ACCO Brands, MBI deals slate, though no junk prices; ResCap bonds gain after missed payment

By Paul Deckelman and Paul A. Harris

New York, April 17 - The high-yield primary market's drought extended into its third consecutive day on Tuesday, when no new issues were heard to have priced in the domestic market.

Two other deals emerged, with roadshows to market them to prospective investors slated to begin on Wednesday: a $500 million offering of eight-year notes from Monaco SpinCo. Inc., a unit of office products company MeadWestvaco Corp., in support of the latter's pending acquisition by industry peer ACCO Brands Corp. and a $250 million offering of eight-year seniors from MBI Energy Services Inc., which provides various oilfield services to the energy industry. Both deals are expected to price next week.

Apart from that, things were deadly dull in the new-deal arena, which has seen exactly one deal price since Friday, a $100 million add-on from electrical products manufacturer Rexel SA that priced on Monday. There was a little bit of trading activity in that deal, as well as in several offerings that came to market last week, including Intelsat Jackson Holdings, SA, Freedom Group Inc. and Constellation Brands, Inc.

But traders said that aftermarket action in those credits was restrained.

The focus seemed to shift to the non-new deal market, which was up by around a half-point across the board.

There was fairly brisk trading in Residential Capital LLC's bonds after the mortgage lender chose to skip a scheduled debt payment. The bonds were quoted trading flat, or without their accrued interest, at higher levels.

MBI starts Wednesday

MBI Energy will begin a roadshow on Wednesday for its $250 million offering of eight-year senior notes (expected ratings Caa1/B).

The deal is set to price during the middle part of the April 23 week.

RBC is the left bookrunner. Wells Fargo is the joint bookrunner.

Proceeds will be used to repay debt and for general corporate purposes.

ACCO brings $500 million

ACCO Brands will begin a roadshow on Wednesday in Baltimore and New Jersey for its $500 million offering of eight-year senior notes (expected ratings B2/B).

The deal is set to price early in the April 23 week, following the conclusion of the roadshow.

Barclays is the left lead bookrunner. Bank of America Merrill Lynch, BMO and SunTrust are the joint bookrunners.

Rexel deal moves up

With no new deals having priced on Tuesday, traders saw some aftermarket action among several recent issues, all of which were trading above their respective issue prices.

For instance, a trader said that Rexel SA's 6 1/8% notes due 2019 were trading in a 101-to-102 bid context early in the day, although he did not see the bonds after that.

On Monday, the French maker of electrical products priced a quickly shopped $100 million add-on offering to those bonds at 100.75 to yield 5.96%. Rexel had priced the original $400 million of those bonds at par on March 21.

Recent deals seen improved

Going back to last week's issues, a trader saw Intelsat Jackson Holdings' 7¼% notes due 2020 trading at 102¾ bid, 103 offered.

That was up from Monday's levels between 101 7/8 and 102 3/8, and up as well from 101.75, where the Pembroke, Bermuda-based satellite communications company priced $1.2 billion of those bonds on Thursday to yield 6.909%.

Intelsat's quick-to-market offering, enlarged from the originally announced $800 million size, was structured as an add-on to the original $1 billion issue of the bonds that priced at par in September of 2010.

A trader said that Freedom Group's 7 7/8% senior secured notes due 2020 were trading at 102 1/8 bid, 102½ offered on Tuesday.

The Madison, N.C.-based firearms and ammunition producer's $250 million deal had priced at par on Thursday and then proceeded to move up.

After pricing at par, the bonds had shot up to quoted levels as high as 1021/2-1031/2, before coming down from those peaks on Friday to trade around the 102 bid level, where they seem to have stabilized.

Constellation still stars

A trader said that Constellation Brands'6% notes due 2022 "moved up nicely," trading Tuesday in round lots between 104 and 104½ bid.

The Victor, N.Y.-based wine and spirits manufacturer and importer priced its $600 million drive-by deal - upsized from the originally shopped $400 million - last Tuesday at par.

The new bonds began to rapidly move up that same session, breaking at 101-102 and moving up to 101 3/8 bid, 101 7/8 offered in initial aftermarket trading and then continuing to rise gradually on a session-by-session basis for the next week until reaching Tuesday's levels.

Elsewhere among the recently priced deals, the trader said, "I never saw that Audatex," referring to the Solera Holdings, Inc. 6¾% notes due 2018, which priced last Tuesday via the Dallas-based auto insurance industry software provider's Audatex North America Inc. subsidiary.

