EV Energy, Pretium, Hyva price deals; General Maritime gyrates; funds see first 2011 decline

By Paul Deckelman and Paul A. Harris

New York, March 17 - The high-yield primary maintained its momentum, however modestly, on Thursday as a trio of deals got priced.

Syndicate sources said that EV Energy Partners, LP came to market with an upsized $300 million offering of eight-year notes, which traded at slightly higher levels when they moved into the aftermarket.

They also saw Pretium Packaging LLC's $150 million of five-year senior secured notes price, and these too stayed around their issue level.

Dutch hydraulic-cylinder manufacturer Hyva Global BV's $375 million of secured bonds came off the emerging markets desks but attracted some junk market interest. A trader saw the deal up solidly in the secondary.

Wednesday's Lantheus Medical Imaging, Inc. add-on deal was being quoted up smartly, though with little trading actually seen.

In the secondary market, one of the most active bonds was General Maritime Corp., whose paper had slid badly in very late trading on Wednesday after the oil tanker operator announced that it would have to delay filing its 10-K report with the Securities and Exchange Commission and that it was in talks with lenders and investors to augment its liquidity. On Thursday, the credit recovered a few points of that lost ground, but it was still well under pre-news levels.

The overall market tone was meantime improved from the bearish sentiment felt on Tuesday and Wednesday. Junk took its cue from a stock market rebound fueled by data pointing to an improving U.S. economy. Performance indicators were better across the board.

But high-yield mutual funds - considered a key indicator of overall junk market liquidity trends - suffered their first outflow of the year so far in the latest week.

Junk funds lose $471 million

After the session's activity had wound down, participants familiar with the weekly AMG high-yield mutual fund flow statistics generated by Lipper/FMI said that in the week ended Wednesday, $471 million more left those funds than came into them.

It was the first outflow seen by the funds so far this year after 10 straight inflows totaling about $6.24 billion, according to an analysis of the data by Prospect News, including the $574 million cash infusion seen in the previous week, which ended March 9. The latest week's outflow drops that year-to-date net inflow figure to about $5.76 billion.

It also broke a 14-week inflow winning streak dating back to Dec. 8. During that stretch, $8.29 billion of net inflows came into the junk market, according to the analysis.

That streak had extended the strong inflow trend seen in 2010, when $10.67 billion more came into the funds than left them, and inflows were seen in 37 weeks, against just 15 weeks experiencing outflows.

But the latest week's outflow really was not much of a surprise to many traders, who saw the downturn as inevitable given the junk market's relatively bearish performance over the past few sessions.

EPFR sees $802 million outflow

Another fund-tracking service, Cambridge, Mass.-based EPFR Global, whose methodology differs somewhat from AMG, meantime reported an $802 million outflow in the latest week, which followed the previous week's $1.25 billion gain.

As was the case with the AMG numbers, the latest week's outflow snapped a string of 14 consecutive inflows dating back to early December. It brought the year-to-date net inflow number down to $14.298 billion from $15.1 billion previously.

AMG and EPFR calculate their respective fund-flow totals differently, although the two services' numbers generally point toward the same trends. EPFR includes results from certain non-U.S. domiciled funds as well as the domestic funds.

Cumulative fund-flow estimates, whether from Lipper/FMI or 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 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. Both of those trends have been continuing in 2011 as well, at least till now.

Hyva prices through talk

The Thursday primary market session saw three issuers raise $825 million of proceeds.

Netherlands-based Hyva Global priced a $375 million issue of five-year senior secured notes (B1/B+/BB-) at par to yield 8 5/8%.

The yield printed 12.5 basis points inside of the 8 7/8% area price talk.

Merrill Lynch, Goldman Sachs, Nomura and Standard Chartered Bank were the bookrunners for the deal.

Orders for the deal topped out near the $1 billion mark, sources said. It played to a substantial emerging markets following owing to the fact that the company has operations in Asia and one of the sponsors, Unitas Capital, is based in Hong Kong.

Proceeds will be used to fund the acquisition of Hyva by Unitas Capital and NWS Holdings from 3i Group plc.

EV Energy upsizes

Elsewhere, EV Energy Partners priced an upsized $300 million issue of eight-year senior notes (B3/B-) at par to yield 8%, at the tight end of the 8% to 8¼% price talk.

RBC Capital Markets LLC was the left bookrunner for the issue, which was upsized from $250 million.

