Sealed Air, Claire's drive-bys pace $1.2 billion day; Navistar up; funds gain $820 million

By Paul Deckelman and Paul A. Harris

New York, March 7 - The high-yield primary sphere saw a busy session on Thursday. Five new dollar-denominated, junk-rated deals from domestic or developed-country borrowers priced during the day, and the deals totaled more than $1.2 billion principal amount.

Among these were several opportunistically timed and quickly shopped transactions including the day's largest deal: $425 million of 10-year secured notes from packaging products company Sealed Air Corp.

There was also a $210 million drive-by offering of seven-year secured paper from familiar junk issuer Claire's Stores Inc.

Greek barge and maritime provider Navios South American Logistics Inc. did a $90 million same-day add-on to its existing notes.

Two other deals priced after wrapping up roadshows: automated kiosk retailer Coinstar, Inc., with $350 million of six-year notes, and Acadia Healthcare Co. Inc., which did $150 million of eight-year notes.

Except for Navios' smallish add-on deal, all of the day's other pricings were seen by market sources to have firmed solidly when they moved into the aftermarket.

There was busy trading in two of Wednesday's deals, infrastructure construction company MasTec, Inc. and commercial aircraft lessor International Lease Finance Corp. The latter was a two-part megadeal-sized transaction.

Away from the new deals, Navistar International Corp.'s bonds firmed smartly in busy dealings after the troubled truck manufacturer and bus builder announced its new chief executive officer.

Statistical measures of junk market performance were meantime stronger across the board.

And money flows into and out of high-yield mutual funds and exchange-traded funds - a key gauge of market liquidity - were strongly positive in the latest week, according to both major fund-tracking services.

AMG sees $820 million inflow

As Thursday's market activity was winding down, junk market participants familiar with the fund-flow statistics generated by AMG Data Services, Inc. reported that in the week ended Wednesday, $820 million more came into those funds than left them.

It was the second consecutive inflow reported by Arcata, Calif.-based AMG, a unit of the Lipper analytics division of Thomson Reuters Corp., which had seen a $69.9 million cash addition the previous week, ended Feb. 27.

This week's inflow was the biggest seen this year since the massive $1.11 billion liquidity injection the service had reported in the week ended Jan. 9, and it was the first really sizable one since the $512 million the funds gained in the week ended Jan. 23. In the interim, there had been several smaller inflows and a three-week string of outflows in the weeks ended Feb. 6 through Feb. 20, during which the funds lost a total of about $1.67 billion, according to a Prospect News analysis of the data.

Ten weeks into the new year, 2013 net inflows as reported by Lipper so far have amounted to about $1.03 billion, according to the analysis.

There have now been six inflows and four outflows reported by Lipper so far this year.

In 2012, when cumulative net inflows for the year totaled an estimated $32 billion, according to the analysis, inflows to the funds were recorded in 39 weeks of the year and outflows in the remaining 13 weeks.

EPFR sees $1.9 billion inflow

The other major fund-tracking service, Cambridge, Mass.-based EPFR Global, saw its third straight inflow in the latest reporting week, also ended Wednesday, as $1.9 billion more came into the funds that it tracks than left them.

That was a continuation of the trend seen the week before, when the service recorded a $287 million cash injection, and the week before that, ended Feb. 20, when the funds had showed a $135 million improvement.

Those recent inflows, in turn, followed two weeks of outflows in the weeks ended Feb. 6 and Feb. 13 totaling $1.54 billion, according to a Prospect News analysis of the EPFR figures.

The latest week's inflow was the eighth recorded so far this year by EPFR against the two outflows and thus raises the year-to-date net inflow total to just over $5 billion.

EPFR and Lipper calculate their respective fund-flow statistics using different methodologies. EPFR includes some non-U.S. domiciled mutual funds and ETFs in its tabulations, while the Lipper number is purely domestic funds. Despite the differences in the actual numbers, the two services' weekly results usually point in the same direction.

Reporting only the U.S. funds that it tracks - a category usually more closely aligned with the Lipper totals - EPFR said that those domestic funds accounted for $1.33 billion of the overall number's rise. The week before, inflows to the domestic funds had come in at around $140 million.

Despite those recent gains, EPFR has actually still seen six weekly net outflows from the U.S.-only funds since the start of the year against just four weekly inflows; however, the latest week's big inflow to the domestic funds swung the 2013 cumulative flows figure back into the black, at an estimated $530 million, according to the analysis.

In 2012, EPFR's overall figure showed a cumulative net inflow of about $72.3 billion. According to the Prospect News analysis of the data, EPFR recorded 42 weeks of inflows last year against just 10 weeks of outflows.

Cumulative fund-flow estimates, whether from EPFR or from AMG/Lipper, may be revised upward or downward or be rounded off and could include unannounced revisions and adjustments to figures from prior weeks.

The continued flow of fresh cash into junk - and the mutual funds and ETFs represent but a small, though very observable and quantifiable percentage of the total amount of investor money coming into the junk market - has been seen by analysts as a key element behind the high-yield secondary market's strong performance last year versus other fixed-income asset classes and its record active new-deal pace, which easily topped the $300 billion mark - patterns of primary activity and secondary strength that have mostly continued into the new year so far.

