dallas-based upscale retailer acknowledged that this had resulted in the theft of an unknown amount of credit and debit card data.

"Let there be the taint of bad news - and investors will flee," the trader warned.

The Neiman Marcus bonds were last quoted around the 105 bid area.

NII volume slackens

Elsewhere, a trader said "a name that was pretty active was NII Holdings. That was something that had an awful lot of volume over the last few days."

That was especially true on Monday, when the bonds and shares of the Reston, Va.-based seller of the Nextel wireless service in Latin America surged in heavy trading, on the news that it had signed an agreement with a rival, the Spanish telecommunications company Telefonica SA, that will allow NII to distribute its service to customers in Brazil and Mexico - the two largest Latin American markets - over Telefonica's 3G wireless network.

That would spare NII the necessity of having to build out its own network in remote areas, a costly venture.

But while the volume in the bonds issued by the company's NII Capital Corp. subsidiary was sufficient to land them on the junk market's Most Actives list on Tuesday, it paled in comparison with Monday, when, for instance, its 10% notes due 2016 had rolled up more than $64 million traded, in rising some 5½ points to the 60 bid area.

"We had a little lower volume today," he said.

And he characterized the bonds as "holding," in terms of hanging onto most of the gains they had notched on Monday.

For example, he said the 10% notes "are holding right in that 58-59 range - that's where trades are taking place all day today. They were pretty much unchanged from yesterday."

He saw about $7 million or $8 million having traded.

He said that the company's 8 7/8% notes due 2019 were in the high 40s on Tuesday, around 46½ to 471/2, although there was "more size trading around 46 to 461/2. He saw "well over $10 million traded, at about where they had been. They jumped up from the low 40s to that low 46 range [on Monday], and they're holding."

A second trader, who also saw about $10 million of the 8 7/8s having traded, pegged them down 1½ points, at a last trade of 461/4.

Meanwhile, NII's 7 5/8% notes due 2021 traded at 461/2, down about ¾ point, on over $7 million of volume.

"There was still some activity in it," a third trader said."For the most part, it was trading around the [Monday] closing levels: the 10s around 59, the 11 3/8% notes around 86, and the 7 7 /8% notes trading around 78.

Thompson Creek trades up

One of the traders said that Thompson Creek Metals' stock "was up a good bit, the bonds were trading a little bit better."

He saw its 7 3/8% notes due 2018 were trading at better levels, around 88 bid.

"The stock was up a ton on an analyst upgrade," as Bank of America Merrill Lynch raised it to a "buy."

"They were up something like 20-something percent at one point and finished up almost 20%."

The New York Stock Exchange-traded shares jumped by 39 cents, or 17.81%, to end at $2.58, on volume of 8 million shares, about five times the norm.

"You don't see those bonds trade too much - but they were trading up today."

Verso stays strong

Verso Paper Corp.'s 8¾% notes due 2019 were seen by a trader staying in a 54-to-56 range "all day today. That's right where they've been - they were at the same spot yesterday. It's maybe 1 point down from last week - but pretty much unchanged from yesterday [Monday]."

He said $7 million or $8 million of the notes traded.

Even though the Memphis-based paper company's bonds were off from last week's levels, the trader noted that "at the end of last year, they were in the 30s, but they ran up on the NewPage news, and it's holding here in the 50s.

The bonds had surged last week on the news that Verso will acquire rival NewPage Corp. for $900 million, with debt assumption bringing the deal's value to $1.4 billion.

Market indicators turn higher

Overall, statistical junk-market performance indicators improved across the board on Tuesday, after having turned mixed on Monday. They had been higher for two straight sessions before that.

The Markit Series 21 CDX North American High Yield index gained 5/32 point to end at 107 15/16 bid, 108 offered, after having lost 15/32 point on Monday.

The KDP High Yield Daily index was up by 3 basis points on Tuesday to close at 74.88. It had been unchanged on Monday, snapping a string of seven consecutive advances before that.

Its yield, meanwhile, came in by 2 bps to go home at 5.44%. On Monday, it had been unchanged, following four straight sessions of declining yields before that.

And the widely followed Merrill Lynch High Yield Master II index put up its 17th consecutive advance - a winning streak dating back to Dec. 19. It rose by 0.035%, on top of Monday's 0.117% advance.

The latest gain lifted its year-to-date return to 0.815%, its eighth straight new peak level for 2014, passing the previous mark of 0.78%, which had been set on Monday.

The index's yield to worst came in to 5.463%, its third straight new 2014 low level. That eclipsed the previous low point of 5.486%, set on Monday.

Its spread to worst tightened to 407 bps over comparable Treasuries from 413 bps on Monday. The spread remained slightly wide of its tight level for the year so far, 406 bps, set last Wednesday.

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