J.P. Morgan Securities LLC, Wells Fargo Securities LLC and BNP Paribas Securities Corp. were the joint bookrunners.

Proceeds, along with proceeds from the partnership's March equity offering, will be used to repay borrowings under its revolver used to finance a Barnett Shale acquisition.

The deal was several times oversubscribed, according to an informed source. "It didn't hurt that there was a positive tone to the market" on Thursday, the source said, with global stock markets heading back north following a week of losses.

"There was a day-and-night difference, in terms of market sentiment, between Wednesday and Thursday," the sellsider remarked.

Pretium, atop price talk

Finally, Pretium Packaging priced a $150 million issue of five-year senior secured notes (B3/B) at par to yield 11½%, on top of price talk.

The timing of the deal was moved up. Books closed at 3 p.m. ET Thursday, an hour earlier than previously anticipated, and the deal priced on Thursday rather than Friday morning as initially planned.

Jefferies & Co. ran the books.

The Chesterfield, Mo.-based specialty packaging company plans to use the proceeds to repay all existing debt and to fund a distribution.

Question marks for Friday

The Thursday session came with one negative development, albeit a development that market-watchers had been expecting: Flows turned negative.

High-yield mutual funds recorded $471 million of outflows for the week to Wednesday, according to a weekly report from Lipper-AMG, a market source said.

However, it is apparent that the buyside still has plenty of cash to put to work, said this source, a debt capital markets banker with a close-up view of one of Thursday's deals.

And there are upcoming deals that they can use to put that cash to work, although most of what was an active new issue calendar has become a "pending-market-conditions" calendar due to capital markets volatility that took hold in the wake of catastrophic events that began unfolding in Japan one week ago.

The market anticipates that at least one deal will price on Friday: Boart Longyear Management Pty. Ltd.'s $250 million offering of 10-year senior notes, via Goldman Sachs.

The deal is roundly reported to be doing very well.

Discussions have taken place in the context of 6½% to 7%, market sources said.

EV Energy firms slightly

When EV Energy Partners' upsized issue of eight-year notes was freed for secondary dealings, a trader said that they were up, "but not by too much."

He saw the bonds, which had priced at par, break at a wide par bid, 102 offered then get "a little bit tighter," getting as good as 100½ bid.

A second trader pegged the bonds at 100¼ bid, 101¼ offered.

Another trader saw "sellers at the 101 level right now."

Pretium settles around issue

A trader said that Pretium's offering of five-year senior secured notes opened at 100½ bid, 101½ offered when it was freed to trade after pricing at par.

"They hit that 100½ bid, then they hit that 100¼ bid" - and he last saw the bonds at 99 7/8 bid, par offered.

A trader said that he had seen sellers at the 101 level, "but I would guess that if people could get paid above par, they would probably sell it."

He noted that the Chesterfield, Mo.-based plastics packaging manufacturer's offering "got done. I think some people were hesitant because of the fees being paid to Castle Harlan Partners," the company's private equity owner, which will receive a distribution from the new-deal proceeds. He also cited the amount being paid to the chief executive officer, which combined with the Castle Harlan payment "is right around 8% of EBITDA - a pretty hefty fee. Some people stepped back because of that."

That having been said, he added that it was "a tribute to Jefferies," the underwriter, "that they got that deal done."

Hyva heads higher

A trader said that Hyva Global's five-year senior secured bonds "did really well," quoting them at 102 bid, 102¾ offered, up from the par level at which the issue had priced.

Lantheus quoted higher

A trader said that Wednesday's $150 million add-on offering of 9¾% notes due 2017 from Lantheus Medical Imaging, a North Billerica, Mass.-based health-care company, seemed to be doing well in the secondary.

He said that he had seen "a generic quote" of 104½ bid, 105½ offered on the bonds, which had priced at 101.5 to yield 9.418%.

However, he said he had not seen any actual trading in the drive-by deal.

Secondary turns stronger

Away from the new-deal world, a trader saw the series 15 CDX North American High Yield index rise by 5/8 point on Thursday to close at 102 3/16 bid, 102 5/16 offered after having slid by ¾ point on Wednesday.

The KDP High Yield Daily index meantime rebounded by 12 bps on Thursday to close at 75.53 after having gained 5 bps on Wednesday. Its yield narrowed by 1 bp, to 6.81%, after having come in by 3 bps on Wednesday.

