Primary quiets, though Associated Asphalt on tap, Cornerstone hits road; GGS dives on numbers

By Paul Deckelman and Paul A. Harris

New York, Feb. 26 - The high-yield primary arena turned decidedly quiet on Tuesday, with market participants having seen no dollar-denominated, junk-rated deals coming to market during the session, even though the overall tone seemed a little brighter than Monday's equity-influenced sogginess.

Only two nuggets of news were heard coming out of the new-deal sphere.

Price talk emerged on Associated Asphalt Partners LLC's $175 million offering of five-year senior secured notes, which is scheduled to come to market on Wednesday.

Syndicate sources said that Cornerstone Chemical Co. had begun a roadshow for a $220 million issue of secured five-year paper; presentations were scheduled for this week on the East Coast, while West Coast investors get a look at the planned transaction next week.

Recently priced names like TRW Automotive Inc., which did a deal on Monday, and Goodyear Tire & Rubber Co., which came to market last week, were seen by traders to be pretty much still holding their own. While Goodyear remained one of the busiest junk names, overall activity was seen as pretty light for a second straight session, with the J.P. Morgan junk bond conference in Florida still putting a damper over activity.

Away from the new deals, Global Geophysical Services Inc.'s bonds tumbled in brisk trading, in line with a plunge in the energy industry seismic services provider's shares following worse-than-expected fourth-quarter numbers.

Statistical indicators of junk market performance were mixed for a second consecutive session on Tuesday.

No deals

The primary market put up a goose egg on Tuesday.

Secondary trading was muted, and primary market news practically non-existent, as numerous players attended the J.P. Morgan high yield and leveraged finance conference, in Miami, sources said.

Also impeding the high-yield news flow was the corporate earnings blackout season, which is now concluding, they added.

Things could change soon, sellside sources advised.

Look for BofA Merrill Lynch to bring at least one deal before the end of the present week, according to sources.

And when its conference winds up, J.P. Morgan is expected to hit the ground running during the March 4 week, with deal announcements expected.

Cornerstone's $220 million

Parsing Tuesday's minimal news flow, Cornerstone Chemical started a roadshow for its proposed $220 million private placement of senior secured notes due 2018.

Imperial Capital and Keybanc Capital Markets are the placement agents.

The deal is a Regulation D private placement, with no registration rights, however the bonds are expected to trade Rule 144A-style.

Credit ratings in the low single-B range are expected.

Proceeds will be used to repay debt and to pay a cash dividend to shareholders.

Associated Asphalt sets talk

In the straight-up high-yield primary, Associated Asphalt Partners talked its $175 million offering of five-year senior secured notes (Caa1/B) to yield 8½% to 8¾%.

Books close at noon ET on Wednesday, and the deal is set to price after that.

Goldman Sachs & Co., KeyBanc Capital Markets and SunTrust Robinson Humphrey Inc. are the joint bookrunners.

Associated Asphalt is one of three deals roadshowing during the February-March crossover week.

Also on the road are Noranda Aluminum Acquisition Corp. with a $225 million offering of 6.25-year senior notes (existing ratings Caa1/CCC+) via BofA Merrill Lynch, Citigroup Global Markets and UBS Investment Bank. No price talk has circulated, but guidance is in the mid-9% range.

And Avis Budget Finance plc is shopping €250 million of eight-year senior notes (existing senior unsecured ratings B2/B) via Citigroup, Credit Agricole CIB, Deutsche Bank and JP Morgan. Again, there is no official price talk, but market chatter has the deal coming in the context of 5¼% to 5½%.

Official timing has not materialized. However the market expects that both of Noranda and Avis could be Friday business.

Conference continues as a factor

In the secondary market, a trader declared that "there were no new deals today, and the J.P. Morgan conference - so there really was a little bit of a lack of activity here.

"It was a pretty light day."

Several market participants have cited the numbing effect on overall market activity levels of the big investment bank's annual high yield and leveraged finance conference taking place in Miami through Wednesday; the get-together is traditionally one of the high points of the Junkbondland yearly calendar, attracting numerous portfolio managers and other senior decision-makers, making for a usually quiet market otherwise.

TRW holds gains

In the absence of any new primaryside activity, traders saw TRW Automotive's 4½% notes due 2021 continuing to trade at a modest premium to the par price at which that paper came to market on Monday.

One quoted the $400 million issue at 101 bid, while a second pegged the notes at 100 5/8 bid, 101 offered.

After the Livonia, Mich.-based automotive systems and components manufacturer's drive-by issue priced on Monday, those bonds had been initially seen in a 100¾ to 101¼ bid context, before going home around 100 7/8 bid.

Aramark, Station little changed

Friday's deals from Aramark Corp. and Station Casinos LLC were seen little changed on Tuesday from the levels they had held on Monday.

