Niska, Catamaran, Emeco, Coeur price to cap $11.7 billion week; junk accounts play Safeway

By Paul Deckelman and Paul A. Harris

New York, March 7 - The high-yield primary arena, busy all week, put on a big finish Friday to close out its busiest week on 2014 so far and its busiest as well since last fall, with $1.56 billion of new U.S. dollar-denominated, fully junk-rated paper having priced by the close.

Houston-based energy operator Niska Gas Storage Partners LLC had the big deal of the day, a $575 million scheduled forward calendar offering of five-year notes

It was joined by Schaumburg, Ill.-based pharmacy benefits management company Catamaran Corp., bringing a scheduled $500 million of seven-year notes to market, and by Australian mining equipment rental concern Emeco Pty. Ltd., pricing a downsized $335 million tranche of five-year secured notes. Both of those deals also came off the forward calendar.

The day's sole quick-to-market issue was Chicago-based precious metals prospector Coeur Mining Inc.'s $150 million add-on to its existing 2021 bonds.

The four deals closed out a breathtakingly busy week which saw $11.74 billion of new junk paper price in 21 tranches, according to data compiled by Prospect News.

Friday's deals also raised the year-to-date issuance total to $49.16 billion in 97 tranches - although that continued to lag about 14% behind the primary pace of a year ago, when $57.26 billion had priced in 134 tranches by this point on the calendar, according to the data.

Traders did not see any initial aftermarket action in the day's new bonds, although they saw busy dealings in transactions that had priced earlier in the week from such names as HCA Inc., R.R. Donnelley & Sons. and ADT Corp.

But several junk traders noted that many high-yield accounts were at least dabbling in Safeway Inc.'s nominally investment-grade rated bonds following the news that the supermarket giant is to be acquired by rival Albertsons.

Statistical indicators of market performance were lower for a second consecutive session Friday, and were also down across the board from where they had closed out the previous week on Friday, Feb. 28.

Niska prices $575 million

Four issuers completed single-tranche deals during Friday's primary market session, raising a combined total of $1.56 billion.

Executions tended to be slightly less crisp than those seen in the rest of the week.

Only one of the four came as an a.m.-to-p.m. drive-by

No deals were upsized, although one was downsized. And only one of the four came at the tight end of talk. Among the others, one came on top of talk while two came either at the wide end or the cheap end of talk.

Niska Gas Storage priced a $575 million issue of five-year senior notes (B2/B) at par to yield 6½%.

The yield printed at the wide end of the 6¼% to 6½% yield talk.

There were also covenant changes.

RBC was the left bookrunner for the debt refinancing deal. Barclays, Citigroup and J.P. Morgan were the joint bookrunners.

Catamaran's seven-year bullet

Catamaran Corp. priced a $500 million issue of non-callable seven-year senior notes (Ba3/BB+/) at par to yield 4¾%.

The deal, which was announced on Thursday, and thus in the market overnight, priced on top of yield talk.

BofA Merrill Lynch was the left bookrunner for the debt refinancing and general corporate purposes deal. J.P. Morgan and SunTrust were joint bookrunners.

Emeco at the tight end

Australia-based Emeco priced a downsized $335 million issue of 9 7/8% five-year senior secured notes (Ba3/BB-) at 98.563 to yield 10¼%.

The deal was reduced from $360 million.

The yield printed at the tight end of the 10¼% to 10½% yield talk. The reoffer price came in line with discount talk of 2.5 points maximum original issue discount.

Credit Suisse Securities (USA) LLC was the bookrunner for the debt refinancing deal.

In addition to the downsizing, call protection was increased to three years from two years. The equity clawback was extended to cover the length of the additional non-call period and the clawback premium was decreased to 35% from 40%.

Coeur taps 7 7/8% notes

Coeur Mining priced a $150 million add-on to its 7 7/8% senior notes due Feb. 1, 2021 (expected ratings Caa1/BB-) at 102 to yield 7.495%.

The reoffer price came at the cheap end of the 102 to 102.5 price talk.

Barclays was the bookrunner for the general corporate purposes deal.

The original $300 million deal priced at par on Jan. 24, 2013, so the issuer realized 38 basis points of interest savings with Friday's print versus the yield on the original notes.

The week ahead

The week ahead will get underway with a thin calendar as there it has only one announced deal aboard heading into the weekend.

On Thursday Aurico Gold Inc. disclosed plans to price a $300 million offering of eight-year senior notes (B3/B) late in the week ahead.

Joint global coordinator and joint bookrunner RBC will bill and deliver. Credit Suisse is also a joint global coordinator and joint bookrunner. Scotia is a joint bookrunner.

A roadshow was scheduled to get underway on Friday.

Also during the week ahead, watch for Netherlands-based CEVA Group plc to roll out an $825 million two-part offering of secured notes, market sources say.

The debt refinancing deal is expected to include $400 million of new first-priority notes and about $425 million of new first-and-a-half priority notes

The first-priority notes come with early guidance of 7%, according to a market source who added that the first-and-a-half priority notes have initial guidance of 9½%.

BofA Merrill Lynch will lead the notes offer, a market source said on Friday.

Day's deals little traded

Several traders said that they did not see any kind of aftermarket dealings in the day's new deals from Niska Gas Storage Partners, which priced fairly early in the trading day, or from Emeco, which priced around mid-afternoon ET.

