Upsized Smithfield, MedImpact add-on cap $5.3 billion week, Smithfield up; Charter active

By Paul Deckelman and Paul A. Harris

New York, July 19 - Smithfield Foods, Inc. came to market on Friday with an upsized $900 million two-part offering, consisting of five-year and eight-year notes. Both tranches of the new bonds were seen trading higher in the aftermarket.

The session also saw MedImpact Holdings, Inc., a pharmacy benefits management company, doing a $160 million add-on to its existing 2018 secured notes.

Those deals closed out a week in which some $5.3 billion of new dollar-denominated and fully junk-rated paper from domestic or industrialized-country borrowers came to market in 16 tranches, according to data compiled by Prospect News. That was well up from the roughly $1.6 billion eight tranches that had priced during the previous week ended on Friday, July 12 - one of the slowest weeks of the year so far.

On a year-to-date basis, the week's deals lifted 2013's issuance to some $179.1 billion in 406 tranches, according to the data, running 17.7% ahead of the new issue pace seen at this time last year, when Junkbondland was on its way to record issuance of over $350 billion.

Traders meantime saw continued aftermarket strength in new deals that came to market earlier in the week from issuers including Nova Chemicals Corp., Harbinger Group, Inc. and Schaeffler AG.

In the non-new-deal secondary market, Charter Communications Inc.'s bonds were seen lower in active trading, as investors mulled over news reports that had the cable operator considering the potential acquisition of larger sector peer Time Warner Cable Inc. - a scenario being driven by telecommunications tycoon John Malone, who owns 27% of Charter and hopes to use it as a vehicle for consolidating the cable industry.

Statistical indicators of junk market performance were higher across the board for both a third straight session and a second consecutive week.

MedImpact's add-on

MedImpact Holdings priced a $160 million tack-on to its 10½% senior secured notes due Feb. 1, 2018 (Caa2/B-) at 105 on Friday, according to an informed source.

The yield to worst is 8.809%.

Credit Suisse Securities (USA) LLC was the sole bookrunner.

The San Diego-based full-service pharmacy benefit management company plans to use the proceeds to fund the acquisition of Medical Security Card Co., LLC, which does business as ScriptSave.

Smithfield leads the way

In the secondary arena, a trader observed that "the market had a very firm tone, highlighted by today's two-part deal from Smithfield Foods."

He saw the Smithfield, Va.-based hog producer and pork processor's 5¼% notes due 2018 at 101¾ bid, up from their par issue price.

He also saw the company's 5 7/8% notes due 2021 trading around that same 101¾ bid level.

Smithfield's existing 6 5/8% notes due 2022 were seen by a market source up 1 point on the session, finishing at 1081/2, on volume of over $4 million.

That's about where those bonds had begun the week - only to slide down to 105 bid around mid-week on initial investor dismay over the prospect that the company would be doing a big offering of new debt to help pay for its expected acquisition by Shaunghui International.

Recent deals doing well

Looking at some of the other new issues that came to market during the week, a trader observed that "everything that came was very firm."

For instance, he said that Chemtura Corp.'s 5¾% notes due 2021were trading around a 100¾ bid level on Friday.

A trader at another desk meantime quoted that deal as trading in a 100 3/8 to 100¾ bid context.

The Middlebury, Conn.-based chemical manufacturer's quickly shopped $450 million issue had priced late Thursday at par after having been upsized from an originally announced $400 million. Those bonds appeared too late in Thursday's session for any kind of an aftermarket and began trading around on Friday.

In that same sector, the first trader noted that Nova Chemicals' 5¼% notes due 2023 "did very well. That blew out."

The Calgary, Alta-based manufacturer's $500 million drive-by deal had priced on Tuesday at par and quickly moved up to around a 101½ to 102 bid context. The bonds continued to trade at those firmer levels for the rest of the week.

A second trader pegged them at 101½ bid, 101 7/8 offered on Friday, which he called unchanged on the session.

That trader also saw Harbinger Group's 7 1/8% senior secured notes due 2019 up ½ point on the session, at 103 bid, 104 offered.

The New York-based diversified holding company priced a quick-to-market $225 million of those bonds on Thursday after having upsized the deal from an originally announced $150 million. The bonds priced at 101½ to yield 7.474% and had quickly zoomed to around 102½ bid, 103 offered when they hit the aftermarket late in the day on Thursday.