A trader said that Aramark's 5¾% notes due 2020 were trading in a locked market at 101 7/8.

A second trader quoted the bonds at 101½ bid, 102¼ offered.

The Philadelphia-based food service company and uniform supplier's $1 billion quick-to-market offering had priced at par and then moved up to around a 101¾ 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.

Las Vegas-based gaming concern Station Casinos' 7½% notes due 2021 straddling their par issue price on Tuesday, at 99¾ bid, 100¼ offered.

After Station had priced its $500 million issue, 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.

Goodyear stays active

One of the traders quoted Goodyear Tire's 6½% notes due 2021 at 101 bid, "hanging right in there."

He said that the Akron, Ohio-based tiremaking giant "is a good name - people are comfortable with it."

A second trader located the bonds trading between 100½ and 101½ bid.

Goodyear priced its quickly shopped $900 million issue at par last Wednesday after upsizing the transaction from an originally announced $750 million. The bonds were seen in Wednesday's aftermarket 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, when a market source said that 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. The bonds continued to trade in a mostly narrow range, except for one late trade as high as 103¼ bid before lapsing back to around 101 bid going home.

On Tuesday, another $17 million of the new notes traded in round lots, with several million more in volume from busy odd-lot dealings, once again putting Goodyear at or at least near the top of the most-actives list. The bonds once again pushed as high as the 103 level, albeit on a smallish trade late in the session, before going out just below 101, about unchanged on the day.

Where is Clear Channel?

A trader said that Clear Channel Communications Inc.'s new 11¼% priority guarantee notes due 2021 "just disappeared."

He noted that San Antonio, Texas-based broadcasting and outdoor advertising company's same-day deal "shot up" to around the 101 bid level after that $575 million had priced at par on Thursday, upsized from the originally announced $500 million.

"We got caught in that one too," he admitted.

After hitting such heights, he said, "everybody found out that they got as many bonds as they put in for," causing aftermarket levels to slide from 101 to around 100 1/8 to 100¼ bid.

"That was weird," he declared.

A second trader quoted the bonds as having dropped back to 99¾ bid, 100¼ offered.

The company's existing 9% notes due 2021 meantime lost 1½ points to end at 91¼ bid.

Its 11% notes due 2016 were seen trading around the 76 bid mark.

Global Geo crushed

Away from those new or recent deals, activity was fairly quiet, although there were some exceptions.

One such case was Global Geophysical Services' 10½% notes due 2017.

A market source saw the notes plunge nearly 5 points on the day to end at 79½ bid, on volume of over $21 million.

The notes swooned in tandem with the company's New York Stock Exchange-traded shares, which nosedived by 40 cents, or 13.89%, to close at $2.48, on volume of 1.18 million, almost seven times the norm.

The bonds and shares got crushed after the Missouri City, Texas-based provider of seismic services to the energy drilling industry reported that in the fourth quarter it lost $28.6 million, or 76 cents per diluted share, a sharp deterioration from a year earlier, when the company had earned $1.4 million, or 4 cents per share. The loss was far wider than the roughly 13 to 15 cents of red ink that Wall Street was looking for.

On top of that, revenues slid 51% year over year to $55.3 million from $113 million a year earlier; the revenue total came in well under analysts' expectations of around $95 million.

Penney quiet before earnings

Also on the earnings front, a trader said that he did not see much activity Tuesday in J.C. Penney Co. Inc.'s bonds, ahead of the Plano, Texas-based department store retailer's scheduled release of its fourth-quarter numbers on Wednesday afternoon.

"There were sellers around," he said, although he was not sure how much the bonds were down. "But there were definitely sellers around on that one."

He said the company's 7.95% notes due 2017 "traded down a little bit," estimating the paper to be off 3/8 point to ½ point around the 97 bid area, but on "not much volume."

Analysts say that Penney is expected to report a quarterly loss - and a 26% year-over-year drop in same-store sales, the key retailing industry performance measure.

Market indicators stay mixed

Statistical junk market performance indicators were mixed for a second straight session on Tuesday; before that, they had moved higher across the board on Friday.

The Markit Series 19 CDX North American High Yield Index rose by ¼ point on Tuesday to end at 102 1/8 bid, 102 3/8 offered, after having fallen by 21/32 point on Monday.

However, the KDP High Yield Daily Index lost 4 basis points to finish Tuesday at 75.24, after having had gains for the two sessions before that, including Monday's 2 bps advance.

Its yield was unchanged at 5.67%, after having declined by1 bp on Monday, its second consecutive narrowing.

The widely followed Merrill Lynch High Yield Master II index fell by 0.082% on Tuesday, in contrast to Monday's 0.172% gain, its second in a row.

The loss dropped the index's year-to-date return down to 1.59% from 1.674% on Monday. It also remained well down from its peak level for 2013 so far of 1.991%, set on Jan. 28.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.