VWR prices $750 million deal, but new-issue trading falters; busy ATP up post-Chapter 11

By Paul Deckelman and Paul A. Harris

New York, Aug. 20 - VWR Funding Inc. came to market Monday with a quickly shopped $750 million offering of five-year notes.

The bonds came too late in the day for any kind of an aftermarket, although there was some trading in the laboratory supply company's existing bonds that are to be taken out using the new-deal proceeds.

Trading in new or recently priced bonds, which was the dominant theme in the secondary market lately, shriveled up. While some trading was seen in the recent issues from Sprint Nextel Corp. and Concho Resources Inc., they seemed to be the exception to the rule. For instance, traders saw little activity in the new ServiceMaster Co. notes that priced last Thursday. Likewise, there was only quiet trading in last week's well-received issues from DaVita, Inc. and Unisys Corp.

The big name in the junk secondary market Monday was ATP Oil & Gas Corp., whose bonds were seen rising as much as 3 points in the wake of the troubled energy company's Friday bankruptcy filing. Traders said more than $70 million of the bonds changed hands, making it easily the day's busiest Junkbondland issue.

But after ATP, traders said dealings fell off sharply. Overall volume was muted with many market participants taking their summer vacations in the traditionally sleepy period from mid-August to Labor Day.

Statistical indicators of market performance were seen firmer across the board on the session.

VWR prices wide of talk

A single issue priced during the Monday session.

VWR Funding, a unit of VWR International, LLC, priced a $750 million issue of 7¼% five-year senior notes (Caa1/B-) at par to yield in the 7.247%.

The yield printed 12.2 basis points beyond the wide end of yield talk, which was set in the 7% area.

Goldman Sachs, Bank of America Merrill Lynch, Barclays, Citigroup, Deutsche Bank and J.P. Morgan Securities LLC were the joint bookrunners for the quick-to-market debt-refinancing deal.

Eyeing Asian corporates

Elsewhere, one high-yield syndicate banker was following a deal from China's Guangzhou R&F Properties Co. Ltd.

The real estate company is tapping its 10 7/8% notes due 2016 in a deal that is roadshowing via Citigroup, Standard Chartered Bank and UBS.

There is a push among the high-yield syndicates to look at more Asia leveraged finance, the banker said.

Several of these deals were postponed in the early summer, the banker recounted.

The list of pulled deals includes China ZhengTong Auto Services Holdings Ltd., which pulled an offering of senior guaranteed notes via J.P. Morgan; Baoxin Auto Group Ltd., which pulled an offering of senior notes via Morgan Stanley and UBS, both in mid-May; and China Tianrui Group Cement Co. Ltd., which pulled an offering of senior notes via Deutsche Bank in early June, according to information reported by Prospect News.

"There are certain things the accounts in the U.S. do not seem to want to take a risk on," the banker commented, but he added that Asian corporate high-yield issuers are increasingly moving away from their local markets in favor of high-yield funding.

The buyside does not seem to be looking at them yet, but that could change, the banker said.

New VWR too late to trade

The only junk deal seen during the session, from VWR Funding, came to market too late in the day for any kind of aftermarket.

There were a few trades, however, in the Radnor, Pa.-based laboratory supply and distribution company's existing 10¼% PIK toggle notes due 2015, which are to be taken out via a tender offer. That was separately announced Monday and will be funded by the proceeds from the new bond deal.

Those notes - which had not traded for several weeks - were seen up a quarter-point to 1031/2, around the anticipated takeout level.

Volume was about $4 million, all of it in round lots.

Recent new deals trade quietly

Unlike last week - or for that matter, the past several weeks - trading in new or recently priced bonds was not the dominant feature in Monday's junk bond secondary market. Traders threw out a few quotes, but said the activity level was generally low.

For instance, a trader said that he was "not seeing anything at all" in the 11½% senior secured notes due 2017 that priced Friday by American Gilsonite Co., a Bonanza, Utah-based mining concern.

That quick-to-market deal priced at par, but did not trade around, with market participants theorizing that the $260 million offering likely was snapped up and put away.

Maybe the most active of the recent deals was Concho Resources' 5½% notes due 2020. A trader said the Midland, Texas-based energy exploration and production company's bonds were up by three-eighths of a point, at 102 3/8 bid, which he called "up slightly." Volume was "just $11 million on 11 trades."

The quickly shopped $700 million issue - upsized from an originally announced $400 million -priced at par last Tuesday, moved above 101 bid when it was freed to trade Wednesday and continued to firm after that.

Sprint Nextel's new 7% notes due 2020 were seen by a trader moving up to around the 102 level, from their levels last week around 101¼ bid, 102 offered, but he said that only $7 million of the bonds traded, characterizing that as "still pretty small."

A market source said the bonds went as good as 103½ during the session, calling that up about 1¾ points, although a second source noted that the peak level was a smallish odd-lot outlier trader and the bonds came back in to the 102 level going out, with $7 million traded.

The Overland, Kan.-based No. 3 U.S. wireless carrier priced $1.5 billion of the bonds at par in a drive-by transaction back on Aug. 9. They started out trading, anchored around that level but eventually firmed to 100¾ bid at the close Friday and continued to gain Monday.

The ServiceMaster Co.'s new 7% notes due 2020 were quoted around 101½ bid, 102 1/8 offered, but a trader said "nothing was trading."

A second trader agreed. "Surprisingly, we're not seeing anything in ServiceMaster today. The last trades we saw were actually on Friday morning," in a 101 7/8-to-102 bid context, he said.

