Kabel prices; domestic primary quiet as several deals delayed; NewPage falls in busy dealings

By Paul Deckelman and Paul A. Harris

New York, June 13 - The high-yield primary market, which already has quieted down from the positively torrid issuance levels seen in early and mid-May, got even quieter on Monday.

No deals were heard by syndicate sources to have priced in the domestic market, and just one was heard from an overseas issuer. German cable operator Kabel Deutschland Holding AG came to market with an upsized offer of euro-denominated seven-year notes.

Meanwhile, the sources heard that two prospective bond issues had been scrubbed - at least for the moment - due to market conditions: energy operator Endeavor International Corp.'s $250 million offering of five-year notes and French cleansing products manufacturer Spotless Holdings SAS' euro-denominated offering of seven-year senior secured notes.

The forward calendar did grow a little on Monday, though, with Canadian environmental and energy services provider CCS Corp.'s planned C$675 million-equivalent, two-part offering of U.S. and Canadian dollar paper.

And creeping in under the radar, California-based restaurant operator El Pollo Loco, Inc. was heard to have wrapped up the roadshow on its $110 million deal, with price talk emerging on Monday.

Traders said the secondary market remained in a funk, with investors seeing no real reason to buy. Most statistical measures were lower.

Among specific issues, NewPage Corp.'s several series of notes were down by multiple points on heavy volume, although there was no fresh news seen out on the Miamisburg, Ohio-based coated-paper manufacturer that might explain the drop.

A goose egg in the primary

The primary market turned out a goose egg on Monday, with no deals pricing.

"It doesn't feel so good out there," conceded a trader from a high-yield mutual fund.

"The Street is not crazy about taking on anything right now. And there are a few names offered, which have not been seen for sale in months," the source added.

"But you don't see evidence of any forced selling out there."

Noting that recent sessions have seen at least three deals pulled - Forestar Real Estate, Endeavor International Corp. and, most recently, Spotless Group ASA - the trader said that due to volatility in the capital markets, the high-yield primary market will likely be much quieter than was the case in April and May.

Nevertheless, the deals still on the forward calendar should get done, the source asserted.

CCS starts Tuesday

Much of Monday's modest amount of primary market news emanated from Canada.

Calgary, Alta.-based CCS plans to start a roadshow on Tuesday in the Mid-Atlantic region of the United States for its C$675 million-equivalent offering of senior notes (Caa2//) in two tranches.

The company plans to sell dollar-denominated eight-year notes and Canadian dollar-denominated seven-year notes, with tranche sizes to be determined.

Goldman Sachs & Co. and Deutsche Bank Securities Inc. are the joint bookrunners for the debt refinancing deal.

Elsewhere, Ontario-based Husky Injection Molding Systems Ltd. announced a C$570 million offering of eight-year senior notes (Caa1/CCC+) via bookrunners Goldman Sachs & Co., Morgan Stanley & Co. Inc., RBC Capital Markets Corp. and TD Securities Inc.

Proceeds will be used to help fund the leveraged buyout of parent company Husky International Ltd. by Berkshire Partners LLC and Omers Private Equity Inc. from Onex Corp.

Whispers heard Monday

Although no official price talk surfaced on Monday for the deals being actively marketed, preliminary guidance circulated on two offerings, market sources said.

Germany's Evonik Carbon Black Ltd. has been running a global roadshow for its €600 million-equivalent, two-part offering of seven-year senior secured notes (B2/B) to be sold in dollar and euro denominations.

The whisper is 8¾% to 9%, according to a buyside source.

Goldman Sachs International, UBS and Barclays are managing the sale.

Meanwhile, El Pollo Loco is expected to conclude a roadshow for its $110 million offering of 6.5-year senior secured notes (expected ratings Caa2/CCC) on Tuesday, according to a market source.

The deal, which comes with initial guidance of 12% to 12 ½%, is seeing its strongest demand in California, the source related.

Jefferies & Co. Inc. is leading the private placement.

Spotless postpones euro deal

Finally, France's Spotless Holdings postponed its €400 million offering of seven-year senior secured notes (B3/B) due to adverse market conditions on Monday.

JPMorgan and Morgan Stanley were the physical bookrunners.

Friday deals hang in there

With no new dollar-denominated paper seen having priced during the session, market participants had to content themselves with dealings in recently priced new deals, such as Friday's offerings from Solera Holdings, Inc. and from Quadra FNX Mining Ltd.