Inflows were expected

A high-yield trader said that the inflows reported by Lipper and EPFR should come as no surprise given the overall strength seen in Junkbondland the past week or so.

"It's been a pretty healthy week for inflows, just talking to some of the portfolio managers I talk to," he said.

"They've all been getting cash and trying to figure out what to do" - although in some cases, rather than buying junk bonds, he said that the managers "were diverting [cash] to the loan market, figuring it's a defensive trade. They can get money invested."

He said that such investors going the loan route rather than continuing to stick to bonds "are sacrificing some liquidity in terms of maybe not being able to trade in and out of what they buy as easily as they might like, but it's just a portion of their portfolios.

"And in some cases, the loans are more attractive than the bonds."

Sealed Air drives by

Five issuers brought single-tranche deals on Thursday, raising a combined total of $1.23 billion. Three of the five deals came as drive-bys.

Sealed Air priced a $425 million issue of non-callable 10-year senior notes (B1/BB-) at par to yield 5¼% on Thursday, according to a syndicate source.

The yield printed at the tight end of yield talk in the 5 3/8% area.

BofA Merrill Lynch, Citigroup Global Markets Inc., BNP Paribas Securities Corp., J.P. Morgan Securities LLC and Rabo Bank were the joint bookrunners for the debt refinancing.

Coinstar upsizes

Coinstar priced an upsized $350 million issue of six-year senior notes (Ba3/BB-) at par to yield 6%.

The yield printed at the tight end of the 6% to 6¼% yield talk.

BofA Merrill Lynch, Wells Fargo Securities, LLC and HSBC Securities (USA) Inc. were the joint bookrunners for the deal, which was upsized from $300 million.

The Bellevue, Wash.-based provider of automated retailing systems plans to use the proceeds for general corporate purposes.

Claire's first-lien deal

Claire's Stores priced a $210 million issue of seven-year senior secured first-lien notes (B2/B-) at par to yield 6 1/8%.

The yield printed at the tight end of yield talk set in the 6¼% area.

Goldman Sachs & Co., Credit Suisse Securities (USA) LLC, J.P. Morgan Securities LLC and RBC Capital Markets LLC were the joint bookrunners for the quick-to-market debt refinancing deal.

Acadia eight-year deal

Acadia Healthcare priced a $150 million issue of eight-year senior notes (B3/CCC+) at par to yield 6 1/8%.

The deal was in the market with guidance in the 6¼% area, according to market sources.

BofA Merrill Lynch, Citigroup and Jefferies & Co. Inc. were the joint bookrunners.

The Franklin, Tenn.-based provider of inpatient behavioral health-care services plans to use the proceeds for general corporate purposes, which may include acquisitions.

Navios taps 9¼% notes

Navios South American Logistics and Navios Logistics Finance (US) Inc. priced an upsized $90 million add-on to their 9¼% senior notes due April 15, 2019 (B3/B+) at 103.75 to yield 8.15%.

The reoffer price came cheap to the 103.5 to 104 price talk.

Morgan Stanley & Co. LLC was the bookrunner for the quick-to-market deal, which was upsized from $75 million.

Proceeds will be used for capital expenditures.

The barge and upriver port logistics concern, with operations in South America, is a subsidiary of Piraeus, Greece-based Navios Maritime Holdings Inc.

MetroPCS talks benchmark deal

MetroPCS Wireless, Inc. is alone on the calendar for Friday.

The company set price talk for its benchmark-sized senior notes offering (B1/BB) on Thursday.

A tranche of eight-year notes is talked with a yield in the 6 3/8% area, and a tranche of 10-year notes is talked with a yield in the 6¾% area.

The deal is expected to be sized at a minimum of $1 billion.

Deutsche Bank Securities Inc., Credit Suisse, JPMorgan and Morgan Stanley are the bookrunners.

NANA to start Friday

The Thursday session also brought news of two roadshows.

NANA Development Corp. plans to start a roadshow on Friday for its $275 million offering of six-year notes (B3/B+).

The roadshow wraps up on Wednesday.

Goldman Sachs is the bookrunner.

The Anchorage-based company plans to use the proceeds to refinance its revolver and term loan and for general corporate purposes.

Seitel plans $250 million

Seitel, Inc. set an investor call for Monday to discuss its $250 million offering of six-year senior notes (B1/B).

The deal will be featured in a roadshow that is set to run through next week.

Deutsche Bank and JPMorgan are the joint bookrunners.

Proceeds, together with cash on hand, will be used to repurchase $275 million of the company's 9¾% senior notes due 2014.

New deals firm up

Although most of Thursday's new deals came to market fairly late in the session, a trader saw some late levels in the new paper indicating that there was considerable pent-up demand for that paper. He pegged four out of the five deals that priced - all except the smallish add-on from Navios - up at least a point and, in some cases, considerably more than that.