Another winner on the day among the recent deals was Chassix, Inc.'s 9¼% senior secured notes due 2018, which a trader saw on Friday at 103½ bid, 104½ offered, up 1 point on the day.

The Southfield, Mich.-based automotive components manufacturer came to market on Wednesday with its $350 million offering, upsized from an initial $325 million, and after pricing at par, that paper had firmed smartly in the aftermarket to around 102½ bid, 103½ offered.

One of the few recent deals to actually lose a little bit of ground in Friday's otherwise strongly positive session was Schaeffler's dollar-denominated 6 7/8% senior secured PIK notes due 2018.

The German automotive and industrial ball-bearing manufacturer had priced $1 billion of those notes on Thursday, along with an €800 million tranche of similar euro-denominated bonds, via its Schaeffler Finance Holding BV subsidiary. The dollar bonds had priced at 99.468 to yield 7% and had moved up to 102½ bid, 103½ offered, a trader said. On Friday, though, he pegged those notes down from that peak level, at 101¾ bid, 102¼ offered.

Overall firm tone

A trader said that generally, "the market had a good overall tone throughout the day, even though it was pretty quiet."

He opined that "there seems to be some value back in the marketplace that people are looking at."

"Everybody had a constructive feeling about the marketplace today," he commented.

Charter seen lower

However Charter Communications' bonds were lower on Friday, as investors mulled over news reports indicating that the company may attempt to acquire considerably larger sector peer Time Warner Cable. The reports indicated that billionaire media and telecommunications tycoon John C. Malone - who recently bought a 27% stake in Stamford, Conn.-based cable operator Charter - is the driving force behind the idea.

A market source said that Charter's CCO Holding LLC's 5¼% notes due 2022 finished the session down 13/16, at 96¾ bid, on volume of over $11 million.

Its 5 1/8% notes due 2023 were down a deuce, at 94½ bid, though on lighter volume of around $4 million.

Charter's Nasdaq-traded shares were up by $3.74, or an even 3%, closing at $128.31. Volume of 2 million shares was about twice the norm.

Bloomberg News reported that Malone is looking to re-enter the cable business after having profitably sold his Tele-Communications Inc. some years ago and, after moving into programming and other aspects of the industry, was eyeing Charter as potentially "a horizontal acquisition machine." Bloomberg News also said that Malone's holding company, Liberty Media Corp., is considering a range of options for financing a possible Time Warner merger and that Charter is working with heavyweight investment bank Goldman Sachs Group Inc. on a possible bid.

Time Warner Cable, whose estimated $33 billion market capitalization dwarfs Charter's roughly $12 billion, reportedly rebuffed informal overtures from Charter and Malone earlier in the year.

Market indicators up - again

Statistical junk market performance indicators were higher for a third straight session on Friday and were up across the board versus the previous week as well for a second consecutive time.

The Markit Series 20 CDX North American High Yield index rose by 9/32 point to end Friday at 106 5/16 bid, 106½ offered. It was the index's third straight gain, having risen by 7/32 point on Thursday.

The index was up for the week, versus the 105¼ bid, 105 3/8 finish seen at the close the previous Friday, July 12.

The KDP High Yield Daily index gained 13 basis points on Friday to go out at 74.48, its ninth consecutive rise, on the heels of Thursday's 21 bps advance.

Its yield meantime came in by 5 bps, to 5.79%, also its ninth straight narrowing. On Thursday, it had closed 9 bps lower.

Those results stacked up favorably against the previous Friday's 73.68 index reading and 6.01% yield.

And the widely followed Merrill Lynch High Yield Master II index saw its ninth straight gain on Friday, as it rose by 0.159%. That followed Thursday's 0.342% advance.

The latest gain raised the index's year-to-date return to 4.057% from 3.892% on Thursday - the year-to-date return's first time above the psychologically significant 4% mark since May 31, when it stood at 4.249%.

On the week, the index gained 1.281% - its second consecutive weekly gain after eight straight weeks on the downside, dating back to the week ended May 17. It was also the biggest single-week gain for the year and one of the largest such advances ever, eclipsing the 1.281% weekly rise recorded the previous week ended July 12.

Last week, the index had ended on Friday with a 2.74% year-to-date return.

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