Terex leads busier primary; Cenveo finally prices; Solo Cup up, again; funds gain $978 million

By Paul Deckelman and Paul A. Harris

New York, March 22 - The previously nonchalant high-yield primary arena suddenly got busy on Thursday. Syndicate sources saw five deals totaling nearly $1.9 billion come to market, more than doubling the total new-issue volume of the previous three sessions.

While not the largest, probably the most notable issue was construction and industrial equipment manufacturer Terex Corp.'s $300 million issue of eight-year notes. Those quickly shopped bonds were seen by traders to have firmed smartly when they reached the aftermarket.

The biggest deal of the day, oil and gas operator Cimarex Energy Co.'s upsized $750 million drive-by offering of 10-year notes, came too late in the day for any aftermarket action. Traders heard that there was substantial investor demand for the oversubscribed deal.

Business services provider Alliance Data Systems Corp.'s upsized $500 million forward calendar offering also appeared too late in the session to trade around.

Another late-comer, in more ways than one, was commercial printer Cenveo Corp.'s $225 million deal, which actually concluded its roadshow last week and then just hung around on the forward calendar, leading to some market chatter that it might not even get done. But get done it did - though not before it was halved from its originally announced size and its maturity greatly shortened. The deal priced too late in the session to trade around.

There was also a smallish quick-to-market add-on from Kemet Corp., a maker of materials for electronic components.

And British luxury carmaker Jaguar Land Rover plc drove by with a €500 million eight-year transaction.

Away from the deals that actually priced, talk was out on diversified manufacturer J.B. Poindexter & Co. Inc.'s $200-million 10-year deal, which could come to market after the order books close on Friday morning.

Among the non-new-deal names, there was brisk trading at mostly higher levels in Solo Cup Co.'s bonds, particularly its 2014 notes, as investors continued to react to Wednesday's announcement that the maker of the iconic red plastic party cups and other disposable food containers has agreed to be acquired in a $1 billion deal, including debt assumption.

Traders saw an otherwise lackluster secondary session. Statistical market performance indicators were uniformly down.

But high-yield mutual funds - considered a good proxy for overall junk market liquidity trends - notched yet another in a long string of recent inflows.

AMG posts $978 million inflow

As Thursday's session was coming to a close, market participants familiar with the weekly AMG high-yield mutual fund flow statistics said that in the week ended Wednesday, $978 million more came into those weekly reporting funds than left them.

It was the 12th consecutive gain so far this year, coming on the heels of the $487 million cash injection seen by Arcata, Calif.-based AMG - a unit of Thomson Reuters' Lipper/FMI division - in the week ended March 14.

There have been no outflows so far in 2012, while net inflows have totaled about $15.8 billion, according to a Prospect News analysis of the numbers, up from around $14.8 billion the week before.

It was also the 16th consecutive inflow overall, a streak that dates back to early December. Over that more than three-month stretch, net inflows have totaled $17.9 billion, according to the Prospect News analysis.

EPFR sees $1.4 billion inflow

Another fund-tracking service, Cambridge, Mass.-based EPFR Global, whose methodology differs from AMG, also reported a 16th straight week of inflows.

Some $1.41 billion more came into those funds than left them during the week ended Wednesday.

That followed the $818 million cash addition the previous week.

On a year-to-date basis, with no outflows seen so far in 2012, inflows were north of $25 billion, according to an analysis of the numbers.

EPFR's figures and those of AMG generally point in the same direction, although their actual numbers usually differ since they calculate their respective fund-flow totals very differently. EPFR, for instance, includes results from non-U.S. domiciled funds as well as the domestic funds and counts exchange-traded funds excluded from the more narrowly focused AMG tally.

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

Analysts say the continued flow of fresh cash into junk - and the mutual funds represent but a small, though observable and quantifiable percentage of the total amount of money coming in - fueled the record new-deal borrowing binges seen in both 2009 and then in 2010, as well as the robust secondary market seen both years, and continued to be the driver behind 2011's near-record issuance.

Those fund flows are also seen as the key element behind the high-yield secondary market's fairly strong performance so far this year and relatively active new-deal developments, with volume now running ahead of last year's pace.

Cimarex upsizes

The primary market saw $1.88 billion of dollar-denominated business on Thursday.

Cimarex Energy priced an upsized $750 million issue of 10-year senior notes (Ba1/BB+) at par to yield 5 7/8%.

The yield printed on top of yield talk.

J.P. Morgan Securities LLC, Deutsche Bank Securities Inc. and Wells Fargo Securities LLC were the joint bookrunners for the quick-to-market issue, which was upsized from $650 million.

The Denver-based oil and gas exploration and production company plans to use the proceeds to fund the tender offer for its 7 1/8% notes due 2017 and for general corporate purposes.

