Downsized Media General prices; market retreats as stocks gyrate but new deals mostly hang in

By Paul Deckelman and Paul A. Harris

New York, Feb. 5 - Media General Inc. priced a downsized offering of seven-year senior secured notes on Friday, bringing to a close a busy week in the high yield primary market which saw over $4 billion of new paper priced, including deals from other media companies such as McClatchy Co. and Reader's Digest Association Inc., as well as energy credits like Denbury Resources Inc., Crosstex Energy, LP/Crosstex Energy Finance Corp., and HilCorp Energy I, LP/Hilcorp Finance Corp.

Media General's offering came to market too late in the session for aftermarket dealings in the Richmond, Va.-based newspaper and broadcasting company's new bonds. Traders meantime saw the recently priced paper from Denbury, McClatchy and most of the week's other new deals a little softer on the day, in line with a generally easier junk market, but still holding onto most of the gains which those issues had notched in initial secondary trading. However, Hilcorp's new 10-year notes continued to trade well under the levels at which they priced on Wednesday.

Away from the new deals, traders saw things in Junkbondland mostly on the downside, in line with stock prices, which were lower for most of the session - sometimes sharply lower, with the benchmark Dow Jones Industrial Average in a 170-point hole at one point - before turning back upward in a frantic last-hour rally that left them slightly higher on the day, though still lower for a fourth straight week.

Junk did not stage a similar late session rally, traders said, although the larger early losses which some issues showed did moderate. They said overall, the market closed out the day and the week with most issues anywhere from ¼ to ¾ point lower. Major statistical indexes of junk market performance also finished the day in negative territory.

While most issues ended modestly lower, a notable loser down multiple points was Harry & David Holdings Inc. after the Medford, Ore.-based specialty retailer best known for its mail-order gift baskets released quarterly results - even though, one trader said, "we didn't think the numbers were that bad."

Against the backdrop of mostly lower prices, market participants heard some positive news - that weekly-reporting high yield mutual funds showed a $42 million inflow in the week ended Wednesday, according to AMG Data Services, bouncing back from the prior week's $75 million outflow. The numbers - considered a key barometer of overall junk market liquidity trends - usually circulate around the market late in the day on Thursdays, but were delayed this week.

Media General downsizes

In Friday's sole deal, Media General, Inc. priced a downsized $300 million issue of 11¾% seven-year senior secured notes (B2/B) at 97.69 to yield 12¼%.

The deal was reduced from $350 million.

The yield printed 1½ points beyond the wide end of the 10½% to 10¾% price talk. The reoffer price was cheap to discount talk of about 2 points.

Bank of America Merrill Lynch and SunTrust Robinson Humphrey Inc. were joint bookrunners.

Proceeds will be used to repay bank debt.

The Media General deal took the week's dollar-denominated high-yield issuance to $4.98 billion of proceeds,

Meanwhile, Songa Offshore SE, a Cyprus-based drilling services company, moved its $200 million offering of seven-year senior notes (Caa1/B+) into the week ahead.

It had previously been expected to price Friday.

The deal, via Citigroup, is talked at the 10¼% area.

The week ahead

Deals slated for the week ahead include:

• NFR Energy LLC and NFR Energy Finance Corp.'s $250 million offering of seven-year senior unsecured notes, via left bookrunner UBS, along with joint bookrunners Bank of America Merrill Lynch, J.P. Morgan and BNP Paribas;

• ITC DeltaCom Inc.'s $325 million of six-year first-lien senior secured notes, via Credit Suisse and Jefferies;

• Serverstal Columbus, LLC's $250 million of eight-year first-priority senior secured notes, via Credit Suisse and Citigroup;

• Community Education Centers, Inc.'s $210 million offering of six-year senior secured notes, out of Jefferies;

• Kemet Corp.'s $275 million offering of eight-year senior notes, via Bank of America Merrill Lynch;

• Cable International Finance Ltd. (Cable and Wireless plc)'s planned $500 million of seven-year senior secured notes (Ba2/BB)--a deal being run by Barclays Capital, BNP Paribas, JPMorgan and RBS;

• New World Resources NV's €700 million equivalent of eight-year senior secured notes due 2018, in dollars and euros, being led by left bookrunner Goldman Sachs, along with joint bookrunners JP Morgan and Morgan Stanley;

• Stallion Oilfield Holdings, Inc.'s $225 million of five-year first-lien senior secured notes, via Credit Suisse, Bank of America Merrill Lynch and Jefferies;

• Hudson Products Holdings Inc.'s $250 million of six-year senior secured second-lien notes, via bookrunner UBS; and

• Interxion Holdings' €200 million offering of seven-year senior secured fixed-rate notes (/B-/) - a deal being led by Citigroup, Bank of America Merrill Lynch, Credit Suisse and Barclays.

New deals mostly holding their own

A trader said that Denbury Resources' new 8¼% senior subordinated notes due 2020 were going home at 101½ bid, 102 offered.

