Meritage prices, gains; Associated Asphalt emerges; Global Geophysical Services slide continues

By Paul Deckelman and Paul A. Harris

New York, Feb. 27 - Meritage Homes Corp. came to market on Wednesday with an upsized, quickly shopped $175 million issue of five-year notes. The builder's new bonds were quoted modestly higher.

Associated Asphalt Partners LLC also priced an upsized five-year offering during the session, but the $185 million of secured paper came too late in the day for any aftermarket activity.

Traders saw slightly better levels on some recent deals, such as last week's issues from Goodyear Tire & Rubber Co., Aramark Corp. and Station Casinos LLC, although the big multipart offering from Ashland Inc. appeared to have lost ground on Wednesday.

In the non-dollar primary market, Tereos Finance Groupe, a unit of the French sugar producer, did an upsized euro-denominated offering, while British furniture retailer DFS Furniture Holdings plc hit the road to market a two-part sterling deal.

Away from the new-deal realm, traders said things remained quiet with many market participants still at the J.P. Morgan junk bond conference, which was wrapping up in Florida.

J.C. Penney Co. Inc.'s bonds were heard to have traded inconclusively ahead of the underachieving retailer's report of sharply wider fourth-quarter and full-year losses versus a year ago, just as the market closed.

There was little real reaction in either the junk bond market or among equities to the latest developments in the ongoing struggle between Sprint Nextel Corp. and DISH Network Corp. for control of Clearwire Corp.

But there was definite downside movement for a second straight session in Global Geophysical Services Inc.'s bonds following that company's poor fourth-quarter numbers.

Statistical measures of junk market performance were higher across the board after having been mixed the previous two sessions.

Associated Asphalt upsizes

The Wednesday primary market session saw executions on two smaller deals.

Two issuers each brought a single tranche and raised a combined total of $360 million.

Associated Asphalt Partners priced a $185 million issue of 8½% five-year senior secured notes (Caa1/B-) at par to yield 8.502%.

The yield printed at the tight end of the 8½% to 8¾% yield talk.

Goldman Sachs & Co. was the left bookrunner for the issue, which was upsized from $175 million.

KeyBanc Capital Markets, SunTrust Robinson Humphrey and J.P. Morgan Securities LLC were the joint bookrunners.

The Roanoke, Va.-based supplier of liquid asphalt to the paving industry plans to use the proceeds to repay bank debt.

Meritage drives through

Meritage Homes priced an upsized $175 million issue of non-callable senior notes due March 1, 2018 (B1/B+/BB-) at par to yield 4½%.

The quick-to-market deal, which was upsized from $150 million, came on top of guidance, according to a buyside source.

Citigroup Global Markets Inc. was the bookrunner.

The Scottsdale, Ariz.-based homebuilder plans to use the proceeds to repurchase or redeem its 7.731% senior subordinated notes due 2017 as well as for general corporate purposes.

No new dollar-denominated deals were announced on Wednesday.

The slow pace of the primary market has been roundly attributed to this week's J.P. Morgan High Yield & Leveraged Finance Conference in Miami, which was scheduled to wrap up on Wednesday.

And the pace should pick up soon - and dramatically - sources say.

In addition to business already on the active forward calendar, look for at least one drive-by deal on Thursday and one on Friday, a syndicate banker said, adding that both issuers - one from the media sector and one from the energy sector - are bringing sizable deals.

And the March 4 week should be a busy one, sources say.

March could turn out to be the biggest March in the history of the market, a banker said on Wednesday, adding that issuance could conceivably come to $40 billion

Tereos at the tight end

In the European session, sugar producer Tereos priced a €500 million issue of 4¼% seven-year senior notes (Ba3/BB+) at 99.26 to yield 4 3/8% on Wednesday, according to informed sources.

The yield printed at the tight end of yield talk that was set in the 4½% area.

Earlier on Wednesday, books opened on an offering sized at €350 million minimum.

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

Proceeds will be used to refinance bond and bank debt.

The company is based in Lille, France.

DFS Furniture five-years

In the sterling-denominated market, DFS Furniture began a roadshow on Wednesday for £310 million of five-year senior secured notes, which will be sold in fixed-rate and floating-rate tranches, the sizes of which remain to be determined.

The roadshow is set to wrap up on Friday.

Goldman Sachs, JP Morgan and Lloyds TSB are managing the sale.

Proceeds will be used to repay debt and fund a dividend.

The Doncaster, South Yorkshire, England-based furniture retailer specializes in upholstered furnishings.

Meritage moves up

In the secondary market, a trader quoted Meritage Homes' new 4½% notes due 2018 at 100½ bid, 101¼ offered, after the Scottsdale, Ariz.-based homebuilder had priced its quick-to-market $175 million deal earlier in the session at par.

The day's other pricing - from Associated Asphalt Partners, a Roanoke, Va.-based supplier of liquid asphalt to the paving industry - appeared too late in the session for any aftermarket dealings, a market source said.