A trader saw Solera's 6¾% notes due 2018 trading Monday at 100½ bid, 100 7/8 offered. That wasn't too far from the levels around 100 3/8 bid, 101 offered, which were seen in the aftermarket dealings Friday.

Earlier that session, Solera, a Dallas-based provider of software and related services to the automobile insurance claims industry, priced $450 million of those bonds - upsized from the originally shopped $350 million - at par through its Audatex North America, Inc. subsidiary. The new bonds got as good as 100 5/8 bid, 101 1/8 offered when they were freed to trade, before settling in at levels slightly off from that peak.

The trader also saw Vancouver-based copper mining company Quadra FNX's new 7¾% notes due 2019 at 99 7/8 bid, 100 3/8 offered on Monday.

On Friday, the company had priced $500 million of the notes at par, and they settled in to straddle their issue price at around 99¾ bid, 100¼ offered.

Big CenturyLink volume

A junk bond trader noted a fair amount of trading in the new split-rated (Baa3/BB/BBB-) CenturyLink, Inc. bonds, but said he had seen little or no interest from junk accounts in the Monroe, La.-based telecommunications company's big new three-part issue, which priced on Friday.

"Everything was quoted off the high-grade desks on a spread basis," he said. "We just didn't get involved."

A market source saw the company's new 7.6% notes due 2039 near the top of the Trace high-yield volume list Monday, with over $26 million having changed hands. He quoted the bonds at 96¼ bid - down ¾ point from the levels seen at the end of trading on Friday, but still up more than 7/8 point from the 95.377 level at which the $400 million tranche had priced on Friday to yield 8.014%.

The source had also seen fairly active trading in the other two parts of that quickly shopped $2 billion issue, with nearly $10 million each of the 5.15% notes due 2017 and the 6.45% notes due 2021 as of the early afternoon - strong enough volume to put those tranches near the top of the most actives list as well.

The first trader said that volume-wise, "the NewPages led the way, and after that, it was just a bunch of crossover names like Anadarko [Petroleum Corp.], stuff like that," as well as the CenturyLink deal.

Recent deals around issue

Among other recently priced bond deals, a trader saw both halves of Arch Coal Inc.'s $2 billion two-part offering holding at the levels seen last week, quoting both tranches at par bid, 100¼ offered.

The St. Louis-based coal operator priced $1 billion of 7% notes due 2019 and $1 billion of 7¼% notes due 2021 last Wednesday, both at par, and the bonds had settled in by the end of the week in a tight par to100 1/8 bid range for both tranches.

A trader, meantime, saw Symbion Inc.'s 8% senior secured notes due 2016 tighten up a little from the levels at which they traded on Friday - to 98½ bid, 99 offered from Friday's wider 98½ bid, 99½ offered.

The Nashville-based owner and operator of short-term surgical facilities priced $350 million of the bonds last Tuesday at 98.492 to yield 8 3.8%. The bonds got as good as 99 bid, 99½ offered later that session before settling in around current levels.

However, that trader said that another deal from that same June 7 session - Austin, Tex.-based computer-chip manufacturer Freescale Semiconductor Inc. - was not doing all that well.

He said that the $750 million issue of 8.05% notes due 2020 was bouncing around in a 971/4-97¾ context, "still below new issue." The quickly shopped deal priced at 98 to yield 8 3.8%, but has struggled since then.

A trader said that Vulcan Materials, Inc.'s recent $1.1 billion two-part offering has come in from the strong aftermarket levels seen following the June 3 pricing of that deal by the Birmingham, Ala.-based manufacturer of construction aggregates, such as asphalt and concrete.

On Monday, he quoted the company's 6½% notes due 2016 at 99¾ bid, 100¼ offered, and its 7½% notes due 2021 at 99 3/8 bid, 99¾ offered.

Vulcan priced the $500 million of five-year notes and the $600 million of 10-year paper at par. The five-years got as good as 100¾ bid, 101¼ offered in initial aftermarket dealings, while the 10-years peaked at 101½ bid, 102 offered before backing off such levels. In the intervening 10 days, the bonds have weakened gradually, down to their current levels.

Chrysler crunch continues

A trader said that with a more cautious tone appearing in the overall market, some accounts "have been shorting more actively traded bonds or larger issues," particularly those with lower ratings, such as Chrysler Group LLC's $3.2 billion of single-B rated senior secured eight-year and 10-year notes

He noted that "since Chrysler came to this market, it's traded from a premium down to 95, on both issues."

