Georgia Gulf deals lead $1.5 billion day, rise; recent deals steady; funds gain $571 million

By Paul Deckelman and Paul A. Harris

New York, Jan. 17 - The high-yield primary market slacked off a little Thursday from the red-hot pace seen on Wednesday, which was the busiest new-issue session so far this year.

Even so, more than $1.5 billion of dollar-denominated, purely junk-rated new paper from domestic issuers priced by the time the market closed.

The session saw not one, but two separate deals under the auspices of Georgia Gulf Corp.: a $688 million offering of eight-year bonds being done through a PPG Industries Inc. unit being acquired by Georgia Gulf and a $450 million same-day issue of 10-year notes issued by the chemical manufacturer itself.

Both of those deals firmed smartly when they hit the secondary market.

There was also a quick-to-market $275 million 10-year deal from Clearwater Paper Corp. and a $150 million transaction from SunCoke Energy Partners, LP, both of which traded up in the aftermarket as well.

Traders also heard that the slew of deals that priced on Wednesday or before, including such names as DuPont Performance Coatings, Ardagh Packaging Finance plc and Wells Enterprises Inc., were pretty much hanging on to the gains they had notched in the aftermarket.

Away from the issues that have actually priced, high-yield syndicate sources heard price talk out on pending deals from GenCorp. Inc., Zachry Holdings, Inc. and Gibraltar Industries Inc., each of which is expected to come to market on Friday.

Statistical indicators of secondary market performance were mostly up on the session.

And flows of cash in to and out of high-yield mutual funds and exchange-traded funds, considered a barometer of overall liquidity trends, were positive for a second straight week, an agency that tracks such flows said.

AMG sees $571 million inflow

As Thursday's session was wrapping up, junk market participants familiar with the fund-flow statistics generated by AMG Data Services, Inc. reported that in the week ended Wednesday, $571 million more came into those funds than left them.

It was the second consecutive inflow seen by Arcata, Calif.-based AMG, a unit of the Lipper analytics division of Thomson Reuters Corp., augmenting the $1.11 billion cash injection recorded last week, ended Jan. 9, which had been the first inflow seen in the new year. The two inflows follow three consecutive weeks of outflows that totaled about $1.17 billion, according to a Prospect News analysis of the figures, including a $473 million cash loss recorded the week before that, ended Jan. 2.

Three weeks into the new year, net inflows so far have amounted to about $1.21 billion, according to the analysis.

The return to positive funds-flow figures is in line with the pattern of strength seen over most of last year, when cumulative net inflows for the year totaled an estimated $28 billion, according to the analysis, with inflows to the funds recorded in 39 weeks of the year and outflows in the remaining 13 weeks.

EPFR sees $1.12 billion inflow

Those Lipper inflows are also in line with similar cash injections recorded by the other major fund-tracking service, Cambridge, Mass.-based EPFR Global. That agency said that in the latest reporting week, also ended Wednesday, $1.12 billion more came into the funds that it tracks than left them.

It was the fourth consecutive inflow seen by the service, including the $1.66 billion that came into the funds the week before and the $265 million cash gain in the Jan. 2 week. During that four-week stretch, which also includes the final reporting week of 2012, inflows have totaled $3.2 billion, according to a Prospect News analysis of the figures.

It was also the third consecutive inflow seen so far in the new year, against no outflows; that net inflow total was about $3.05 billion, according to the analysis.

EPFR and Lipper calculate their respective fund-flow statistics using different methodologies; EPFR includes some non-U.S. domiciled mutual funds and ETFs in its tabulations, while the Lipper number is purely domestic funds. Despite the differences in the actual numbers, the two services' weekly results usually point in the same direction, as was the case this week and last week, although for the two weeks before that, EPFR was seeing net inflows while Lipper was recording net outflows.

Reporting only U.S. funds that it tracks - a category more closely aligned with the Lipper totals - EPFR saw a $246 million inflow in the latest week. This came on top of a $978 million inflow seen last week and a $151 million outflow in the Jan. 2 week.

In 2012, EPFR's overall figure showed a cumulative net inflow of $72.3 billion. According to a Prospect News analysis of the data, EPFR recorded 42 weeks of inflows last year against just 10 weeks of outflows.

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

The continued flow 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 the junk market - has been seen by analysts as a key element behind the high-yield secondary market's strong performance last year versus other fixed-income asset classes and its record active new-deal pace, which easily topped the $300 billion mark.

Eagle SpinCo/Georgia Gulf

Four issuers brought single-tranche dollar-denominated deals to the block during the Thursday primary market session, raising a combined total of $1.56 billion.

The executions were notable in that each deal priced at the tight end of talk, with the exception of Clearwater Paper, which priced its deal through talk.

Georgia Gulf and Eagle SpinCo Inc., which will become a subsidiary of Georgia Gulf, brought two of Wednesday's four dollar-denominated tranches.

Barclays was left bookrunner for both deals.