"There was not a lot of new-issue trading," one said, adding that he saw "very little re-trading this afternoon."

However, another market source asserted that he had heard that Emeco was trading away from the dealer, but he could give no prices.

The Catamaran Corp. and the smallish Coeur Mining deals came to market later in the session and were not seen trading around afterward.

Recent deals busy

There was some activity, however, in some of the new issues that priced earlier in the week.

A check of the Trace system disclosed that HCA's new bonds remain busily traded, with over $38 million of its 5% notes due 2024 having changed hands and over $16 million of its 3¾% notes due 2019.

The former bonds were off by 5/8 point at 99 bid, and the latter lost 1/8 to end at 100 1/8 bid.

A trader also saw the 5% notes at 99, opining that "that one has really struggled all the way."

The Nashville, Tenn.-based hospital operator priced a quickly shopped $3.5 billion two-part senior secured bond deal last Monday, after upsizing it from an original $3 billion.

The company priced $1.5 billion of the 3¾% notes 2019 and $2 billion of the 5% notes due 2024, both at par.

That transaction was the second-biggest purely junk-rated deal so far this year, according to Prospect News data, trailing only the $4 billion two-part deal done on Jan. 15 by HCA competitor Community Health Systems Inc.

The HCA bonds were heavily traded from the get-go, with over $140 million of the 5% notes and $100 million of the 3¾% notes having changed hands on Tuesday, $32 million of the 5% paper on Wednesday and another $31 million of it on Thursday, putting it high on the Most Actives list for all of those days.

Another active recent deal on Friday was Chicago-based printing and communications provider R.R. Donnelley's $450 million of 6% notes due 2024; more than $36 million of those bonds traded on Friday, holding steady at 100½ bid.

That drive-by offering had priced at par on Thursday after upsizing from $350 million and the bonds gained about ½ point in the aftermarket and stayed there.

Boca Raton, Fla.-based security alarm service provider ADT Corp.'s 4 1/8% notes due 2019 were seen down ¾ point at 1001/4, on turnover of more than $22 million.

That quick-to-market $500 million transaction had priced at par on Wednesday, and while the bonds had milled around their issue price in initial aftermarket trading, they had been seen having gotten as good as the 101 mark on Thursday, before giving some of those gains back on Friday.

Safeway seen active

Several junk traders noted the heavy trading in Safeway's bonds on the news that it will be acquired by sector peer Albertsons and said that some traditional high yield investors were playing in those notes, despite their nominal BBB rating

One trader said that the Pleasanton, Calif.-based supermarket operator was "by far was the most active name today, with over $500 million of its various bonds having traded."

He saw its 3.95% notes due 2020 up 5¾ points at 101¾ bid, 102 offered, its 4.75% notes due 2021 up 1¼ point around 101¼ bid, and its 6.35% notes due 2017 up 3¾ points at 114¾ bid. Each of those bonds, he said, had traded well in excess of $100 million.

The company's 7¼% bonds due 2031 were the sole downsiders, losing 1 point to end around 94 5/8 bid, on volume of more than $95 million.

"It's a BBB credit, but a lot of junk guys were in it today," he said. Noting that investment-grade accounts frequently trade in nominally high-yield bonds on the upper end of the junk spectrum to pick up some yield, such as the new HCA five-year notes, he said, tongue partly in cheek, "so now we're reaching into their market."

Another trader also saw "a lot of activity in Safeway" on the part of junk investors.

He saw the 7¼% long bonds fall as low as 92 during the day before rebounding off the bottom to end at the 94 mark.

He pointed out that such prices translate to a yield of 7.90%. He said that even if the bond gets downgraded from its current Baa3/BBB- status, "at 7.90%, it's still a pretty generous yield."

He further noted that "the bonds have some decent covenants," and at this juncture can only be taken out via a make-whole call at 25 basis points over Treasuries.

"So you've seen activity there."

Market indicators stay down

Statistical junk-market performance indicators were lower across the board on Friday, their second consecutive down session, and were off as well from where they had finished out the previous week on Friday, Feb. 28.

The Markit Series 21 CDX North American High Yield Index lost 3/16 point on Friday, its second straight setback, to close at 107 13/16 bid, 107 15/16 offered. On Thursday, the index had eased by 1/16 point, its first loss after two gains.

The index was also down from last Friday's close at 108 bid, 108 1/8 offered.

The KDP High Yield Daily Index posted its second consecutive loss, dropping by 9 bps on Friday to finish at 75.12, on top of Thursday's 6 bps retreat.

Its yield, meanwhile, rose by 4 bps to 5.19%, after having been unchanged on Thursday.

Those levels compared unfavorably with the previous Friday's 75.38 index reading and 5.16% yield.

And the widely-followed Merrill Lynch High Yield Master II Index was also lower for a second consecutive session, losing 0.184%, on top of Thursday's 0.052% downturn.

Friday's loss left its year-to-date return at 2.57%, down from Thursday' 2.759% and down as well from Wednesday's 2.812%, its 2014 peak level

For the week, the index was down by 0.184%, its first such weekly loss after four consecutive weekly gains, including last week, when it rose by 0.675% and the year-to-date return stood at 2.759%.

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