ACI Worldwide, Shingle Springs, Medical Properties deals price; funds lose $388.2 million

By Paul Deckelman and Paul A. Harris

New York, Aug. 15 - The high-yield market saw a trio of smallish new deals price on Thursday, with some in the market speculating that the long-awaited traditional summer lull was starting to take hold.

The biggest deal of the day was the $300 million of seven-year notes priced by ACI Worldwide, Inc., a provider of payment systems. Those bonds were seen having firmed when they were freed for secondary dealings.

They also noted that casino operator Shingle Springs Tribal Gaming Authority did a downsized $260 million of eight-year notes, although these came too late in the day to trade.

Medical Properties Trust, a health-care-oriented investment firm, priced a quickly shopped $150 million add-on to its existing 2022 notes. The bonds firmed slightly from their issue price.

The $713 million of new junk-rated, dollar-denominated paper that priced in three tranches came in below the $1.63 billion of such paper from domestic or industrialized-country borrowers that had come to market during Wednesday's session.

Away from the deals that actually priced, market participants were anticipating coal operator Foresight Energy LLC's upsized $600 million eight-year notes, which are expected to price on Friday.

In the secondary, news that billionaire investor George Soros had increased his stake in J.C. Penney Co., Inc.'s equity gave the troubled retailer's bonds a boost.

But overall, the secondary market was seen mostly easier, including the statistical market performance measures.

And flows of money into and out of high-yield mutual funds and exchange-traded funds - a key indicator of overall Junkbondland liquidity trends - turned negative in the latest week.

Lipper funds lose $388 million

Around the time of Thursday's close, junk market participants familiar with the fund-flow statistics generated by AMG Data Services said that during the week ended Wednesday, $388.2 million more left those funds than came into them.

It represented a reversal from the week before, ended Aug. 7, when the numbers showed a net inflow of $485.6 million

It was the second time in the last three weeks that the fund-flow numbers have been negative, including the $1.03 billion outflow recorded in the week ended July 3. During that three-week stretch, cumulative net outflows have totaled an estimated $929 million, according to a Prospect News analysis of those numbers from Arcata, Calif.-based AMG, a unit of the Lipper analytics division of Thomson Reuters Corp.

However, over a somewhat longer timeframe, this was just the second downturn in seven weeks, a stretch that included a four-week winning streak for those funds. During that seven-week period, dating back to the week ended July 3, cumulative net inflows have totaled an estimated $5.48 billion, according to the analysis, although much of that was attributable to just one week's results, the massive $3.28 billion cash injection to the funds seen during the week ended July 24, which was the second-biggest inflow seen since Lipper predecessor AMG began tracking flows of money into and out of the junk funds in 1992.

For the year so far, inflows have now been seen in 19 weeks, against 14 weeks of outflows, but cumulative flows for the year as a whole remain negative due to a sizable losing streak seen during May and June that was prompted by investor worries over whether the Federal Reserve would end its accommodative monetary policy.

The latest outflow swelled that year-to-date net outflow figure to about $3.62 billion, according to the analysis, from the previous week's $3.23 billion deficit.

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

The sustained flows 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 or leaving the roughly $1 trillion junk market - have been seen by analysts as a key element behind the high-yield secondary sphere's strong performance last year versus other fixed-income asset classes and its record active new-deal pace, which easily topped the $350 billion mark.

It was also seen as one of the major drivers behind the robust patterns of primary activity and secondary strength that had continued for much of this year's first half before turning choppy over the past two months or so.

ACI Worldwide prices mid-talk

Three single-tranche issuers raised a combined total of $713 million during Thursday's high-yield primary market session.

ACI Worldwide priced a $300 million issue of seven-year senior notes (B2/BB-) at par to yield 6 3/8%.

The yield printed in the middle of the 6¼% to 6½% yield talk.

Wells Fargo Securities LLC was the left bookrunner. BofA Merrill Lynch was the joint bookrunner.

The Naples, Fla.-based provider of payment systems plans to use the proceeds to repay its credit facility and for general corporate purposes.

Shingle Springs shifts deal size

Shingle Springs priced a $260 million issue of eight-year senior notes (B3/CCC+) at par to yield 9¾%.

The deal was downsized from $275 million after having previously been upsized to $275 million from $250 million.

The yield printed on top of yield talk.

BofA Merrill Lynch ran the books for the debt refinancing.

In a restructuring, the call protection was extended to four years from three years.

Medical Properties taps notes

Medical Properties priced a $150 million add-on to the MPT Operating Partnership, LP/MPT Finance Corp. 6 3/8% senior notes due Feb. 15, 2022 (Ba1/BB) at 102.

The yield to maturity is 6.07%, and the yield to worst is 5.998%.

The reoffer price came at the cheap end of the 102 to 103 price talk.

J.P. Morgan Securities LLC, BofA Merrill Lynch, Deutsche Bank Securities Inc. and RBC Capital Markets LLC were the joint bookrunners.

The Birmingham, Ala.-based trust plans to use the proceeds to acquire three hospitals from acute health-care provider Iasis Healthcare LLC. Should the acquisitions not be completed, Medical Properties plans to use the proceeds to pay down its revolver debt and for general corporate purposes.

Foresight Energy for Friday

Things seem genuinely to be winding down for Summer 2013 in the primary market, sources said on Thursday.

"It's hard to scare up a crowd for a deal with so many people on vacation," one source said.