Aramark, Station improve

A trader saw Friday's deals from Aramark and Station Casinos move up a little on Wednesday, after having been largely unchanged the session before.

He saw Aramark's 5¾% notes due 2020 at 101 7/8 bid, 102 1/8 offered, calling that up 1/8 of a point on the session.

The Philadelphia-based food service company and uniform supplier's $1 billion quick-to-market offering priced at par and then moved up to around a 1013/4-to-102 bid context in initial aftermarket dealings.

The bonds were seen having gone home on Monday trading between 101 5/8 and 102 bid. The trader pegged them at 101¾ bid, 102 offered on Tuesday, although a second trader said that they had been trading in a locked market at 101 7/8.

As for Station Casinos' 7½% notes due 2021, the first trader said they too had firmed by about 1/8 of a point, to 100 1/8 bid, 100 3/8 offered, tightening up from par bid, 100 3/8 offered on Tuesday.

The Las Vegas-based gaming concern had priced its $500 million issue at par on Friday. After that, the bonds had initially moved to a little bit above par and opened up in that same region on Monday, before falling back a little amid a generally softer market to close around 99½ bid, edging back upward a little on Tuesday.

Goodyear gains continue

But the best performer of the day among recently priced offerings was Goodyear Tire's 6½% notes due 2021.

A market source said that the Akron, Ohio-based tiremaking giant's deal continued to trade among the most active junk issues of the day, with over $17 million having changed hands in round-lot trading on Wednesday. There were also numerous smaller odd-lot transactions in the credit as well.

He saw the bonds having firmed smartly to around 101½ bid, calling that a half-point gain.

A second trader, though, while seeing brisk activity in the bonds, said the bonds had already been trading around that 101½ level and called Goodyear unchanged on the day.

Goodyear had priced its quickly shopped $900 million issue at par exactly a week ago on Wednesday, after upsizing the transaction from an originally announced $750 million.

Those bonds were seen in their initial aftermarket dealings that session trading in a narrow range of par-to-100 1/8, but on heavy volume estimated at more than $44 million. They continued to trade just a little bit above par on Thursday, but the big story wasn't the price movement.

Everyone was trying to get a piece of that deal, as an astounding $130 million of the bonds had changed hands in round-lot dealings. That frantic pace subsided on Friday, but Goodyear still racked up over $37 million to close out the week.

After a slight lull on Monday, with a source calling volume around $10 million, another $17 million of the new notes traded in round lots on Tuesday, with several million more on top of that from busy odd-lot dealings, once again putting Goodyear at or at least near the top of the most-actives list.

While the bonds had pushed as high as the 103 level, albeit on a smallish trade late in the session, they had finished Tuesday going out just below 101, about unchanged on the day.

Ashland trades off

While those recent deals were moving to the upside, a trader said that Ashland's big four-part offering that had priced last Thursday was off across the board on Wednesday, although he did not have a ready explanation for that movement.

For instance, he saw the Covington, Ky.-based specialty chemicals manufacturer's 6 7/8% bonds due 2043 at a wide 104 bid, 106 offered, calling that down half a point on the session.

Those long bonds have been the best aftermarket performer of the new paper that Ashland brought to market.

The company had priced $350 million of those bonds at par as part of its massive $2.3 billion drive-by behemoth of a deal, and the securities had quickly moved up to around 1011/2-to-102 on the break. The bonds then tacked on more than 2 additional points in Friday's dealings and were seen as good as 104½ bid by Monday.

Ashland's 3 7/8% notes due 2018 were circulating around 101¼ bid, 102¼ offered on Wednesday, which the trader called a 3/8 point loss on the day from prior levels around 101 5/8 bid, 102 1/8 offered.

The company had priced $700 million of those bonds at par, and the bonds had first moved up to 100½ bid, 101 offered Thursday before coming up to the 102 mark Friday, although they had fallen back from that peak level amid Monday's softer junk market.

The trader also saw Ashland's 4¾% notes due 2022 at 101 bid, 102 offered, calling that down 5/8 of a point on the day. The company priced $650 million of those notes as an add-on to the existing $500 million of the bonds it had sold last summer.

After they came to market at 99.059 to yield 4 7/8 points, the bonds had initially edged up to 100¼ bid, 100¾ offered, but then they had advanced to 101 5/8 bid, 102 1/8 offered by Friday. The '22s had pretty much stayed around that latter level at the beginning of this week.

Ashland's 3% notes due 2016 were going home on Wednesday around 101¼ bid, 101¾ offered, the trader said, down 1/8 of a point on the day.

The company had priced $600 million of those bonds on Thursday at par, and they had gotten as good as 101½ bid, 102 offered by Friday. The bonds had been seen at the beginning of this week having eased a little to 101 3/8 bid, 101 7/8 offered.

Axle spins its wheels

Another recent issue seen slightly on the downside on Wednesday was American Axle & Manufacturing Inc.'s 6¼% notes due 2021. A market source saw the bonds trading around 101 bid, calling that off a half-point on the day.

The Detroit-based manufacturer of automotive axles and other drive-train components had priced $400 million of those bonds at par in a drive-by deal on Feb. 14.

