Mannkind, Platinum deals slate as primary ends $1 billion week; secondary stays under pressure

By Paul Deckelman and Paul A. Harris

New York, Sept. 23 - The high-yield market closed out the week on Friday with no new pricings, but several prospective deals having emerged.

Pharmaceutical company Mannkind Corp. was heard by primaryside sources to be getting ready to hit the road on Monday to market an offering of six-year notes that would raise $370 million. Pricing is expected next month.

The sources also heard that oilfield services company Platinum Energy Services was planning a $50 million non-fungible add on to its existing bonds.

Those upcoming deals follow the pricings this week of three deals accounting for slightly over $1 billion of proceeds, from Iron Mountain Inc., Bill Barrett Corp. and Avis Budget Car Rental LLC.

The junk bond secondary market meantime remained under pressure on Friday, declining for a third straight session, even though stocks - down sharply over the previous two sessions - managed to eke out a small rebound on Friday.

As was the case on Thursday, the new Bill Barrett bonds continued to trade around their par issue price while Iron Mountain was slightly below that level, both having given up their aftermarket gains. The new Avis bonds were still down around 2 points from issue.

Non-new deal names such as Caesars Entertainment Corp. were again mostly lower.

Statistical performance indicators were down both on the session and versus a week earlier.

Mannkind marketing for Monday

No issues were priced on Friday but the primary market did generate news.

Mannkind Corp. plans to raise $370 million via the placement of six-year senior discount notes.

An investor roadshow kicks off on Monday. The deal is expected to price on Oct. 12.

Knight Capital Group has the books.

Platinum Energy plans add on

Elsewhere Platinum Energy Services announced a $50 million non-fungible add on to its 14¼% senior secured notes due March 1, 2015 on Friday.

The non-rated deal was the subject of a Friday investor call.

J.P. Morgan Securities LLC is the bookrunner.

The original $115 million issue priced at 97.764 to yield 15.17% on March 3 in a deal led by Global Hunter Securities, LLC and Knight Capital Americas, LP.

$1.05 billion week

With no deals pricing on Friday, the Sept. 24 week closed having seen $1.05 billion price in three deals.

That falls short of the previous week's $2.15 billion in four tranches.

At Friday's close 2011 had seen $214.9 billion of issuance in 480 tranches, according to Prospect News data.

The week ahead

The September-October crossover week will get underway with a thin deal calendar.

Stillwater Mining Co. roadshowed its $300 million offering of five-year senior notes via Deutsche Bank Securities during the week which just ended.

That deal had been expected to price before the weekend, but has been carried over into the week ahead.

No official price talk has been released on the Billings, Mont.-based palladium and platinum producer's deal.

However yield conversations in the high-10% range have taken place, according to an asset manager who works for a high yield mutual fund.

Apart from that deal, some primary market activity is expected in the week ahead, the dealers say.

Look for a sizable issue from the health care sector to come as a drive-by early in the week, possibly on Monday, sources say.

Although activity in the high-yield primary market has been slow, it is in better shape than the bank loan market, according to a debt capital markets banker who works in both.

Whereas high yield has lately seen positive cash flows, the bank loan market has seen record setting outflows since late August, the banker added.

"The bank loan market is in price discovery mode right now, and you're seeing big discounts," the sell-sider said, mentioning that covenant-lite loans from Go Daddy Operating Co. LLC and Blackboard Inc. are being marketed with original issue discounts of 93 and 92, respectively.

New issue concessions, although less dramatic, have lately become the rule in the high-yield market as well, the banker added.

"That opens the door for the next wave of issuance," the sell-sider said.

"Right now it is difficult to persuade an opportunistic issuer to come to market amid all of the volatility.

"When you start to see intraday volatility slow down the calendar could build."

Harrah's hit again

In the secondary market, a trader said that "you still had certain names selling off."

For instance, he saw the Caesars 10% notes due 2018 down 3 points on the session at 65 bid. The widely traded bond was issued by the Las Vegas-based gaming giant's predecessor company, Harrah's Operating Co. Inc.

He said the Harrah's paper was probably the most actively traded credit in Junkbondland on Friday, with over $25 million having changed hands.

Those 10s "were the big trader on the day," said a participant at another desk, who also had them at 65 bid. However, he said that was only down 1 point from a Thursday close at 66 bid.

"They got as low as 64, then came back up to 65 at the end of the day, he said.

At another desk, the bonds were seen down 2½ points at that same 65 bid level.

'A miserable day'

The first trader said that among other names on the downside were Newark, Del.-based education finance company SLM Corp., whose 8% notes due 2020 fell 1¾ points to 100¼ bid, with over $20 million of the bonds traded.

Atlanta-based electronic transaction processor First Data Corp.'s 11¼% notes due 2016 were likewise down by 1¾ points to 74¼ bid, with over $11 million of turnover.

