Upsized Steel Dynamics, Alion, Parker deals price, First Data falls; funds jump $795 million

By Paul Deckelman and Paul A. Harris

New York, March 11 - Steel Dynamics, Inc. came to market on Thursday with an upsized $350 million offering of 10-year notes - one of a slew of high yield deals which priced during the very busy session, racking up a total of more than $1.4 billion and €1.9 billion face amount of new paper. Besides the Fort Wayne, Ind.-based metals producer, pricings were seen from McLean, Va.-based defense contractor Alion Science & Technology Corp., from Houston-based energy operator Parker Drilling Co. and from Scott Depot, W.Va.-based International Coal Group, Inc., which priced, respectively, issues of $310 million, $300 million and $200 million.

New York-based office REIT SL Green Realty Corp. and its Reckson Operating Partnership LP subsidiary also weighed in with a $250 million 10-year offering, although the deal came off the high-grade desks of the participating banks, despite the company's ratings in the high BB range.

From the Continent meantime came word of three euro-denominating pricings, as French beverage maker Pernod Ricard SA came to market with a €1.2 billion offering of six-year notes and French carmaker Renault SA priced €500 million of seven-year paper, while Swedish maritime company Stena AB did an upsized €200 million 10-year notes deal.

Price talk emerged on Chicago diversified industrial manufacturer Amsted Inc.'s $500 million of eight-year notes, which are expected to price Friday after the mid-morning closing of the deal's order books, and on Huntsman International LLC's $250 million of 10-year senior subordinated notes. The Salt Lake City, Utah-based chemical maker's issue could also price as soon as Friday after the final order books are closed.

Away from the new-issue market, First Data Corp.'s bonds slid in heavy trading after the Atlanta-based electronic payments processor reported fourth-quarter numbers that included a year-over-year fall in EBITDA and its chief executive officer announced plans to leave the company.

Junk funds see $795 million inflow

And as trading was finishing up for the day, market participants familiar with the fund-flow statistics generated by AMG Data Services of Arcata, Calif. - a closely watched indicator of overall junk market liquidity trends - reported that in the week ended Wednesday $795 million more came into those weekly-reporting high yield funds than left them.

It was the third consecutive cash infusion for the junk market as it continued to bounce back from two massive outflows seen before that -- $984 million in the week ended Feb. 10, followed by another $916 million in the week ended Feb. 17 - which had reflected at least a temporary state of heightened investor angst, leading to a spate of redemptions from the funds.

However, between the latest inflow and the $784 million which came into the funds over the previous two weeks, according to a Prospect News analysis of the AMG figures -- $314 million in the week ended Wednesday, March 3 and $470 million in the week ended Feb. 24 - inflows over that three-week winning streak have now totaled $1.579 billion, according to the Prospect News analysis.

That, in turn, has lifted the year-to-date net inflow total for 2010 to $1.222 billion, according to the analysis, from $427 million last week. The fund flows have gyrated between a peak cumulative inflow level of $1.576 billion seen in the week ended Jan. 20, and a net outflow of $357 million seen in the Feb. 17th week, which had been the first such year-to-date net loss for the funds since early April of 2008, according to the analysis. In the 10 weeks since the beginning of this year, AMG has now reported seven inflows, including this week's, against three weeks of outflows, the analysis indicated.

EPFR sees $1.19 billion cash gain

Another fund-tracking service - Cambridge, Mass.-based EPFR Global, whose methodology differs somewhat from AMG - meantime also reported that some $1.19 billion more came into the funds than left them in the latest week - the largest weekly inflow EPFR has seen since it began tracking the junk funds' flows in late 2004.

That huge cash infusion followed the $476 million inflow seen in the previous week, which, along with the week before's $632 million liquidity injection - following the pattern seen in the AMG figures - had also lifted the funds from a two-week rut in the Feb. 10 and Feb. 17 weeks, which had seen some $1.76 billion of combined outflows.

Reflecting the difference in the way AMG and EPFR calculate their respective fund-flow totals, the latter -- which includes results from some non-U.S. domiciled funds -- said that on a year-to-date basis, the mutual funds are now showing a $2.75 billion net inflow, widening from $1.56 billion in the previous week. The latest week's figure represents a new peak level for the year.

The company's analysts attributed the record flow of money into the junk funds, as well as into emerging market bond funds, to expectations of lower default rates, the hunger for yield and the prospect of a resolution for Dubai World's debt problems.

Any and all cumulative fund-flow totals, whether for AMG or EPFR, can include unannounced revisions and adjustments to figures from prior weeks.

The flow of money into and out of the junk bond funds is seen as a generally reliable barometer of overall high yield market liquidity trends - although they comprise less of the total monies floating around the high yield universe than they did in the past.

Last year's strong pattern of inflows - with AMG reporting over $20 billion having come in to the weekly-reporting funds over the course of the year, along with over $10 billion more into funds which only report on a monthly, rather than weekly basis, and EPFR posting similarly robust numbers - was seen as a proxy for the overall surge of liquidity into the junk market from all sources, which helped to fuel record new-issuance of over $160 billion and unprecedented secondary returns topping 57%.