The Merrill Lynch High Yield Master II index rose for a second consecutive session on Thursday, by 0.335%, on top of Wednesday's gain of 0.105%. That lifted its year-to-date return to 3.219% from Wednesday's 3.162% reading. However, that new cumulative return remained behind the 2011 peak level of 3.73%, which was set last Wednesday.

Advancing issues pulled ahead of decliners on Thursday after having trailed them for the previous five sessions. As was the case on Wednesday, the margin of difference was just a relative handful of issues out of the more than 1,300 that traded.

Overall market activity, as measured by dollar-volume levels, rose by 1% on Thursday on top of Wednesday's 5% gain from the previous session's activity level.

"Today, the buyers definitely took the bull by the horns," a trader declared. "Everybody came back in with their buying hat on, it seems."

A second trader said, "We kind of moved along with equities. The market was probably up by ¼ to ½ point," even as stocks roared back into the black on improved U.S. economic data after three sessions on the downside due to jitters about the situation in Japan and other unsettling events. The bellwether Dow Jones Industrial Average finished Thursday up 161.29 points, or 1.4%, to end at 11,774.59 after having slid by 242 points on Wednesday, its largest drop since August.

Yet another trader agreed that "we had a better day today" - although he cautioned that "there's still a lot of concern" overhanging the market from the whole Japanese situation, including the dislocations in the derivatives contract markets caused by that county's surging yen, which has been rising since Friday's disastrous earthquake and tsunami on market expectations that Japanese insurers and investors will redeem overseas assets to pay for the unprecedented heavy damages.

The first trader, meantime said that bad as the Japanese situation is - and besides the yen, there are numerous worries about the lack of progress in bringing the earthquake-induced accidents at several nuclear reactors under control - "the one thing it has done is it has back-burnered any concerns" about the weak economies among Europe's PIIGS countries - Portugal, Ireland, Italy, Greece and Spain, a major source of financial market tension in the pre-Japan days. "Nobody even mentions the euro anymore."

He said that the Japan crisis has similarly pushed investor worries about the volatile Persian Gulf region, with popular unrest sweeping through countries like Yemen and Bahrain and even touching kingpin oil producer Saudi Arabia, while fierce fighting continues in Libya, onto that same "back burner."

Rough seas for General Maritime

Among specific names, General Maritime's $300 million of 12% notes due 2017 were gyrating around a day after the New York-based oil tanker operator had surprised the market with an announcement after regular trading hours that it could not file its 10-K annual report with the SEC by the proscribed time, forcing it to seek an extension. It postponed the release of its 2010 fourth-quarter and full-year numbers and was heard to have scrubbed a scheduled Thursday morning conference call as a result.

The heavily leveraged company said in its statement that it was in ongoing talks with prospective lenders or investors seeking additional liquidity via a possible restructuring or refinancing of its existing debt or by issuing new debt or equity (see related story elsewhere in this issue).

A market source said that the 12% bonds - which had traded almost exclusively in smallish odd-lot pieces in a 93-94 context for most of Wednesday's pre-news session - plunged as low as 79 bid very late in the day Wednesday following the announcement amid a slew of round-lot trades at those lower levels that shot its volume up above $14 million. The bonds went out Wednesday at around the 83 level and continued to trade in the mid-80s on Thursday. They went home Thursday at 85 bid, up 2 points or so on the day but still well below pre-news levels. Volume was over $25 million, making it one of the busier junk issues of the day.

Meanwhile, General Maritime's New York Stock Exchange-traded shares - which had been trading this week, pre-news, in a $2.50-$2.60 context and which closed at $2.50 on Wednesday - plunged 16% to $2.11 in heavy after-hours trading on Wednesday.

On Thursday, the shares opened at $1.79 and went home at $1.81 - down 69 cents, or 27.6%, from Wednesday's close. Volume of 10.3 million shares was almost five times the norm.

Crossover market active

A trader said that apart from the purely high-yield names, "it was the investment-grade or the crossover guys that were playing a pretty big role in running prices up on a lot of the '4-B' and '5-B' paper," which he said was "all over the place."

Included in that category, he said, were such borderline names as Anadarko Petroleum Corp., Edison International - which he said "continued to be active and was off about a half point [versus Wednesday], at least as the day closed" - CIT Group, Inc., Sprint Nextel Corp., Capital One Financial Corp.'s junk-rated hybrid issues, Ally Financial, Inc. and El Paso Corp.

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