'So it's off a little from its highs - but it's still hanging in there." The Plano, Tex.-based energy exploration and production operator priced $1 billion of the notes on Wednesday at par, with the mega-deal eventually moving as high as 102¾ bid, 103¼ offered before coming off that peak to settle in, still well above its issue price.

"I think everybody got in on that one," he said.

Another trader quoted the bonds at 101 5/8 bid, 102 offered, noting that "relatively speaking, they held up pretty well."

The first trader also saw McClatchy Co.'s 11½% senior secured notes due 2017 on Friday at 983/4, looking for an offer, and then at 99 with no trades. The Sacramento, Calif.-based newspaper publisher had priced $875 million of the bonds on Thursday at 98.824 to yield 113/4, and they had traded as high as par bid later that session, before coming in to about a 99¼ bid, 99½ offered level.

"So all of these new issues have kind of stayed in there," he opined, trading not too far below the highs they had hit in initial aftermarket action. "I think people didn't get all of their allocations and they're taking advantage of a market dip down and adding."

The exception to the rule, he said, was Hilcorp Energy's 8% notes due 2020, $300 million of which had priced on Wednesday at 98.315 to yield 8¼% - and then proceeded to drop to bid levels around 96½ in initial aftermarket dealings, and stay down there. Not surprisingly, he said that he "didn't have that many [accounts] playing in that deal."

But Houston-based oil and gas exploration and production operator Hilcorp's issue aside, "with everything trading off like it did today, and you would think the market would be a little heavier on our side, on a lack of volume, I think these new issues held in there pretty well."

Market indicators in retreat

Affecting established bonds, a trader said that "equities was a wild world - I think it dragged some [junk] stuff down." He said that "with stocks being down most of the day, and ending up positive - and they came back a lot - I'm sure there was a lot of activity in all of the high yield indexes. But most of our things were weaker on the day."

A trader saw the CDX Series 13 index fall ¾ point on Friday to 95 7/8 bid, 96 3/8 offered, after dropping more than a full point on Thursday - although he said that the index "rallied back" a little to cut its losses somewhat after having been down a full point or more earlier. The index - which earlier in the week had managed to push as high as 97 5/8 bid, 97 7/8 offered, before surrendering all of those gains in Thursday's slide - thus ends the week below the 96¾ bid, 97 level at which it had closed out the previous week on Friday, Jan. 29.

The KDP High Yield Daily Index meanwhile nosedived by 43 basis points on Friday to end at 70.30, this after having fallen an additional 34 bps on Thursday. Its yield gapped out by 10 bps to 8.42%, after having ballooned out by 11 bps the session before. The index thus ends the week well below the previous Friday's 71.02, while its yield was substantially wider than the prior week's 8.23% closing yield.

Advancing issues remained behind decliners Friday for a second straight session, by around an eight-to-five margin.

Overall market activity, as measured by dollar-volume levels, rose about 7% from Thursday's pace.

"The equity market took it right on the big old chin today," a trader said, although he also noted that "it came back and rallied really nicely at the end of the day." The bellwether Dow Jones Industrial Average - down by as much as 170 points at mid-afternoon - put on a last-hour full-court press to actually end up by 10.05 points, or 0.10%, closing at 10,012.23. Broader stock indexes mirrored that late surge into barely positive territory.

But by that time, he said, junk activity had trailed off with the market unable to follow the equity lead upward.

'I personally saw the market selling off - but not selling off in high volume," the trader said. "I saw it just do dribs and drabs for a Friday afternoon. I guess people were bailing [out early] because of first, the Super Bowl," with many people wanting to head home to make their Sunday TV party preparations, "and second, because of the storm in the Northeast," which was supposed to hit New York and other business centers by Friday night.

Scenes from a marketplace

He saw Ford Motor Co.'s 7.80% notes due 2012 trading in a 991/2-99¾ context, "so that's in some" from recent levels. At the end of Thursday's dealings, he said, the bonds had been offered at 1001/4, dipping below par in the early going Friday, "so that's come in. A lot of the short end started selling off a little bit.

"I definitely felt that the [junk market] tone was off by ¼ to ½ [point], but on light volume."

Another trader characterized Friday's session as "a sloppy market. The caution flag is up - I saw selling come into the market for the first time in quite a while."

He said that overall, he said that bonds were down about ½ point across the board, "at a minimum.

"Some bonds traded lower than I thought they would because some people wanted out, but for the first time, I've seen some nervous selling come into the marketplace.

The trader saw one of the junk market's benchmark issues - Community Health Systems Inc.'s $3 billion issue of 8 7/8% notes due 2015 - losing multiple points on Friday. He said that the Franklin, Tenn.-based hospital operator's big, liquid deal had recently been trading around 103 - but on Friday, it dropped as low as 100½ bid, "in the morning, when the market was getting cratered," before bouncing off that low to be quoted going out at 101 5/8.