The Memphis-based residential cleaning, lawn care and extermination-services provider priced $750 million of those bonds in a quick-to-market deal Thursday after first terminating its offering of $1 billion 6 1/8% notes due 2020, which priced at par Aug. 8, but then struggled in the aftermarket.

The new deal, in contrast, was seen up 1 point in immediate aftermarket dealings and added another point Friday.

Thursday's opportunistically timed $215 million offering of 6¼% notes due 2017 from Unisys Corp. was trading Monday around 102¼ to 1031/4. A trader said there was some actual trading going on in that range Monday, rather than just quoting. "But it was nothing great. Flows were low," he said.

The Blue Bell, Pa.-based information technology company's quick-to-market deal came in at par and the bonds firmed smartly as soon as they were freed to trade later that same session, shooting up to 102 bid mark.

A trader said that DaVita's 5¾% notes due 2022 were trading around 101¼ bid, 102¼ offered, about where they were traded last week, but added that there was "not a flurry of activity there."

The Denver-based kidney health company - rumored for several months to be planning a big bond deal as part of the financing for its acquisition of Health Care Partners Inc. - did its $1.25 billion offering, upsized from an originally announced $1 billion at par last Tuesday.

Tronox Finance LLC's 6 3/8% notes due 2020 were trading inside a 100 3/8 to 100 5/8 context Monday, a trader said.

That's about where the Oklahoma City-based chemical concern's rapidly marketed $900 million offering traded last week after pricing at par Wednesday. The issue was upsized from an original $650 million.

ATP active after filing

With relatively little going on in the junk market Monday in terms of new deals, a trader declared that "the most action today" was in ATP Oil & Gas' 11 7/8% second-lien senior secured notes due 2015, which he saw up 2 points on the day, trading at 31½ bid and trading flat following the Houston-based energy offshore exploration and production company's Chapter 11 filing with the U.S. Bankruptcy Court.

A second trader agreed that ATP was "definitely one of the big ones," seeing more than $90 million of the bonds trading on the Trace system as of about 4:30 p.m. EDT, with still more trades likely after that.

"Huge size traded," he said, seeing the bonds finishing in a 31- to 311/2-context, which he called up a couple points, trading flat. "Bankruptcy will do that to you every time," he quipped.

He said that ATP was by far and away "the biggest dog on the block today."

A market source estimated that round-lot trading alone accounted for about $75 million of turnover.

While ATP finally filed for Chapter 11 protection Friday, the market was not really surprised as this was something investors had been waiting for since Aug. 10 when news outlets reported that the company was already lining up debtor-in-possession financing.

The filing came ahead of an $89 million interest payment due in November. Prior to the filing, it was widely believed the company would not be able to make the payment as it struggled to bring production up to targets.

The company blamed its financial troubles on its inability to hit those targets, which was made worse by the April 20, 2010 Deepwater Horizon oil rig explosion in the Gulf of Mexico and the resulting offshore drilling moratorium in the Gulf imposed by the federal government.

While ATP's bonds rose on the news that the other shoe finally dropped, its Nasdaq-traded shares were beaten down since shareholders are normally relegated to the bottom of the food chain in a bankruptcy.

The stock plunged as much as 56% during the session before coming off its lows to go home down 16 cents, or 34.68%, at 30 cents. Volume of 18.8 million shares was nearly six times the norm.

Petroleos percolates

Also in the energy sphere, a trader said that one area of activity, away from ATP, was in the bonds of Venezuela's national oil company, Petroleos de Venezuela SA.

He saw the 9% notes due 2021 trading in an 80- to 81-context, which he called down about a half-point with $33 million to $35 million of the paper traded.

He saw the Caracas-based energy concern's 8½% notes due 2017 also down a half-point at 86½ bid, 87½ offered, on volume of about $23 million.

The company's 9¾% bonds due 2035 were up a half-point on the day at 79 bid, 80 offered, on volume of $7 million, while its 5 3/8% notes due 2027 were unchanged at 61 bid, 62 offered, on volume of $5 million.

Bon-Ton holds levels

Outside of the energy sector, a trader said that The Bon-Ton Department Stores Inc.'s 10¼% notes due 2014 were quoted at 88 to 89, while its 10 5/8% notes due 2017 were at 78 to 80, both levels about where they were last week after the York, Pa.-based department store retailer released quarterly numbers showing little or no year-over-year improvement in sales and a wider loss.

"There really was no activity in them," he said.

Indicators turn higher

Statistical indicators of junk-market performance strengthened Monday after being mixed for two sessions at the end of last week.

The Markit Group CDX North American Series 18 High Yield Index was up by 5/16 of a point on Monday, its third straight gain, ending at 98 9/16 bid, 98¾ offered. The index rose 3/16 of a point on Friday.

The KDP High Yield Daily Index, meanwhile, posted its first gain in nine sessions since Aug. 7, firming by 4 basis points to end at 73.78. It was unchanged Friday.

Its yield was lower for the first time in nine sessions, dipping by 2 bps to 6.25%, after no change Friday.

And the widely followed Merrill Lynch U.S. High Yield Master II Index saw its second straight gain Monday, moving up by 0.117%, on top of Friday's 0.052% advance.

That lifted its year-to-date return to 9.794% from Friday's 9.666%, although it was still off its 2012 peak level of 9.838%, set Aug. 8.

The index's yield-to-worst meanwhile came in to 6.808%, tying the low yield for the year so far, also recorded Aug. 8.

Stephanie N. Rotondo contributed to this report

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