However, market sources also made reference to choppiness in the equity market and rising Treasury yields generating a poor backdrop against which to price junk bonds.

Also, there was news on Thursday that cash flows for the asset class once again turned negative.

All in all, Friday ought to be a quiet day.

Foresight Energy has a deal on deck.

The St. Louis-based coal company upsized its offering of eight-year senior notes (expected ratings Caa1/CCC+) to $600 million from $500 million on Thursday.

Price talk also circulated on the notes, which are expected to come with a 7 7/8% coupon, at a discount, to yield 8%.

Morgan Stanley & Co. LLC, Citigroup Global Markets Inc., Barclays, Deutsche Bank, Goldman Sachs & Co., JPMorgan and UBS are the joint bookrunners.

The company plans to use the proceeds, together with proceeds from a new credit facility and cash on hand, to fund a dividend, refinance its existing credit facility, take out its 2017 notes and repay about $150 million of other secured debt. The additional proceeds resulting from the upsizing of the deal will be used to increase the dividend to $375 million from $275 million.

The market has also been watching a dollar-denominated deal from an Australian corporate.

Orionstone Pty. Ltd., a heavy equipment rental company, has been marketing a $200 million offering of seven-year secured notes (B3/B) via Morgan Stanley.

Timing on the deal is to be determined, a source said.

Beyond Friday, there could be a couple of deals during the week ahead, syndicate bankers said on Thursday.

However, one syndicate source said that a Friday deal announcement is unlikely.

ACI, MPT bonds improve

In the secondary market, two of the day's new deals were seen having firmed from their respective issue prices.

A trader saw ACI Worldwide's 6 3/8% notes due 2020 having firmed to 101¼ bid, 102 offered - up from the par level at which those bonds had priced.

However, he said he saw no dealings in the MPT Operating Partnership 6 3/8% add-on notes.

But at another desk, a trader did see that MPT paper at 102¼ bid, 102¾ offered - up a little from the 102 level at which the bonds had priced earlier.

Traders meantime did not see any initial aftermarket activity in the Shingle Springs 9¾% notes due 2021 owing to the central California-based Native American casino operator's deal having come to market too late in the session.

Wednesday deals ease

Looking at some of the issues that priced on Wednesday, two different traders each saw NuStar Logistics LP's 6¾% notes due 2021 trading at 100½ bid, 101¼ offered.

One of them pegged that down a half point from the 101 bid, 101½ offered level where the notes had traded late Wednesday after the San Antonio-based provider of petroleum terminaling and storage services had priced its $300 million issue of that 7.5-year paper at par.

A trader meantime saw Access Midstream Partners, LP's $400 million add-on to its existing 5 7/8% notes due 2021 at 101¾ bid, 102¼ offered.

That was down from the levels as high as 102¼ bid, 102½ offered at which those bonds had traded Wednesday.

Earlier in Wednesday's session, Access Midstream, an Oklahoma City-based natural gas services provider, and its ACMP Finance Corp. subsidiary had priced its quickly shopped add-on at 101.5 to yield 5.503%.

Penney paper gets Soros boost

Away from the new deals, a trader characterized the market as "a touch weaker, definitely softer."

But JC Penney bonds bucked that trend, rallying during Thursday's trading as investor George Soros reported that he had upped his stake in the company.

A trader said the 6 3/8% notes due 2036 gained 2½ points to close at 683/4. The 7.4% notes due 2031 rose over 1½ points to 681/2, and the 5.65% notes due 2020 rose 1½ points to 741/2. The 6 7/8% notes due 2015 improved almost a point to 903/4.

Another market source deemed the 2020 maturity up almost 4 points at 74¼ bid.

In regulatory filings published late Wednesday, Soros disclosed that his Soros Fund Management had increased its equity stake to nearly 20 million shares, making him the second-largest shareholder behind William Ackman, whose Pershing Square Capital Management LP holds an 18% stake in Penney.

Despite leaving the company's board earlier this week after a raucous dispute over whether he should have made internal board correspondence public, Ackman has said he has no plans to reduce his position.

While Soros was upping his stake, Hotchkis & Wiley and Tiger Global Management said they had liquidated their holdings in the Plano, Texas-based retailer.

Glenview Capital meantime cut its stake to 8.4 million shares from 9.5 million, and Fidelity Management & Research sold half of its holdings. Fidelity now owns about 4.6 million shares.

Market indicators turn south

Statistical junk market performance indicators were lower across the board on Thursday after having been mixed over the previous four consecutive sessions.

The Markit Series 20 CDX North American High Yield index lost ¾ point on Thursday to finish at 104¼ bid, 104 3/8 offered. It had edged up by 1/32 point on Wednesday, its second consecutive small gain.

The KDP High Yield Daily index saw its third straight loss on Thursday, retreating by 11 basis points to conclude at 73.42. It had eased by 1 bp on Wednesday.

Its yield rose 7 bps to 6.19% after having fallen on Wednesday by 1 bp.

The widely followed Merrill Lynch High Yield Master II index dropped by 0.255% on Thursday after having been unchanged on Wednesday.

That loss cut the index's year-to-date return to 2.869%, down from Wednesday's 3.132%. It was the first time that the year-to-date return had fallen below the psychologically significant 3% mark since July 12, when it had ended at 2.74%.

Stephanie N. Rotondo contributed to this review

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