No pricings; market awaits Carrols, Global Brass, Roofing Supply; Univar scrubbed; Ford flies

By Paul Deckelman and Paul A. Harris

New York, May 23 - The high-yield primary market continued to hold back on Wednesday. No deals priced, the second such goose egg seen this week.

While there had been some expectations that Carrols Restaurant Group, Inc. might price after price talk emerged on its $140 million eight-year secured deal, nothing happened by the close, and that transaction is now expected on Thursday.

Two other issues are set for Thursday pricing after talk was heard on each Wednesday. They are industrial manufacturer Global Brass & Copper Holdings Inc., doing a $375 million seven-year secured offering, and building-products maker Roofing Supply Group LLC, bringing a $200 million tranche of eight-year paper.

For the second time this week, the forward calendar lost a deal. Specialty chemicals maker Univar Inc. was heard to have postponed its $750 million seven-year offering, citing market conditions. On Monday, power generator manufacturer Generac Power Systems Inc. likewise pulled the plug on its planned $425 million of eight-year notes.

Away from the new deals, the overall junk market seemed weaker, in line with equities, which were down sharply most of the day but managed to end the day about unchanged. Statistical measures of junk market performance listed to the downside in contrast to Tuesday's advance.

Energy and materials names were the hardest hit on concerns that economic weakness will undermine their businesses. There was more erosion in two of Tuesday's biggest losers, ATP Oil & Gas Corp. and Patriot Coal Corp., while United States Steel Corp. was also notably on the downside.

But one name definitely not heading lower was Ford Motor Co., whose bonds, along with those of its Ford Motor Credit Co. LLC subsidiary, were up solidly for a second straight session following Tuesday's announcement that Moody's Investors Service upgraded the carmaker's ratings, lifting them out of junk territory. Ford and Ford Credit paper dominated the Junkbondland most-actives list.

Busy Thursday expected

No deals priced on Wednesday as volatility continued to rock the global capital markets.

However, dealers set the stage for a busy Thursday, which will be the final full session before the market breaks for the three-day Memorial Day weekend in the United States.

Official talk surfaced on three deals.

Global Brass & Copper talked its $375 million offering of seven-year senior secured notes (B3/B) with a yield in the 9¼% area.

Goldman Sachs & Co. and Morgan Stanley & Co. LLC are leading the debt-refinancing and dividend-funding deal.

Roofing Supply Group talked its $200 million offering of eight-year senior notes (/CCC+/) with a yield in the 10% area.

Goldman Sachs, Deutsche Bank Securities Inc., UBS Investment Bank, Credit Suisse Securities (USA) LLC and Citigroup Global Markets Inc. are the joint bookrunners for the leveraged buyout deal.

And Carrols Restaurant Group talked its $140 million offering of eight-year senior secured second-lien notes (B3/B-) with a yield in the 10¾% area.

Wells Fargo Securities LLC is the left bookrunner for the debt-refinancing and general corporate purposes deal. Jefferies & Co. is the joint bookrunner.

In addition to those three deals, Wolverine Healthcare Analytics, Inc. is marketing a $325 million offering of eight-year senior notes (Caa1/CCC+) via J.P. Morgan Securities LLC, Bank of America Merrill Lynch, Morgan Stanley and UBS.

Although no official price talk surfaced on Wednesday, the deal has been discussed in the context of a yield in the 9½% to 9¾% range, according to a trader from a high-yield mutual fund.

And high-yield investors have been taking a good look at the Misys plc $615 million seven-year second-lien loan, according to buyside and sellside sources.

The LBO deal is talked with a 12% yield, including a discount, and is expected to price on Thursday.

Bank of America Merrill Lynch is the left lead bookrunner for the second-lien loan. Credit Suisse, Jefferies and Deutsche Bank are joint bookrunners.

The structure is similar to that of a high-yield bond, and it comes with standard incurrence-based high-yield covenants, according to a syndicate source.

However, the deal is governed by a credit agreement as opposed to an indenture, the source added.

River Casino downsize expected

Due to investor interest in its term loan, which has caused the loan book to be oversubscribed, Rivers Pittsburgh Borrower LP will downsize its offering of seven-year senior secured second-lien notes to somewhere in the area of $275 million to $280 million, according to a market source.

The notes kicked off Tuesday with a $300 million size.

The casino operator's term loan A will be upsized to $185 million from $160 million

Goldman Sachs is the left bookrunner for the bonds. Wells Fargo is the lead on the credit facility.

Univar pulls deal

Univar withdrew its $750 million offering of seven-year senior notes (B3/B-) on Wednesday due to market conditions.

Goldman Sachs, Bank of America Merrill Lynch, Morgan Stanley, Wells Fargo and Deutsche Bank were the bookrunners.

The company also cited market conditions when it withdrew its proposed $750 million incremental term loan B.

Proceeds from the notes and loan had been designated to fund a distribution to shareholders and to refinance debt.