Alliance Data prices

Alliance Data Systems priced an upsized $500 million issue of unrated eight-year senior notes at par to yield 6 3/8%, at the tight end of price talk set in the 6½% area.

Bank of America Merrill Lynch, JPMorgan, Barclays Capital Inc., RBC Capital Markets and Wells Fargo were the joint bookrunners for the issue, which was upsized from $350 million.

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

Terex drives by

Terex priced a $300 million issue of eight-year senior notes (B2/BB) at par to yield 6½%, at the wide end of the 6 3/8% to 6½% yield talk.

Credit Suisse Securities (USA) LLC, Goldman Sachs & Co., RBS Securities Inc. and UBS Securities LLC were the joint bookrunners for the quick-to-market deal.

The Westport, Conn.-based diversified manufacturer plans to use the proceeds for general corporate purposes.

Cenveo downsized, restructured

Cenveo priced a downsized, restructured $225 million issue of 11½% senior notes (Caa2/CCC+) at 96.328 to yield 12½%.

The yield printed at the wide end of the revised 12¼% to 12½% price talk, according to a market source. Original talk was 11½% to 11¾%.

The maturity was decreased to five years from eight years. Call protection was decreased to three years from four years.

Bank of America Merrill Lynch, Morgan Stanley & Co. LLC, Macquarie Capital (USA) Inc. and Barclays were the bookrunners for the deal, which was downsized from $450 million.

Concurrently with the notes, Cenveo is offering $75 million of 7% senior exchangeable notes due 2017. That amount will increase to $86.25 million if the initial purchasers' option to purchase additional such notes is exercised in full.

The Stamford, Conn.-based printing company plans to use the proceeds, together with borrowings under its 2010 credit facilities, to tender for its 10½% senior notes due 2016, its 7 7/8% senior subordinated notes due 2013 and its 8 3/8% senior subordinated notes due 2014.

Kemet taps 10½% notes

Kemet priced an upsized $110 million fungible add-on to its 10½% senior notes due May 1, 2018 (B2/B+) at 105.5.

The reoffer price came at the cheap end of the 105.5 to 106 price talk.

The yield to maturity is 9.294%. The yield to worst is 8.864%.

Bank of America Merrill Lynch and Deutsche Bank Securities Inc. were the joint bookrunners for the quick-to-market add-on, which was upsized from $100 million.

The Greenville, S.C.-based capacitor manufacturer plans to use the proceeds to finance a portion of the acquisition of Niotan, to fund the initial payment of $50 million for a joint venture and for general corporate purposes.

The original $230 million issue priced at 98.685 to yield 10¾% in May 2010.

Jaguar prices £500 million

In the sterling-denominated market, Jaguar Land Rover priced a £500 million issue of 8¼% eight-year senior notes (B1/B+/BB-) at 99.289 to yield 8 3/8%.

The yield printed at the wide end of the 8¼% to 8½% yield talk.

Citigroup and Credit Suisse were the joint physical bookrunners. JPMorgan, Morgan Stanley and Standard Chartered Bank were the joint passive bookrunners.

The Graydon, England-based automobile manufacturer, a wholly owned subsidiary of India's Tata, plans to use the proceeds for general corporate purposes.

J.B. Poindexter sets talk

J.B. Poindexter talked its $200 million offering of 10-year senior notes (B2/B) with a yield in the 9% area.

The deal is set to price on Friday afternoon.

JPMorgan has the books.

Terex trades up

A trader said that "the only new deal I've seen today swinging around out there" in the secondary market was Terex's quickly shopped $300 million offering of eight-year notes.

"The only real action was in Terex," he said. "It pretty much traded up to 101 and then hung out there."

"Terex traded well," a second trader said, pegging the construction and industrial machinery manufacturer's new issue at 101¼ bid, with "a good number of bonds trading right in that area."

"That Traced right away," yet another trader noted. "There was a lot of trading in that one." He saw the bonds in that same 101-to-101¼ bid context that everyone else did.

Non-Terex issues little seen

Terex seemed to be the only game in town, at least among the day's new issues, although one of the traders said he heard that "there was big demand" for Cimarex Energy's upsized $750 million deal, suggesting that the exploration and production company's issue may have been at least two times oversubscribed for, or even more, and noting that those soundings came earlier in the day.

But the bonds actually priced too late for any aftermarket activity.

That was the same story with the Alliance Data Systems and Cenveo deal.

The trader said that Cenveo's existing bonds, like its 7 7/8% notes due 2020, "didn't trade much today, but they're still well below the tender price" that the commercial printing company is offering for its bonds.

