Junk primary quietly opens; Party City slates; deals hold gains; ATP, Rotech up on news

By Paul Deckelman and Paul A. Harris

New York, July 2 - July started off quietly in the high-yield primary sphere Monday with only limited action ahead of this week's July Fourth holiday and no major deals pricing.

Community Choice Financial Inc. priced a $25 million issue of eight-year secured paper.

Lafarge SA was heard to have priced €500 million of seven-year notes.

Familiar junk name Nebraska Book Co. issued $100 million of four-year bonds as it emerged from Chapter 11 last week, but the bonds did not trade around.

Market participants said Party City Holdings Inc. plans a $700 million issue of junk notes as part of the financing for the company's coming leveraged buyout, but structure and timing on the deal are nebulous.

There was no sign of Coeur D' Alene Mining Corp.'s $350 million deal, which some market players were expecting last week.

Deals that did come last week, including those for Halcon Resources Corp., Ashtead Group plc and Ceridan Corp., were heard holding the levels at which they finished last week.

Away from the new deals, ATP Oil & Gas Corp.'s bonds and shares gained on the news that the energy company made a sizable gas discovery at an undersea well it is drilling near Israel.

Rotech Healthcare Inc.'s bonds and shares rose on the news that an industry peer, Lincare, will be acquired by Germany's Linde AG in a nearly $4 billion deal.

Statistical indicators of junk market performance were up across the board for a second straight session.

Community Choice Financial

The dollar-denominated primary market generated one news nugget Monday.

Community Choice Financial priced a $25 million issue of senior secured notes due May 1, 2020 at par to yield 12¾% via Credit Suisse.

In mid-April 2011, the Hawthorne, N.J.-based commercial and retail lender did a more sizable deal, pricing $395 million issue of senior secured notes due May 2019 at par to yield 10¾%.

Credit Suisse and Jefferies ran the deal.

Lafarge drives by

In the European high-yield market, France's Lafarge priced a €500 million issue of 5 7/8% seven-year senior notes (Ba1/BB+) at 99.302 to yield 6%.

The yield printed 12.5 basis points inside of price talk set in the 6¼% area.

European accounts, banks conspicuous among them, came ready to buy, which allowed the company to get its deal done inside of price talk, sources said.

The order book contained north of €2.5 billion, according to an informed source.

With no euro-denominated calendar and extremely low second-quarter euro-denominated issuance volume, 300 accounts piled into the Lafarge book, according to a market source.

BNP Paribas, Credit Agricole, HSBC, Royal Bank of Scotland and SG were the active bookrunners for the quick-to-market issue.

Citigroup, CM-CIC, ING, BBVA and Santander were the passive bookrunners.

The Paris-based building materials company plans to use the proceeds to reinforce its liquidity position.

Thin week; July looks busier

Market players are expected to start leaving their offices early Tuesday, ahead of the July 4 Independence Day holiday in the United States.

Although syndicate sources refused to absolutely rule out Tuesday primary-market activity, the possibility of any drive-by deals or roadshow announcements is remote, sources said.

Thursday and Friday, following the Wednesday holiday, are an open question, they added.

Some sell-side players have managed to take substantial portions of the week off, however.

Looking beyond the present week, forecasts for July issuance lately seem to be more robust than was the case in the middle of June.

With the Independence Day week a wash due to the holiday, July is unlikely to be a $30 billion month, said a syndicate official.

However, $20 billion is not out of the question, especially if the negative financial and economic headlines out of Europe continue to subside, sources said.

Two deals carried over from the final week in June remain on the active calendar as possible business for the present week.

Coeur d'Alene Mines has been marketing a $350 million offering of eight-year senior notes (B3/BB-), which are talked with a yield in the 8½% area.

Left bookrunner Barclays and joint bookrunner Wells Fargo are the leads.

Also, Calgary, Alta.-based Xtreme Drilling and Coil Services Corp. is marketing a $170 million offering of five-year first-lien notes with guidance of 8¾% to 9¼% via Pareto Securities, which also could price before the end of the present week, a market source said.

A quiet start to a short week

High-yield secondary traders were describing the action as extremely quiet on their side of the fence on the first trading session of July.

"It seemed like the market didn't really open today," one said.

