Primary quiet, new AMD trades near issue; Quiksilver wipes out after poor quarterly numbers

By Paul Deckelman and Paul A. Harris

New York, June 3 - The high-yield market continued in a mostly quiet mode on Tuesday, with syndicate sources having seen no new pricings of dollar-denominated, fully junk-rated paper.

The day's sole pricing came from British gaming concern Ladbrokes Group Finance plc, which brought a sterling-denominated issue of eight-year notes to market.

Back on the domestic side of the fence, the sources heard that Outerwall, Inc., a kiosk retail services provider, was preparing to price an issue on Wednesday.

Other deals already on the forward calendar that could also price on Wednesday include those from chemical producer Polymer Group, Inc., vehicle transport services provider Jack Cooper Holdings Corp. and builder TRI Pointe Homes, Inc.

The sources also heard of new deals being shopped around by Birch Communications, Inc., a provider of business-focused communications, Hillman Group, Inc., a provider of fasteners, key duplication systems and other hardware, as well as Netherlands-based retailer HEMA, who is planning a three-part, euro-denominated offering.

Among recently priced issues, Monday's deal from Advanced Micro Devices Inc. was trading a little above its issue price.

Away from the new deals, traders saw surf and swimwear manufacturer Quiksilver Inc.'s bonds and shares in turbulent waters after the company reported weak quarterly earnings.

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

Outerwall sets talk

No dollar-denominated deals priced on Tuesday.

However, the latter part of the first week in June should be active in the primary market, with a deal calendar that continued to take shape throughout the Tuesday session.

Outerwall talked its $300 million offering of seven-year senior notes (Ba3/BB-) to yield in the 5 7/8% area. The yield talk comes in line with earlier whisper that had the deal coming in a high 5% yield context.

Pricing is set for Wednesday.

HSBC, BofA Merrill Lynch, US Bancorp and RBC are the joint bookrunners.

Outerwall is one of four deals that could price on Wednesday, although no official price talk had surfaced on the other three by press time, sources said.

The others include Polymer Group, which is marketing a $200 million offering of five-year senior notes (Caa1/CCC+) via Citigroup, Barclays, RBC and HSBC.

The deal is whispered in a yield context of 7¼%, according to market sources.

Jack Cooper is marketing a $150 million offering of five-year senior PIK toggle notes (Caa2//) via left bookrunner Wells Fargo and joint bookrunner Barclays. The deal is guided with a yield around 10%, according to a buyside source who added that it's possible Wednesday business.

And TRI Pointe Homes is in the market with an $800 million two-part offering of non-callable senior notes (B1/BB-) via left bookrunner Citigroup and joint bookrunner Deutsche Bank.

The deal is coming in tranches with five- and 10-year maturities. The five-year notes are guided in a high 4% yield context, and the 10-year notes are guided with a 6% yield.

The roadshow wraps up Wednesday, and the deal is set to price later Wednesday or Thursday.

Aside from the announced business, look for a couple of BofA Merrill Lynch-led deals to surface by the end of the week, a high-yield investor advised.

And look for a deal in the range of $600 million to $700 million from the health-care sector to launch later this week. Morgan Stanley will be involved.

Hillman starts Monday

A calendar for the second week in June began to take shape on Tuesday.

Hillman Group is expected to launch a $270 million offering of senior notes due 2022 (Caa2/CCC+) on Monday.

The deal, which is being led by Morgan Stanley & Co. and will include other banks yet to be announced, is expected to price on Thursday.

Commitments on the bridge loan backing the bonds were due on Tuesday.

Proceeds will be used to help fund the leveraged buyout of the company by CCMP Capital Advisors LLC from Oak Hill Capital Partners, as well as to repay bank debt and redeem Hillman's 10 7/8% notes due 2018.

Ladbrokes taps retail investors

Although early-June primary market news volume from Europe was expected to be muted, according to London-based sources, there was news on Tuesday.

In a deal targeting retail and wholesale investors in the United Kingdom, the Isle of Man and the Channel Islands, Ladbrokes Group Finance priced a £100 million issue of non-callable senior notes due Sept. 15, 2022 (/BB/BB) at par to yield 5 1/8%.

The deal was launched with a 5 1/8% coupon.

Books closed early. The deal was announced on May 27, with a subscription period scheduled to last until June 10.

Joint bookrunner Lloyds Bank will bill and deliver.

Barclays and Canaccord are also joint bookrunners.

HEMA starts Wednesday

Netherlands-based retailer HEMA plans to start a roadshow on Wednesday for a €715 million three-part offering of high-yield notes.