That quickly shopped deal - upsized to $400 million from the originally announced $250 million - was structured as an add-on to the company's original $450 million of those bonds, which came to market at par in June of 2011.

Last Tuesday's add-on priced at 102.72 to yield 6%, moved up to 103½ bid, 104 offered last Wednesday and then disappeared from the market, "probably all put away," the trader said.

And the trader saw El Paso Energy Corp. two-part deal continuing to hold the gains it has notched since pricing last Tuesday.

He quoted the Houston-based exploration and production company's $750 million of 6 7/8% senior secured notes due 2019 at 102½ bid, 103½ offered, while its $2 billion of 9 3/8% senior unsecured notes due 2020 were at 101 7/8 bid, 102 7/8 offered.

Both the secured bonds - upsized from $500 million originally - and the unsecured paper, downsized from an original $2.5 billion, priced last Tuesday at par and then proceeded to move up.

Firmer junk market tone

Away from the new deals, secondary market traders saw another slow and sleepy day. One called it "boring," albeit a day with a firmer tone, as Junkbondland seemed to take its cue from equities, which had their best session in a month as major companies such as Coca-Cola Co., Goldman Sachs Group, Inc. and Johnson & Johnson all had earnings that beat market expectations.

Stocks also benefitted from an easing of investor fears over the European debt situation.

Among the junk names, most were seen up by a quarter-point to a half-point pretty much across the board.

A trader said that the really high-beta names were in most cases up by around 1 point or more.

ResCap misses coupon

Among specific names, Residential Capital LLC missed a $20 million interest payment on its 6½% notes due 2013 on Tuesday, giving rise to chatter that the company could soon be filing for bankruptcy.

However, despite the missed coupon, ResCap bonds were gaining on the day.

One trader called the Minneapolis-based residential lender's 9 5/8% notes due 2015 up 5½ points at 901/2.

Another market source saw the issue opening around 86 and trading with an 86-handle for most of the day. There were a few trades with a 90 handle, including the last of the day, according to the source. Still, the debt was deemed up only a point or so.

Ally Financial - the Detroit-based mortgage and automotive lender formerly known as GMAC and money-losing ResCap's corporate parent - made the announcement regarding the missed payment on Tuesday. Though technically a default has not yet occurred, the skipped coupon could be yet another sign that Ally is lining ResCap up for Chapter 11.

Last week, Ally gave ResCap an extension on $2.1 billion in secured financing until May 14. The shorter-than-usual extension also indicated that perhaps a filing could come within the next few weeks.

"It could end up being very good news for Ally," a preferred stock market source said of the missed payment. "If they pay [within the 30-day grace period], everybody is all fine and dandy at least from a legal standpoint."

However, if the payment goes unpaid, thus triggering a default, it will then have to be decided if ResCap is separate enough from its parent that Ally itself can avoid falling into bankruptcy.

The source said that creditors will probably attempt to go after the "deeper pockets" of the parent company, but noted that, unlike the Bank of America Corp.-Countrywide Financial Corp. debacle, there is a "reasonable argument" that "ResCap is much more on an arm's length basis."

As previously reported, Ally has been struggling to figure out what to do with ResCap for some time.

In recent months, talk of a bankruptcy has escalated, though other options - such as selling the unit whole or in pieces - have also gained traction.

Fortress Investment Group has been touted as the most likely buyer, and the deal has been valued at over $1 billion.

Market measures move up

Statistical measures of junk market performance, meanwhile, were higher across the board on Tuesday after having been little changed on Monday.

A trader saw the Markit Group CDX North American Series 18 High Yield Index gain a half-point to end at 95¼ bid, 95½ offered Tuesday, after having been unchanged Monday.

The KDP High Yield Daily Index gained 13 basis points on Tuesday to close at 73.56, after having eased by 2 bps Monday. Its yield came in by 5 bps to 6.71%, after having been unchanged Monday.

And the widely followed Merrill Lynch High Yield Master II Index made it four sessions in a row on the upside on Tuesday, rising 0.175%, on top of Monday's 0.059% gain.

That lifted the index's year-to-date return to 5.188% from Monday's 5.004%, although it remains below its peak 2012 level of 5.361%, recorded on March 2.

Stephanie N. Rotondo contributed to this report

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