He noted that Tuesday is likely to be even quieter with the Securities Industry and Financial Markets Association recommending that all debt markets in the United States have an early close - 2 p.m. EDT - ahead of Wednesday's July Fourth holiday, which will see U.S. financial markets completely shuttered.

"Things will probably wrap up early around here - like around 10:30 [a.m.]," he quipped.

Where's Coeur d' Alene?

"Whatever happened to that Coeur d' Alene deal?" asked the trader, which was a question that nobody seemed to have a concrete answer at this point.

Coeur d' Alene Mines, a gold and silver mining company based in the eponymous Idaho town, announced a week ago that it would bring a $350 million issue of eight-year senior notes to market to fund internal and external growth initiatives and general corporate purposes.

Junk-bond syndicate sources said that it began a short roadshow process last Monday, with pricing expected by Thursday.

The syndicate sources heard last Wednesday that price talk with a yield of about 8½% emerged with pricing likely after the order books closed Thursday.

But Thursday has come and gone, as has Friday, with no deal to be seen. As of late Monday, Coeur was still listed on the forward calendar for possible pricing this week.

Recent deals hang in there

As for the deals that did actually price last week, traders saw them mostly hanging around at the aftermarket levels at which they moved by the end of last week.

For instance, a trader said that Ashtead Group's $500 million of 6½% second-priority senior secured notes due 2022 continued to trade well, pegging those bonds at 101¾ bid, 102¼ offered.

"But that's not any different from where they went out on Friday," the trader said.

A second trader saw the British equipment rental company's quick-to-market offering at 101½ bid.

Those bonds priced Friday at par and were seen moving up in initial aftermarket dealings to 101¼ bid, 101¾ offered.

A trader saw Friday's other deal - Houston-based energy exploration and production operator Halcon Resources' 9¾% notes due 2020 - at 100½ bid, 101½ offered Monday.

A second trader said the bonds traded for a while Monday at 100 5/8 bid, 101 offered. "And then they died," the second trader said.

That $750 million issue, which was upsized from an originally announced $500 million, priced at 98.646 to yield 10%. The issue then moved up in the aftermarket to a 1001/2-to-101 context.

A trader saw Ceridian's 8 7/8% senior secured notes due 2019 trading Monday at 103 1/8 bid, 103½ offered; the Minneapolis-based business services company priced its $720 million issue at par late Thursday, although the bonds did not begin trading around until Friday when they quickly zoomed as high as 104 bid in the secondary, before coming in a little to go home at 1031/2.

A second trader did not see any Ceridian dealings Monday.

But he did see Consolidated Container Co. LLC's 10 1/8% notes due 2020 at 102½ bid, 103 offered.

The Atlanta-based maker of plastic bottles and other rigid containers priced that issue at par on Thursday; after breaking at 101¾ later that same session, the bonds moved up to around 102 to 103.

A trader said that he saw Oasis Petroleum Inc.'s 6 7/8% notes due 2023 "trading all day" around 100¼ bid. The Houston-based company's quickly shopped $400 million offering - upsized from the originally announced $300 million - priced at par Wednesday and was then heard in the aftermarket to be staying close to that issue price.

Dollar General Corp.'s 4 1/8% notes due 2017 were quoted Monday around 101 5/8 bid. Although the trader said he saw just one $1 million trader at that level and a $250,000 trade at 102 bid, 102 ¼ offered. "Then that was it," the trader said.

The Goodlettsville, Tenn.-based deep-discount retailer priced its quick-to-market $500 million deal - upsized from an original $450 million - at par Wednesday. Later that session, the bonds got as good as 101½ bid, 101¾ offered and were quoted Friday going home at 1013/4.

Market signposts stay strong

Away from the new-deal arena, statistical market performance measures were up across the board for a second straight session Monday, after being higher last Wednesday and mixed last Thursday, continuing their recent pattern of choppy action.

A trader saw the Markit Group CDX North American Series 18 High Yield Index up a quarter-point to end at 96¾ bid, 97 offered; on Friday, it jumped by 1 5/16 points amid a general market upturn.

The KDP High Yield Daily Index recorded its fourth straight gain Monday, firming by 17 basis points to close at 73.37.

On Friday, it rose by 18 bps. Its yield came in by 5 bps on Monday to 6.60% after tightening by 10 bps on Friday.