After initially having moved up only slightly, they were seen having gradually firmed to around the 101½ bid level by earlier this week.

Morgan impact felt

For a third consecutive session, market participants said that the relative absence of people due to the J.P. Morgan conference was continuing to restrain activity in Junkbondland.

The always well-attended gathering, which opened on Monday in Miami, was scheduled to wrap up on Wednesday, but several sources mentioned that it was unlikely that the various portfolio managers and other senior decision-makers would be moving heaven and earth to hustle back chilly and rainy New York and other Northeastern business centers just to play out an already truncated week.

"My guess is we'll just have to really pick up when everyone is back in pocket next week," one opined.

Penney putters around

There wasn't that much activity going on in J.C. Penney's debt.

Wednesday's session was largely a mixed bag for the Plano, Texas-based department-store operator, as investors awaited results that were scheduled to come out after the market closed. It, however, was widely known already that the numbers would be "pretty ugly," as one trader put it.

Penney's 5.65% notes due 2020 were off fractionally by the end of business, a trader said, seeing them at 843/4. Another market source called the issue up half a point at 85 bid.

But a third source deemed the debt "pretty much unchanged" at 84½ bid, 85 offered.

The trader said the pending earnings could "stir the pot" come Thursday.

After dealings had wound down, the embattled retailer reported a yawning net loss of $552 million, or $2.51 per share.

That was a sharp deterioration from the profit of $294.1 million, or $1.28 per share, which it had posted the year before.

Excluding one-time charges, the net loss was $427 million, or $1.95 per share - far wider than the loss of 28 cents per share Wall Street had been expecting.

Revenues were down 28.4% to $3.8 billion, despite it being a big holiday quarter. Additionally, same-store sales nosedived by 31.7%.

For the year, the company lost $985 million, or $4.49 per share. Revenues declined by 24.8% to $12.99 billion.

Same-store sales were down 25%.

After several years of sagging sales, J.C. Penney, under new CEO Ron Johnson, had sought to shake up the way it did business by abandoning traditional sales and coupons and instead offering "everyday low prices."

Customers were not pleased with the changes, however, and the company eventually was forced to bring back sales and coupons.

Investors were likely looking for indications that the turnaround effort was taking root. In the company's earnings call, Johnson called 2013 a make-or-break year for Penney, adding that he expected the new strategy to take hold.

Johnson also opted not to provide any guidance for 2013.

"I don't want to get into the habit of offering forecasts for early quarter results," he said. "I want to stay out of the guidance business. We think we are taking the steps to return to growth."

GGS losses continue

Another ugly earnings story this week has been Global Geophysical Services, whose bonds weakened further in mid-week trading after the company reported disappointing numbers.

A trader saw the 10½% notes due 2017 slipping 2½ points to 771/4. After the results came out on Tuesday, the bonds had lost 5 points on the day.

A market source said that over $12 million of the company's bonds had traded.

A second, smaller add-on tranche that the Missouri City, Texas-based provider of seismic services to the energy drilling industry had sold last summer was down more than 2 points on Wednesday, to just under 75 bid, on top of a 5-point loss on Tuesday.

In its quarterly report, the company posted a net loss of $28.6 million, or 76 cents per share. There was a $12 million loss from operations.

Revenues were cut in half from the previous year, coming to $55.3 million.

Analysts had been expecting a loss of just 13 cents per share, on revenues of $95.94 million.

The company said several non-recurring charges were included in the quarter's net loss.

Little impact from Sprint

News that Clearwire will take advantage of a financing offer by 51% owner Sprint Nextel and accept an $80 million loan from Sprint, which could hinder a rival acquisition bid for Clearwire from DISH Network Corp., had little real impact on any of those companies' bonds Wednesday.

Clearwire's 12% notes due 2015, which had traded Tuesday around the 107 mark, were not seen on Wednesday, a trader said.

Sprint Capital Corp.'s 6.90% notes due 2019 were marginally higher at 108 5/8 bid on $7 million of volume.

DISH's 5 7/8% notes due 2022 were up a little at 106 on volume of about $6 million.

Market indicators get better

Statistical junk market performance indicators turned higher on Wednesday after having been mixed over the two previous sessions.

The Markit Series 19 CDX North American High Yield index gained 13/32 of a point on Wednesday, its second consecutive advance, to end at 102 9/16 bid, 102 11/16 offered. On Tuesday, it had risen by a quarter-point.

The KDP High Yield Daily index edged up by 1 basis point to finish at 75.25, after having lost 4 bps on Tuesday. Its yield came in by 1 bp to close at 5.66%, after having been unchanged on Tuesday.

And the widely followed Merrill Lynch High Yield Master II index rose by 0.104% on Wednesday, bouncing back from Tuesday's 0.082% loss.

The gain raised the index's year-to-date return to 1.696% from 1.59% on Tuesday, although it still remained down from its peak level for 2013 so far of 1.991%, set on Jan. 28.

Stephanie N. Rotondo contributed to this review

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