The best performer of the bunch, he said, was Acadia Healthcare's 6 1/8% notes due 2021. He quoted those bonds late in the session at 102 5/8 bid, 103 5/8 offered after the Franklin, Tenn.-based provider of behavioral health-care services priced its $150 million deal at par.

Sealed Air's 5¼% senior secured notes due 2023 firmed to 101 3/8 bid, 101 7/8 offered, he said, up from the par level at which the Elmwood Park, N.J.-based maker of bubble wrap and other air-based packaging products had priced its quick-to-market $425 million issue.

He saw Coinstar's $350 million of 6% notes due 2019 at 101½ bid, 102½ offered, up from the par level at which the Bellevue, Wash.-based operator of the popular Redbox movie and videogame rental kiosks and other automated retailing systems had priced its deal.

"They really pushed that one," a second trader said, noting that the deal had been upsized from an original $300 million. He said that he had heard the deal "was struggling, from what I could tell" before it came to market, but he added that "you've got to believe the Redbox story." The ubiquitous kiosks - there are an estimated more than 42,000 of them at 34,000 discrete locations as of the end of 2012 - have become a major vehicle for renting videos and games.

The first trader meantime saw Claire's Stores' 6 1/8% senior secured notes due 2020 at 101 3/8 bid, 101 7/8 offered.

The Hoffman Estates, Ill.-based specialty retailer - it sells jewelry, trendy handbags and other fashion accessories primarily aimed at teenaged girls and 20-something women - had priced its $210 million quick-to-market deal at par.

MasTec trades massively

Among the deals that priced on Wednesday, MasTec's 4 7/8% notes due 2023 were right at the top of the most-actives list when it came to purely junk-rated dollar deals. A market source said volume in the credit totaled more than $45 million.

He pegged the bonds at 100½ bid, which he said was actually off slightly from the levels seen in initial aftermarket dealings on Wednesday after the Coral Gables, Fla.-based infrastructure construction company had priced its $400 million deal - upsized from an originally announced $350 million - at par.

ILFC volume flies

MasTec was exceeded in popularity on Thursday only by one of the other deals that priced Wednesday - Los Angeles-based commercial aircraft leasing company International Lease Finance's $1.25 billion of split-rated (Ba3/BBB-/BB) five-year and eight-year bonds.

More than $100 million of that paper was traded on Thursday, with slightly more of its 3 7/8% notes due 2018 having changed hands than the other half of that deal, its 4 5/8% notes due 2021. ILFC, a wholly owned unit of insurance giant American International Group, Inc., priced $750 million of the former and $500 million of the latter, each tranche coming in just a tad under par.

They did not stray far from those levels in Thursday's busy aftermarket dealings, both being quoted around the 100¼ bid area.

A trader noted that there was some interest in both the high-yield and the high-grade markets in the deal but suggested that "the high-yield guys that played it were flipping out of it and the IG guys were buying it."

Navistar on the move

Away from the new-deal realm, Navistar International bonds were the day's "big up mover," according to a trader.

The gains came as the company reported weak earnings but also a cash burn that was "not so bad," the trader said.

"So everything is rosy," he said.

The trader said the 8¼% notes due 2021 rose over 4 points to end around 99.

Another trader called the issue up 4 to 5 points, also around 99.

For its first fiscal quarter, the Lisle, Ill.-based heavy-duty truck manufacturer posted a net loss of $123 million, or $1.53 per share. That compared to a loss of $153 million, or $2.19 per share, the year before.

Revenue was down 12% at $2.64 billion.

Analysts had been expecting a net loss of $126 million on revenues of $2.8 billion.

Still, the company ended the quarter with $1.19 billion of cash, which amounted to a cash burn for the quarter of about $287 million - well below the $600 million forecast previously given by management.

While the earnings were on the weak side, the better-than-expected liquidity was seen as a positive, as was the appointment of Troy Clarke to the position of chief executive officer. Still, concerns about the company's ability to get its new engines certified by the Environmental Protection Agency - and on time - remained, as well as worries about the company's ability to access the markets for new cash.

Market indicators improve

Overall, statistical junk performance indicators were higher across the board for the second time in three days, although they recently have largely been mixed with a generally higher bias, as they were on Wednesday.

The Markit Series 19 CDX North American High Yield index gained 7/32 point on Thursday to end at 103 9/16 bid, 103 11/16 offered after having softened by 1/16 point on Wednesday.

The KDP High Yield Daily index was higher for a third straight session, rising by 2 basis points to 75.53; on Wednesday, it had jumped by 10 bps for a second straight session, having broken out of a two-session rut that was seen on Friday and again on Monday.

Its yield declined by 1 bp on Thursday, its third straight narrowing. On Wednesday, it had come in by 4 bps.

And the widely followed Merrill Lynch High Yield Master II index made it a lucky seven on Thursday - its seventh consecutive gain, rising by 0.067%, on top of Wednesday's 0.085% advance.

The latest gain lifted its year-to-date return to 2.253% - a new peak level for 2013 so far. That was up from 2.184% on Wednesday, the previous high point for the year so far.

Stephanie N. Rotondo contributed to this review

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