He said that one sign of the unusual market conditions was that "bonds that you normally couldn't buy - you could buy. I was able to buy stuff, bonds that I hadn't seen for months, at levels that I couldn't believe I got hit."

For instance, he said, "two days ago, you couldn't buy" Bausch & Lomb Inc.'s 9 7/8% notes due 2015 at 1051/4. On Friday, he said, those bonds had come down and were trading at 103 5/8-1033/4, "for a good credit."

Cooper-Standard holds gains

A trader said that there was "a lot of activity" in Cooper-Standard Automotive Inc.'s 8 3/8% notes due 2014, though not a lot of bond-price movement. He saw the bonds around 451/2-46 - "about unchanged" from the levels to which the Novi, Mich.-based automotive components company's paper had moved on Thursday in a 5-point follow up to the 10-point gain earlier in the week, which followed the formal filing of Cooper's reorganization plan with the U.S. Bankruptcy Court in Wilmington, Del., which is overseeing its restructuring under Chapter 11. That plan would give the company's bondholders at least 25% of the restructured company's equity, with the option of buying another 50% on top of that.

Despite the lack of price movement, "there was some activity, though," he said.

The trader said that Cooper's 7% notes due 2012, which had pushed as high as 120 bid earlier in the week before coming in to around the 115 level on Thursday, "are still up there though," not too far from the latter level. He pegged them at 114, down a point from Thursday, though on "not much activity - only one or two trades."

Also in the automotive parking lot, a trader saw General Motors Corp.'s 8 3/8% bonds due 2033 finishing around a 271/2-28 context on "not much activity" - he saw the Detroit auto giant's benchmark bonds not much changed from where they had been on Thursday.

He saw GM domestic arch-rival Ford Motor Co.'s 7.45% bonds due 2031 generating "a lot of activity" in the 86-87 range, which he called down about ½ point on the day. "They had a lot of trading."

A market source at another shop saw the saw nearly $15 million of the Ford long bonds having changed hands around mid-afternoon, with more likely to have traded later, and quoted them at 86½ bid.

Another trader said the Ford bonds had lost a point on the day to end at 85½ bid, 86½ offered, while seeing the GM 2033s at 27½ bid, 28¼ offered, down a point on the day.

NewPage knocked lower

Elsewhere, a trader said that NewPage Corp.'s 10% notes due 2012 "were drifting lower," although he said that there was "not a lot of trading."

He quoted the bonds going out at 62-63, which he said was "down a lot, down 4 points" from Thursday's level.

He did not see any news out on the Miamisburg, Ohio-based coated-paper manufacturer that might explain the decline.

Plane maker loses altitude

A trader said that Wichita, Kan.-based aircraft manufacturer Hawker Beechcraft Acquisition Co. LLC's 8½% notes due 2015 were hovering in the lower 60s, around 63-64, though on "not much activity."

But a market source at another desk who saw the bonds at 63 said they were off about 4 points from prior levels.

The first trader saw the company's other issues - its 9¾% notes due 2017 and 8 7/8% notes due 2015 - each down about a point on the day, at 53 bid and 54½ bid, respectively.

Harry & David takes a tumble

Amid all of the issues down by ¼ point, ½ point or ¾ point, Harry & David Operations' 9% notes due 2013 stood out. A trader saw them as having slid all the way down to 58 1/8 bid from closing levels around 69-70 - this he said, even though the Medford, Ore.-based specialty retailer, famed for its gift baskets of delicacies, had put out quarterly results and "we didn't think the numbers were that bad. Then there was a conference call, and that went pretty well.

"Today, post-earnings - and decent earnings - the bonds were trading at 58. Now that's a hell of a big drop." 'He cited this as an example of a new wave of caution sweeping the junk market and pushing many bond prices lower.

Funds see $42 million gain

Against the backdrop of mostly lower prices, market participants heard some positive news - that weekly-reporting high yield mutual funds showed a $42 million inflow in the week ended Wednesday, according to AMG Data Services, bouncing back from the prior week's $75 million outflow. The numbers - considered a key barometer of overall junk market liquidity trends - usually circulate around the market late in the day on Thursdays, but were delayed this week.

The inflow is the fourth in the five weeks since the year began, against the one outflow, seen the previous week. According to a Prospect News analysis, it boosted the year-to-date inflow among the weekly reporters to $1.543 billion from the prior week's $1.501 billion level.

The positive fund-flow trends seen so far this year - even acknowledging last week's cash exodus - have been seen by market-watchers as a key factor in the continued relative strength of both the junk primary and secondary markets so far this year, looking to extend the stunning new-issuance totals and secondary returns seen in 2009 - a record $160.028 million of new paper issued, and a 57.512% secondary advance, also a record, as high yield handily beat virtually every other major investment asset class, fueled by ample liquidity.

However, the notable market downturn the final two days of this week is likely to have sparked fund redemptions, which could show up in the upcoming week's numbers as negatives - a proxy for overall reductions in market liquidity.

© 2015 Prospect News.
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