Eagle SpinCo priced a $688 million issue of eight-year senior notes (confirmed Ba3/expected BB-) at par to yield 4 5/8%.

The yield printed at the tight end of yield talk set in the 4¾% area.

Proceeds will be used to fund the acquisition of Eagle SpinCo (PPG Commodity Chemicals) from PPG Industries.

Meanwhile, in a drive-by, Georgia Gulf priced a $450 million issue of senior notes due May 15, 2023 (Ba3/BB) at par to yield 4 7/8%, at the tight end of price talk set at 25 basis points to 37.5 bps behind the new Eagle SpinCo 4 5/8% senior notes.

The Atlanta-based chemical manufacturer will use the proceeds, together with cash on hand and/or revolver borrowings, to repurchase or redeem the existing Georgia Gulf 9% senior secured notes due 2017.

In addition to left bookrunner Barclays, J.P. Morgan Securities LLC, RBC Capital Markets and Wells Fargo Securities LLC were the joint bookrunners for both deals.

Clearwater prices through talk

In other Thursday drive-by action, Clearwater Paper priced an upsized $275 million issue of 10-year senior notes (Ba2/BB) at par to yield 4½%.

The yield printed 12.5 bps inside of price talk that was set in the 4¾% area.

Goldman Sachs & Co. and Bank of America Merrill Lynch were the joint bookrunners for the quick-to-market debt refinancing and share repurchase deal, which was upsized from $250 million.

SunCoke at the tight end

SunCoke Energy Partners and SunCoke Energy Partners Finance Corp. priced a $150 million issue of seven-year senior notes (B1/BB) at par to yield 7 3/8%, at the tight end of price talk that was set in the 7½% area.

JPMorgan, Barclays and RBC were the joint bookrunners.

In conjunction with the notes offering, the company has undertaken an initial public offering of 13.5 million common units.

The Lisle, Ill.-based producer of metallurgical coke plans to use the proceeds from the notes and units to repay a portion of its term loan, to fund a distribution to SunCoke Energy, Inc. and to fund cash on the balance sheet at the master limited partnership level so that it may prefund obligations.

Loxam at the tight end

In the euro-denominated market, French equipment rental company Loxam SAS priced a €300 million issue of seven-year senior subordinated notes (/B/) at par to yield 7 3/8% on Thursday.

The yield printed at the tight end of revised yield talk in the 7½% area; earlier talk was 7½% to 7¾%.

Joint bookrunner Deutsche Bank will bill and deliver. BNP Paribas, Credit Agricole CIB, Credit Suisse, Natixis and SG were also joint bookrunners.

Proceeds will be used to refinance debt, to fund acquisitions and for general corporate purposes.

Also in Europe, England-based Arrow Global Finance plc plans to start a roadshow on Friday for a £200 million offering of seven-year senior secured notes (expected ratings B2/BB-) in a deal to refinance debt.

The roadshow wraps up on Tuesday, and the deal is set to price thereafter.

Joint bookrunner Goldman Sachs will bill and deliver. JPMorgan is also a joint bookrunner.

Talking the deals

Setting the stage for what figures to be a busy Friday session, prospective issuers circulated price talk on Thursday.

GenCorp talked its $460 million offering of eight-year second-priority senior secured notes (Ba3/B-) with a yield in the 7¼% area.

Morgan Stanley & Co. LLC, Citigroup Global Markets Inc. and Wells Fargo are the joint bookrunners.

Zachry Holdings talked its $250 million offering of seven-year senior notes (B2/B+) to yield 7½% to 7¾%.

JPMorgan, Bank of America Merrill Lynch and Wells Fargo are the joint bookrunners.

Gibraltar Industries talked its $210 million offering of eight-year senior subordinated notes (B2/BB-) with a yield in the 6½% area.

Timing on the deal was moved ahead. Books will close at 12:30 p.m. ET Friday, except for Boston accounts, and the deal is set to price Friday afternoon. Previously, the roadshow had been expected to end on Jan. 23.

JPMorgan and KeyBanc Capital Markets are the joint bookrunners.

And from Canada, Southern Pacific Resource Corp. talked its C$300 million of five-year senior secured second-lien notes (/B+/DBRS: B) with a yield in the 8½% area.

TD Securities Inc., RBC Capital Markets, Credit Suisse Securities (Canada) Inc. and BMO Capital Markets Corp. are the joint bookrunners.

Trinseo starts $1.33 billion

Trinseo Materials Operating SCA and Trinseo Materials Finance, Inc. began a roadshow on Thursday for a $1,325,000,000 offering of six-year senior secured notes.

The deal is expected to price late next week.

Deutsche Bank Securities Inc. is the left bookrunner for the debt refinancing.

Barclays, HSBC Securities (USA) LLC, Goldman Sachs, Scotia Capital (USA) Inc., BMO Securities, Mizuho Securities USA Inc. and SMBC are the joint bookrunners.