The debt refinancing deal is coming in the form of two tranches of five-year senior secured notes (/B+/) from HEMA Bondco I BV: a €290 million tranche of fixed-rate notes and a €275 million tranche of floating-rate notes.

A single €150 million tranche of 5.5-year senior unsecured notes (/B-/) is being issued via HEMA Bondco II BV.

Sole global coordinator Credit Suisse will bill and deliver. ABN Amro, BNP Paribas, Citigroup, JP Morgan and Royal Bank of Scotland are the joint bookrunners.

AMD stays near issue price

Away from trading in the recent issues, a trader characterized Monday as "a pretty dead day."

"It was a very slow day today, with nothing going on in the secondary," a second trader said.

He expressed some puzzlement as to "why it's this slow. Normally, we at least have the doldrums of June before we have the doldrums of summer."

Traders noted that the new 7% notes due 2024 issued by Advanced Micro Devices traded a little above the par level at which the Sunnyvale, Calif.-based semiconductor manufacturer priced its quickly marketed $500 million issue on Monday, after upsizing it from an originally announced $400 million.

One trader said that the bonds traded "pretty much par to 100 1/8, par to 100¼ all day, not going anywhere."

A second trader said that the new issue spent the day wrapped around par, although by day's end, he saw them in a 100½ to 100¾ context.

Another market source pegged the bonds around 100½ to 101.

Going back a little further, Baytex Energy Corp.'s 5 1/8% notes due 2021 were trading at 101 bid, 101½ offered, down 1/8 point on the day but still well above the par level at which the Calgary, Alta.-based oil and natural gas exploration and production company priced its $400 million issue last Thursday.

Its $400 million of 5 5/8% notes due 2024 eased by ¼ point to a 100 3/8 to 101 bid context, versus their par issue price.

Quiksilver gets quashed

Away from the new and recently priced deals, "the only thing really going on," a trader said, was a sharp fall in the bonds and shares of Quiksilver, the Huntington Beach, Calif.-based manufacturer and distributor of swimwear, wetsuits and other aquatic gear used by surfer dudes and dudettes, following its release of poor second-quarter earnings.

"They just wiped out," the trader said, borrowing a favorite surfer expression for getting completely knocked off a surfboard and thrown into the sea by a big wave. "They got crushed."

He saw the company's 10% notes due 2020 down by as much as 17½ points on the session, falling to around a par to 100¼ context - after having previously ridden the crest of a wave that had carried the bonds up to the 116-117 area.

Over $16 million of the notes changed hands.

He called the company "dysfunctional" after it reported a second-quarter net loss of $53.1 million, or 27 cents per share - considerably wider than its year-ago red ink of $32.4 million, or 20 cents a share. Revenue fell 10%, year-over-year, to $408.2 million.

A second trader agreed that the Quiksilver quagmire was "the only thing really happening," quoting the 10% notes having fallen to a 100¼ to 101 context from the mid-teens previously, and a similar plunge in its 8 7/8% notes due 2018 to around the 103¼ bid level.

At the Gimme Credit independent advisory service, senior analyst Kim Noland noted that although the company has adequate liquidity, including $120 million of cash on hand, "net debt to EBITDA remains over 6x and is worsening."

Noland said that the company's bonds had been trading at elevated prices and warned that "disappointing results and high prices suggest the bonds will underperform from current levels."

Quiksilver, Noland concluded, "is experiencing declining revenue and deteriorating credit measures, leaving some doubt as [to] the efficacy and timing of its profit improvement program."

Indicators mixed on day

Statistical junk performance indicators were seen by market sources having turned mixed on Tuesday after they had been stronger across the board on Monday.

The Markit Series 22 index was up by 1/32 on Tuesday, its fourth consecutive improvement, to end at 108 7/16 bid, 108 15/32 offered. On Monday, it had gained 1/16 point.

The KDP High Yield Daily index was unchanged for a second straight session, at 74.92.

Its yield, however, rose by 1 basis point on the day to 5.1% after having been unchanged on Friday and again on Monday.

The widely followed Merrill Lynch High Yield Master II index saw its first downturn after six consecutive upside sessions. It lost 0.031%, in contrast to Monday's 0.055% gain.

Tuesday's setback lowered the index's year-to-date return to 4.78% from Monday's 4.812%, its fifth straight new peak level for 2014 so far.

One of the index components, its spread to worst hit a new tight level for the year of 377 bps over comparable Treasuries, in from 378 bps on Monday, its previous tight level.

Its yield, meanwhile, rose to 5.075% from Monday's 5.068%, its lowest level for the year so far.

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