Univar became the fourth prospective issuer to withdraw from the high-yield primary market in as many days.

Generac Power Systems pulled its $425 million offering of notes on Monday.

On Friday, Harland Clarke Holdings Corp. and HudBay Minerals Inc. each pulled deals that they had in the market.

Secondary seen lower

In the secondary arena, a trader said that Wednesday was "a pretty active day, with the market down a lot" in tandem with the stock market's mostly day-long slide.

Even though equities did come back late in the session to end essentially flat on the day - the bellwether Dow Jones industrial average was off by 150 points earlier in the session but ended down just 6.66 points, or 0.05%, at 12,496.15 - traders said that junk for the most part failed to follow suit.

At another desk, a trader pronounced Wednesday "a mostly blah day."

New NGPL holds up

A trader said that NGPL PipeCo LLC's new 9 5/8% senior secured notes due 2019 were trading at 102¼ bid, 103 offered, versus a 102-103 context on Tuesday, "so at least they didn't get hurt by the market."

Another trader pegged those bonds at 102 3/8 bid, 102 5/8 offered, which he said was slightly off from the 102¾ bid, 103¼ offered level at which he saw those bonds going home on Tuesday after their pricing.

The Houston-based natural gas transportation and storage company priced $550 million of those bonds at par on Tuesday, and they moved up to the 102 area and beyond when freed for aftermarket dealings.

Consolidated holds some gains

A trader said that he had seen no sign of any dealings Wednesday in Tuesday's other new issue, the $300 million of 10 7/8% notes due 2020 from Consolidated Communications Holdings, Inc., a Mattoon, Ill.-based provider of business and residential telecommunications services.

But another trader quoted the bonds Wednesday at par bid, 100 7/8 offered, down a little from the 100½ bid, 101½ offered level at which he saw those bonds go home on Tuesday.

However, that was still above the discounted 99.345 level at which that deal priced on Tuesday via the company's Consolidated Communications Finance Co. subsidiary to yield 11%.

The deal priced after it was downsized from an originally announced $350 million.

Frontier deal down on day

Out of that same telecom sector, one of the traders said that Frontier Communications Corp.'s recently priced 9¼% notes due 2021 have emerged as "a good benchmark" for the overall market. The Stamford, Conn.-based company priced $500 million of those bonds at par last Thursday, and they were seen moving up to 101 bid on the break and staying there subsequently, even adding to their initial aftermarket gains.

For instance, the trader said that on Tuesday, when the junk market rebounded solidly from several sessions of weakness before that, the Frontier issue got as good as 103 bid.

However, on Wednesday, he said that the bonds were "up and down a bit all day," adding that they finished "weak on the day."

He said the bonds opened at 102¼ bid, but the low traded later on, near the end of the day, was 101 3/8 bid.

"I would have thought that the bonds would do better with the equity market coming back quite a bit," he said.

"I thought that they would have bounced back. But the equity market did come back kind of late, so maybe the [junk] market just got tired by then and didn't want to play any more."

A market source at another desk quoted the bonds having come in to around the 101½ level; volume of more than $13 million by late afternoon made the issue one of the busier junk names.

Frontier's existing 8¾% notes due 2022 were meantime being quoted down 1 13/16 points on the day to end at 98¼ bid. On Tuesday, those same bonds had jumped more than 1¾ points to end at just over par.

Ford flight continues

Away from the new issues, a trader said that Ford Motor's bonds, and those of its auto loan financing vehicle, Ford Motor Credit, were among the busiest bonds in the wake of Tuesday's upgrade to investment grade from Moody's Investors Service.

He called Ford's benchmark 7.45% bonds due 2031 the most active credit in the company's capital structure and saw them move up to bid levels between 130¼ and 131, versus 127 5/8 bid, 128 offered on Tuesday, "so they're up at least 2 points."

Another trader saw the 7.45% bonds up 4 points on the session in a 131-to-132 context. That was on top of a 6-point surge on Tuesday following the Moody's announcement.

A market source estimated that more than $51 million of those bonds changed hands Wednesday, seeing them having firmed smartly to 130½ bid.

The first trader saw Ford Motor Credit's 5 7/8% notes due 2021 trading most of the day with a 115-handle, getting as good as 115¾ bid late in the day. That was up from levels between 114¼ and 115 on Tuesday, although he pointed out that Tuesday's dealing was "late trading. The news hit late in the session." He said that earlier Tuesday, and on Monday, the Ford Motor Credit bonds had been down around the 110-to-111 market.

"So they traded up very late in the day to the 115 level from 110-to-111 area earlier and the day before that, and they stayed up at that 115 level."

More than $32 million of the 5 7/8% notes traded on Wednesday, a market source said.

Ford Motor Credit's 5% notes due 2018 - which had been quoted around the 107 bid area at the end of last week - were trading on Wednesday at 109¼ bid on more than $24 million of volume.