The Auburn Hills, Mich.-based No. 3 U.S. automaker priced its two-part deal on May 19. After first upsizing the offering to $3.5 billion from the originally planned $2.5 billion, Chrysler and its underwriters finally brought it in at $3.2 billion, consisting of $1.5 billion of 8% senior secured notes due 2019 and $1.7 billion of 8¼% senior secured notes due 2021.

After both pricing at par, the eight-years initially moved up to 100½ bid, 100¾ offered, while the 10-yeaqrs firmed to 100¾ bid, 101 offered.

However, by the beginning of the next week, the bonds had begun their long skid and were trading under par, and they have continued to accelerate on a downside ride since then.

The trader contrasted Chrysler's bumpy ride with EchoStar Corp.'s upsized $2 billion offering, which priced on May 17, actually pre-dating Chrysler by several days.

While the Englewood, Colo.-based communications satellite operator and set-top satellite broadcast receiver company's deal is also a big, liquid issue, the kind that players looking to raise cash or trim positions could easily sell. Its EH Holding Corp. 6½% senior secured notes due 2019 and 7 5/8% senior notes due 2021 "are barely below 101."

He said that the $1.1 billion of eight years, which got up to 101 bid, 102 offered after pricing at par and the $900 million of 10-years "are maybe off three-quarters of a point to 1 point from their high - and the [overall] market's down a lot more than that."

He cited the better credit quality: Ba3/BB "straight across" for the discrepancy between the EchoStar trading levels and the weaker-rated Chrysler's current status.

Market indicators mostly off

Away from new or recently priced issues, secondary sphere statistical indicators continued to show a struggling market.

While a trader said that the CDX North American Series 16 HY Index actually gained 1/8 point on Monday to end at 99¾ bid, 99 7/8 offered, after having lost 3/8 point on Friday, other market measures told a less hopeful story.

The KDP High Yield Daily Index lost 9 basis points on Monday to close at 75.18, after having dropped 5 bps on Friday. Its yield rose by 4 bps, to 6.83%, on top of the 5 bps rise seen Friday.

And the Merrill Lynch High Yield Master II Index was lower for an eighth consecutive session on Monday, retreating by 0.141% following Friday's 0.065% loss.

That dropped the index's cumulative return to 5.026% from Friday's 5.174% reading. It also retreated further from its year-to-date peak level of 6.071% reached on May 20.

A trader said that Monday's secondary market was "flat to down. Definitely there was no kind of positive feedback. We had a weaker tone."

A second trader said that macroeconomic concerns were weighing on the market, opining that "if this 'economic boom' we're having turns out to be a bust - these companies will not do well."

NewPage is knocked lower

Among specific issues, a trader said that clearly, "NewPage seems like the name of the day," with the coated-paper manufacturer's 10% second-lien senior secured notes due 2012 and its 11 3/8% senior secured first-lien paper due 2014 both down anywhere from 2 to 4 points on the day, depending on whom you were talking to, on "huge" volume.

"There was a lot of activity. It was down and it was ugly," he said.

He saw the 10% notes going home at 33 bid, 34 offered, calling them down anywhere from 3 to 4 points, while the 11 3/8s ended at 92, which he said was off between 2½ to 3 points.

A market source at another desk saw the 10s ending at 33½ bid, down more than 4 points on the day, though on a strictly round-lot basis. Throwing out the smaller trades as unrepresentative, they closed closer to 34 bid, down 3¾ points.

Volume was heavy with over $41 million changing hands, making it easily the busiest purely junk issue of the day.

He also saw the 11 3/8s closing down 1½ points on the day at just over 92 bid on volume of $36 million.

Traders were puzzled as to the cause of the harp slide in the bonds, since there was no fresh news out on NewPage either in terms of company news releases or regulatory filings.

An analyst also noted that there was no fresh paper-industry data out that might spur such selling.

He suggested that "people are shorting high-beta names," and the 10s are especially vulnerable because "even though they're supposed to be second-lien, in reality, there's no asset coverage there."

People, he said, "are making speculative calls," feeding off market rumors, but with no concrete negative news to go on.

Another trader said that investors may be looking to lighten up on "paper that's got trouble ahead, or CCC or weak single-B paper. Particularly in certain sectors, guys have been trying to get rid of it. Maybe they've given up the ghost" on NewPage, he suggested.

He had not been active in the name, but theorized that "there might be some dialog out there about restructuring that's leading to lower valuations."

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