He also pointed out that the company announced Wednesday night that it was drastically capping the amount of those notes that it will purchase under its pending tender offer. It will now buy a maximum of $45 million of the bonds, versus the $271 million of outstanding notes that it originally announced that it was buying.

"They were really bad early in the day, but then they came back a little bit," the trader said.

However, the bonds still went home being quoted at 92 bid, down 1 point on the day - and well under the total purchase price of $1,002.50 per $1,000 principal amount of old bonds offered in the tender offer.

A trader said that Kemet's outstanding 10½% notes due 2018 notes were trading up around 108-109, "so I'm sure the add-on did fine" after that $110 million tranche priced at 105.5, "but I don't think it's really going to show up much, out there by itself."

Rexel issue rallies

Among Wednesday's bonds, a trader said that Rexel SA's new 6 1/8% notes due 2019 "traded well" on Thursday, going up to 101 to 101¼ bid, after the French electrical equipment manufacturer's $400 million offering began trading around.

The issue - upsized from an originally planned $300 million - priced at par on Wednesday, but the bonds weren't seen immediately trading around during that session.

On Thursday, the trader that "there was a lot more activity in that one in the morning, which is not surprising because when Europe went home," about four hours ahead of the close of the U.S. debt markets, "things kind of quieted down."

Among some of the other bonds that came to market earlier in the week, traders did not see very much going on with the new Nord Anglia Education Holdings plc bonds that also priced out of Europe on Wednesday. The British international education services provider's $325 million of 10¼% senior secured notes due 2017 came to market at par but then disappeared off the radar screens.

One of the traders said that on Thursday, he heard the bonds "did well" at 101½ bid, 102½ offered, but he cautioned that he "never actually saw anything in the U.S. markets."

Two other traders had seen no trace of the Nord Anglia bonds, either on Wednesday after they priced or on Thursday.

Tuesday's $440 million issue of 9% notes due 2020 from United Surgical Partners International, Inc. continued to hold the solid gains that the Dallas-based surgical facilities operator's deal had notched almost as soon as it moved into the aftermarket that session, up from its par issue price.

"We were going out basically 102 5/8, 103 1/8 on that one, so that one continues to trade well," a trader said.

"The overall market was a little softer today, but that one continues to trade at its highs."

Another trader saw the bonds at 102 1/8 bid, 103 1/8 offered but added that "I haven't seen much at all cooking in it."

Solo surge continues

Away from the new deals, traders saw a generally lackluster day in the secondary realm, with one proclaiming that "nothing was jumping out."

However, investors were toasting Wednesday's news that Solo Cup will be acquired by Dart Container Corp., maybe even drinking their champagne out of Solo's ubiquitous red plastic 16-ounce cups, which have become an iconic part of the American party scene over the last few decades.

A market source quoted the 8½% notes due 2014 of the Lake Forest, Ill.-based maker of disposable plastic and paper cups, plates and utensils at 100 7/8 bid, up about seven-eighths of a point on the session.

Almost $40 million of those bonds had changed hands by mid-afternoon, making the issue one of the most actively traded Junkbondland credits of the day.

Another trader quoted those bonds at 100¾ bid, 101 3/8 offered.

"I assume there's a change-of-control [put] at 101, so I assume that's what people are looking for," he declared.

He said the company's other bonds, the 10½% notes due 2013, "were probably in the same area, maybe a little higher, because of the higher coupon." However, he said that he was "not sure if people are going to want to do that one or not" as a change of control.

Yet another trader quoted the 8½% notes at 101 and the 10½% notes at 102, both up a point, although there was considerably less trading in the latter bond - maybe volume of around $5 million at midday.

Solo is to be acquired by industry peer Dart Container of Mason, Mich., in a deal that is expected to close during the third quarter. Dart will pay $315 million for Solo and assume nearly $700 million of Solo debt as part of the $1 billion deal, including the $300 million of 10½% notes and $325 million of 8½% paper.

Market indicators turn lower

Statistical measures of junk market performance turned lower on Thursday after having been mixed on Wednesday.

A market source said that the CDX North American Series 17 High Yield index was down 15/16th point on Thursday, ending at 98 bid, 98¼ offered, after having been about unchanged on Wednesday.

The KDP High Yield Daily index meantime eased for a fifth straight session on Thursday, easing by 2 basis points to end at 74.04 after having backtracked by 3 bps on Wednesday. Its yield rose by 1 bp for a second consecutive session, going out at 6.57%.

And the widely followed Merrill Lynch High Yield Master II index was off by 0.109% on Thursday after having been up by 0.08% on Wednesday.

The loss left the index's year-to-date return at 5.043%, down from Wednesday's 5.158% reading and down further from its peak level for 2012 of 5.361%, which was recorded on March 2.

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