Ford Motor Credit's 2¾% notes due 2015 - $1.25 billion of which priced at par in a drive-by offering on May 10 - were seen by a market source having gained a point Wednesday, to 101½ bid, on volume of about $13 million. That volume level was down though from the more than $20 million of those bonds that traded on Tuesday following the Moody's announcement.

It should be noted, however, that at least some of that increased activity was likely due to high-grade accounts doing some buying now that two out of the three major credit agencies (Fitch Ratings is the other) have upgraded the Dearborn, Mich.-based automotive giant to investment grade, giving Ford some new respectability in the eyes of such market players.

Moody's on Tuesday lifted Ford's and Ford Motor Credit's bonds to Baa3, while Fitch elevated the paper to BBB- several weeks ago. Only Standard & Poor's still has Ford parked on the junk side of the fence, at BB+.

Chrysler spins its wheels

But Ford was the exception to the rule on Wednesday. Much of the rest of the market was skidding lower.

For instance, a trader said that he has recently been following Ford competitor Chrysler Group LLC's 8¼% notes due 2021 as a market benchmark. On Wednesday, he saw the Auburn Hills, Mich.-based No. 3 U.S. automaker's notes trading around 99¼ to 99 5/8. On Tuesday, he said, the bonds had been at par to 100¼ for most of the day.

Its 8% notes due 2019 were likewise easier on the day, ending at 101¾ bid on volume of more than $10 million.

Energy names trade off

Away from the autosphere, traders saw continued carnage in coal generally and in Patriot Coal in particular.

A trader saw "a pretty active day today" in the beleaguered St. Louis-based coal producer's 8¼% notes due 2018, seeing the bonds down another several points at 46 bid, 47 offered on volume of more than $25 million.

A second trader said that Patriot has been "all over the lot," trading between 46½ and 48 on Wednesday.

On Tuesday, he said, the bonds gyrated between 38½ on the low end and a high of 50.

"A week and a half ago, they were trading at 65," he said, "and earlier in the month at 75."

He noted the bonds' fall on news stories indicating that the company might not be able to refinance upcoming debt maturities.

"There was a story [Tuesday] that they were close to getting a $600 million loan, which I think would solve their problems, but I guess were betting they're not going to get it."

Even apart from that special situation, coal names were lower. The 6½% notes due 2020 of Patriot's cross-town rival, Peabody Energy Corp., lost 1½ points to end at 100½ bid, while Bristol Va.-based Alpha Natural Resources Corp.'s 6¼% notes due 2021 were seen going home at 88½ bid, down a point.

James River Coal Co.'s 7 7/8% notes due 2019 were seen bouncing around the same 53-54 context at which the Richmond, Va.-based coal producer's bonds had traded on Tuesday, when they lost 10 points.

The sector has been hurt by a falloff in the domestic use of coal as unusually low natural gas prices have caused gas to displace coal in many regions as the inexpensive fuel of choice.

The coal companies have pinned their hopes on making up for the lost domestic sales with orders from overseas, particularly the heretofore booming BRIC economies, including China and India, but a recent slowing of the Chinese economy has endangered that strategy.

Also on the energy front, traders saw continued weakness in Houston-based offshore operator ATP Oil & Gas, whose 11 7/8% second-lien senior secured notes due 2015 were "down a couple of more points," one said, pegging the bonds at 50-51, down several points from the 53 level seen on Tuesday.

A trader noted that "the other day they were trading around 58-59, and on the 18th, they were at 60, so they've been heading south" ever since the company released disappointing quarterly earnings earlier this month. He noted that on May 1, the bonds had stood at 76 bid.

"When the market turns ugly, the high-beta names get beat up the most."

U.S. Steel trades off

Besides energy, materials names generally have also been taking a drubbing, reflecting investor fears that slowing economic activity will reduce demand for commodities.

One such name was U.S. Steel. A market source saw the Pittsburgh-based steel company's 7% notes due 2018 down as much as 3 points during the session, at 99 bid, although that activity was all smallish odd-lot trades.

The company's 7½% notes due 2022 - $400 million of which priced in March - were seen down 1½ points on the day on some size trading, with over $4 million changing hands.

U.S. Steel's New York Stock Exchange-traded shares were down more than 5% at one point in the day but managed to come back late in the day and eke out a small gain.

Market indicators turn lower

Statistical indicators of market performance were seen having lost ground across the board Wednesday in contrast to Tuesday, when those market gauges had broadly improved for the first time in more than a week.

The Markit Group CDX North American Series 18 High Yield index eased by 1/8 point on Wednesday to end at 93 1/8 bid, 93 5/16 offered after having jumped 1 3/8 points on Monday, breaking a six-session losing streak, and then having edged up by 1/8 of a point Tuesday.

The KDP High Yield Daily index meanwhile lost 19 basis points on Wednesday to end at 72.32 - the same size gain that it had posted on Tuesday, its first such gain after seven straight losses. Its yield rose by 4 bps on Wednesday 7.09%, giving back all of the gains seen on Tuesday.

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