Apex Tools starts Friday

Apex Tool Group, LLC and BC Mountain Finance Inc. plan to start a roadshow on Friday for their $450 million offering of eight-year senior notes (B3/B-).

Pricing is set for late next week.

Goldman Sachs is the left lead bookrunner for the LBO deal. Barclays, Citigroup, Deutsche Bank, Morgan Stanley and RBC are the joint bookrunners.

Georgia Gulf deals firm

When the two new Georgia Gulf deals were freed for secondary market dealings, traders saw both firm smartly.

A market source saw levels of 102¼ bid, 102¾ offered on both.

That was well above the par level at which Eagle SpinCo priced its $688 million of new 4 5/8% notes due 2021 and at which George Gulf itself priced its $450 million of 4 7/8% notes due 2023.

SunCoke shows strength

Elsewhere among the day's new issues, a trader saw SunCoke Energy Partners' 7 3/8% notes due 2020 at 102 bid, 103 offered.

A second trader quoted the company's deal trading in a 1013/4-to-102 bid context, although he later saw the bonds get as good as 102½ bid.

Those levels were up from the par level at which the $150 million deal priced earlier in the session.

Clear sailing for Clearwater

Clearwater Paper's 4½% notes due 2023 were seen by a trader to have firmed to 100½ bid, 101 offered.

That was up from the par level at which the quickly shopped $275 million deal priced earlier.

Recent deals hold their own

The traders said that going back to Wednesday and before, those deals for the most part held their own.

One trader noted that the Ardagh Packaging Finance 4 7/8% senior secured notes due 2022 "faded during the day" by about a point; he saw the issue going home at about 101 bid.

That was off from the 1011/2-to-102 bid context at which that $420 million of paper traded on Wednesday after it priced at par.

That aside, "everything else held their gains," he said, including the Dublin-based glass and metal packaging manufacturer's 7% senior unsecured notes due 2020, holding around the same 102 1/8 bid, 102 5/8 offered level at which the upsized $850 million tranche traded on Wednesday after pricing at par.

Those two dollar-denominated tranches were part of a larger, three-tranche offering totaling some $1.6 billion equivalent that the company and its Ardagh Holdings USA Inc. subsidiary priced on Wednesday.

The deals also included €250 million of the senior secured 2022 notes, which priced at par to yield 5%.

Another Wednesday deal, from DuPont Performance Coatings, was better on the session, a market source said on Thursday.

The company's $750 million of 7 3/8% senior notes due 2021 priced at par on Wednesday, jumped to around the 103 bid level on the break and continued to firm even beyond that in initial aftermarket dealings. They were seen on Thursday to still be above 103.

As was the case with the Ardagh deal, those bonds were part of a larger dual-currency offering, which also included €250 million of senior secured notes due 2021 that priced at par to yield 5¾%. The latter bonds were not immediately seen in trading.

The notes were being sold by Flash Dutch 2 BV and U.S. Coatings Acquisition Inc. as part of the financing for Carlyle Group's acquisition of Wilmington, Del.-based DuPont Performance Coatings, a supplier of vehicle and industrial coating systems being sold by chemicals giant DuPont.

New issues dominate

Traders agreed that, as one put it, "the market was very new-issue focused. New issues were clearly the volume leader."

"High-yield new issues are dominating Street flows, with underallocated account bases chasing the new Marfrig 2017s, which are up three points so far," another New York-based trader said.

Marfrig Holdings (Europe) BV sold $600 million of the 9 7/8% notes due July 24, 2017 (B2/B+/B+) on Wednesday at par.

The notes are guaranteed by Marfrig Alimentos SA, a food processing company based in Sao Paulo, Brazil.

Another actively traded new deal, a trader at another shop said, was Wells Enterprises' 6¾% notes due 2020. They continued to trade around the same 103½ bid, 104 offered level that had been seen on Wednesday, which in turn was where the Le Mars, Iowa-based ice cream maker's $235 million issue had wound up on Tuesday after pricing at par earlier that session.

Market measures mostly better

Statistical junk market performance indicators were generally better for a second straight session on Thursday after having been mixed for three straight sessions before that.

The Markit Series 19 CDX North American High Yield index gained ¼ point on the day Thursday to end at 102 3/8 bid, 102 5/8 offered after having been unchanged on Wednesday.

The KDP High Yield Daily index was unchanged on Thursday at 75.86 after having risen by 3 bps to that level on Wednesday. Its yield was also steady on Thursday at 5.48% after having tightened by 2 bps on Wednesday.

The widely followed Merrill Lynch U.S. High Yield Master II index was up for a second straight session on Thursday, gaining 0.123% on the session following Wednesday's 0.026% advance.

That gain lifted its year-to-date return to 1.453% on Thursday from 1.328% on Wednesday. Thursday's reading was a new peak level for the year so far, eclipsing the old mark of 1.37%, which had been set on Monday.

Christine Van Dusen and Cristal Cody contributed to this review

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