New York-based commercial lender CIT Group Inc.'s 7% notes due 2017 were down 1¼ points at 96¼ bid, while Franklin, Tenn.-based hospital operator Community Health Systems Inc.'s 8 7/8% senior secured notes due 2015 were ¼ point down at 99½ bid, 99¾ offered; more than $10 million of each issue had traded.

A second trader, seeing "decent volume" in the CIT deal, pegged them at 96½ bid.

Rite Aid Corp.'s 8 5/8% notes due 2015 were seen off by 1 point at 88½ bid, about duplicating the easing seen after the Camp Hill, Pa.-based number-three U.S. drugstore chain operator reported better-than-expected fiscal second-quarter results

"On the whole, there was not a lot going on," a trader said, characterizing Friday's session as "a miserable day."

"I'm sort of glad this week is over," another trader declared. The junk market "has been getting beat up all week. It's been brutal."

New names still struggle

Among recently priced issues, "Avis was still trading down," a trader opined, referring to Parsippany, N.J.-based vehicle rental powerhouse Avis Budget's 9¾% notes due 2020, which he saw down ½ point at 98 bid, "if not lower."

"They aren't trying hard enough," he suggested, in a joking reference to the Number Two U.S. car-rental company's iconic advertising slogan of decades past, characterizing itself as the scrappy underdog that "tries harder" to please its customers than industry behemoth Hertz Corp.

Another trader said that "I haven't seen anything on CAR" - the company's stock ticker symbol - in two days.

Avis priced its $250 million issue of the bonds at par on Wednesday; while the new bonds initially were quoted as high as 101 bid on the break, they came off that peak level later in the session and finished below issue in a 99-99¾ bid context. The bonds fell further in Thursday's dealings, with some traders seeing them having gone as low as a 97-97½ bid context before coming back up to the 98 level.

A trader saw Denver-based energy exploration and production operator Bill Barrett's 7 5/8% notes due 2019 around par bid, which he called unchanged on the day, while another trader also saw the bonds at par but called then up by ¼ to ½ point.

The energy company priced its $400 million issue of the notes, upsized from the originally $300 million, as a drive-by deal on Tuesday. After the bonds priced at par - too late that session to allow any aftermarket trading - they moved up the following day to bid levels as high as 101, although they had come off those peaks and traded lower during Thursday's session, back down to around the par level.

That was also pretty much the trajectory of Boston-based document storage, processing and disposal company Iron Mountain's 7¾% senior subordinated notes due 2019; like Bill Barrett, the company did $400 million of bonds, upsized from the originally announced $300 million, pricing them at par on Tuesday in a surprise drive-by deal, then seeing them move up in aftermarket dealings to as high as a 101 level, and then later come on back down.

A trader on Friday saw the bonds at 99¾ bid, par offered, calling them "maybe off 1/4," adding that they were "much quieter today."

The trader also saw "some markets today" in Sealed Air Corp.'s $1.5 billion two-part deal which priced last week.

He quoted the Elmwood Park, N.J.-based plastics packaging maker's 8 1/8% notes due 2019 at 101½ bid, and said that its 8 3/8% notes due 2021 "traded equally as well," both having improved from morning levels around 101 bid, 102 offered.

The company priced $750 million tranches of each bond at par on Sept. 16; both shot up to levels above 101-102 in initial aftermarket dealings that session, firmed up to as high as 103 earlier this week, but came off those peak levels around mid-week amid the general market downturn.

Junk indicators mostly down

Junk market statistical performance indicators, down both Wednesday and Thursday, were mostly lower on Friday as well, and were down on the week.

A trader said the CDX North American Series 16 HY Index gained ¼ point on Friday to end at 92 bid, 92¼ offered, after having fallen 7/8 point on Thursday.

However, the index was down on the week from 93½ bid, 93¾ offered at the close of trading the previous Friday, Sept. 16.

The KDP High Yield Daily Index dropped by 45 basis points on Friday to 70.99, after having swooned by 60 bps on Thursday. Its yield ballooned rose by 13 bps to 8.18%, after having ballooned out by 18 bps on Thursday.

It compared unfavorably to the previous week's 72.09 reading and 7.84% yield.

The Merrill Lynch U.S. High Yield Master II Index fell by 0.553% on Friday, its third straight loss, following Thursday's 0.924% slide, one of its biggest declines for the year.

That left the index's year-to-date return at just 0.043%, its lowest point for the year, down from 0.60% on Thursday and well below the peak level for the year of 6.362%, set on July 26.

The index was off by 1.582% on the week, its second straight weekly loss. It had closed the previous Friday at 1.651%

Market activity levels, measured by dollar volume, fell by around 21% on Friday, after having increased around the same amount on Thursday versus the session before.

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