And the widely followed Merrill Lynch U.S. High Yield Master II Index recorded its fifth consecutive gain. It rose by 0.22% on Monday, on top of its 0.356% gain on Friday.

Monday's advance lifted its year-to-date return to 7.311%, up from 7.053% on Friday.

Monday's finish set a new 2012 high for the index, eclipsing the old mark set on Friday. The index is at its highest point since the end of 2010, when it returned 15.19%.

ATP up on Israel find

Among specific issues, a trader said that ATP Oil & Gas' 11 7/8% second-lien senior secured notes due 2015 were up by several points on news that the Houston-based offshore energy exploration and production company, which operates in the Gulf of Mexico and in the Mediterranean Sea off the coast of Israel, hit "meaningful gas deposits" in the latter operation.

They were one of the more active junk bond issues Monday with more than $30 million of the paper changing hands. He saw the bonds trading around 48½ bid versus Friday's levels between 46½ to 47.

"All the trades today pretty much had a 48 handle and there might have been one trade at 49, on the back of that news," the trader said. "Gas is much more valuable over there than it is here, so it's good news for them."

The company said that its Shimshon well encountered more than 62 feet of natural gas pay in the Bet Guvrin sands. Some estimates have put the size of the natural gas reservoir there as much as 2.3 trillion cubic feet. ATP has a 40% working interest in the well.

Along with the bonds, the company's Nasdaq-traded shares jumped as much as 24.4% in intra-day trading, before finishing up 65 cents, or 19.35%, at $4.01 per share. Volume of 8.6 million shares was more than four times the norm.

Rotech rallies on rival sale

A trader said that Rotech Healthcare's 10½% second-lien senior secured notes due 2018 were up as much as 10½ points Monday, to the mid-50s, on the news that a competitor of the Orlando, Fla.-based health care products and services provider, Lincare Holdings Inc., has agreed to be bought by German industrial-gas supplier Linde AG in an all-stock $3.8 billion deal.

"That got people excited about Rotech," the trader said. Like Lincare, Rotech is a provider of oxygen and respiratory therapy services delivered to patients at their homes.

He said the bonds were previously in the mid- to upper-40s.

A second trader said "a couple of million" of the 101/2s traded around 55 bid, versus 50 on Thursday and 43 in mid-June. "So they've moved up quite nicely," the trader said.

He also saw the company's 10¾% senior secured first-lien notes due 2015 move up to 97¼ bid from 96½ last Thursday, also on "a couple million" of volume.

Rotech's over-the counter-traded shares were up by as much as 31.25% in early trading, but went home still up 14 cents, or 17.50%, at 94 cents per share. Volume of 217,000 shares was 2½ times the usual activity level.

K-V Pharmaceutical climbs

Also in the healthcare sphere, a trader said that K-V Pharmaceutical Co.'s 12% notes due 2015 moved up to around 35 to 36 bid, up from previous levels around 32 to 33, after the FDA issued some additional guidance about the St. Louis-based pharmaceutical company's Makena drug, which is used to reduce the risk of pre-term birth in women with a singleton pregnancy who have a history of singleton spontaneous pre-term birth.

A second trader saw the 12% notes at 35, although he said there was only one trade for more than $1 million, in a 35 to 35¼ context.

He noted that about a week ago, the bonds were at 32 to 321/4.

Going back further, "They were in the 40s, so they got some horrible news" on June 22, when investors were digesting some earlier guidance the FDA had put out on Makena, the trader said.

"But they bounced back today," he said, as the agency apparently clarified its earlier statements to remove certain ambiguities.

But the trader said that based on the size of all of those trades, there's not a lot of activity.

K-V said Monday that the government regulator put out a document to clarify its June 15 statement on whether physicians should proscribe another medication, compounded versions of hydroxyprogesterone caproate, instead of Makena.

K-V said that in the new federal statement, the FDA made it clear that the preferred option should be FDA-approved Makena, the only such FDA-approved medication for that condition.

Along with the bonds, K-V's New York Stock Exchange-traded shares were higher, zooming as much as 62.9% in intra-day action before coming off those peaks and going home up 8 cents, or 14.81%, at 62 cents per share. Volume of 2.1 million shares was triple the usual daily turnover.

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