Hot primary

Meanwhile issuers continued to strike while the high-yield primary iron was hot on Thursday.

Nine issuers, each bringing single tranches of notes, combined to price $1.59 billion and €1.9 billion face amounts of new junk.

What is keeping the iron hot is the full-open flow of cash into speculative-grade bonds, sources say.

Steel Dynamics upsizes

Steel Dynamics, Inc. priced an upsized $350 million issue of 10-year senior notes (Ba2/BB+) at par to yield 7 5/8%, on Thursday.

The yield printed at the tight end of the 7¾% area price talk. The size was increased from $300 million.

Bank of America Merrill Lynch, Goldman Sachs & Co., JP Morgan and Morgan Stanley were joint bookrunners for the quick-to-market deal.

Proceeds will be used to repay bank debt and for general corporate purposes.

The deal went well and the order book was oversubscribed, according to an informed source.

Parker Drilling moves up timing

Meanwhile Parker Drilling Co. moved up timing on its $300 million issue of 9 1/8% eight-year senior notes (B1/B+), and priced the deal at par on Thursday.

The 9 1/8% yield printed at the tight end of the 9¼% area price talk.

The deal had earlier been expected to be Friday business.

Bank of America Merrill Lynch and RBS Securities Inc. were joint bookrunners.

Proceeds will be used to fund a cash tender offer and consent solicitation for all of the Houston-based drilling services company's $225 million of 9 5/8% senior notes due 2013 and for general corporate purposes, which may include the repayment of borrowings under its revolving credit facility.

The Parker Drilling book was also oversubscribed, according to a source close to the deal.

Alion notes/warrants deal

Meanwhile Alion Science & Technology Corp. priced a slightly upsized $310 million issue of note-and-warrant units.

The units are comprised of a 12% senior secured note and detachable warrants to purchase the company's common stock.

The notes, which were priced at 97.50, will pay a 10% cash coupon. The remaining 2% of the coupon will be paid in kind.

Credit Suisse ran the books for the deal, which was upsized from $300 million.

Proceeds will be used to repay the company's first-lien credit facility and to take out its subordinated notes and warrants.

Marketing the deal was largely a matter of getting accounts comfortable with its structure, according to an informed source, who added that once a comfort level was reach the book filled sufficiently for the issuer to increase the amount.

SL Green off the high-grade desk

Reckson Operating Partnership LP, an issuing entity of SL Green Realty Corp., priced a $250 million issue of 10-year senior unsecured notes (Ba2/BB+/BB+) at par to yield 7¾%.

The yield printed on top of the price talk.

Citigroup, Bank of America Merrill Lynch and Deutsche Bank Securities ran the books for the issue, which was priced off the high-grade desk.

Proceeds will be used to fund the company's previously announced tender offer for certain outstanding notes of Reckson and SL Green OP, with the remaining proceeds, if any, being used for general corporate purposes and/or working capital purposes.

The issuer is a New York-based real estate investment trust.

International Coal at the tight end

International Coal Group, Inc. priced a $200 million issue of 9 1/8% eight-year senior secured second-priority notes (Caa1/BB-) at 99.298 to yield 9¼%.

The yield printed at the tight end of the 9¼% to 9½% price talk.

Morgan Stanley & Co. Inc. and UBS Investment Bank were joint bookrunners.

Proceeds will be used to fund the purchase of the company's existing senior notes and for general corporate purposes.

Axtel taps 9% notes

Mexico's Axtel SAB de CV also issued into the dollar-denominated junk market on Thusday.

The telecom priced a $190 million add-on to its 9% senior notes (Ba3/BB-/BB) due Sept. 22, 2019 at 102.5 to yield 8.609%.

Credit Suisse and Bank of America Merrill Lynch were the bookrunners.

Pernod brings €1.2 billion

Thursday was also a busy day in the European high yield market, with three conspicuously higher-rated speculative grade credits combining to price €1.9 billion.

Pernod Ricard SA priced a €1.2 billion issue of 4 7/8% six-year notes (Ba1/BB+/BB+) at a 220 basis points spread to euro mid-swaps.

The spread came at the tight end of the mid-swaps plus 220 bps to 225 bps price talk.

Barclays Capital, HSBC, Mitsubishi UFJ Securities International and Natixis Bleichroeder were joint bookrunners.

Renault comes tight to revised talk

French auto-maker Renault SA priced a €500 million issue of 5 5/8% seven-year notes (Ba1/BB/BB) at a 280 basis points spread to euro mid-swaps.

The spread printed tight to spread talk of mid-swaps plus 280 bps to 290 bps. That talk had tightened from earlier guidance of mid-swaps plus 280 bps to 300 bps.

BNP Paribas, HSBC and Natixis Bleichroeder were joint bookrunners.

As with the above-mentioned SL Green Realty deal, Renault and Pernod were transacted from the high-grade desks.

Stena upsizes

Also from Europe, Sweden's Stena AB priced an upsized €200 million issue of 7 7/8% 10-year senior notes (/BB+/) at 98.3113 to yield 8 1/8%.

Informal price talk had been for a yield in the 8% area. The amount was increased from €150 million.

Deutsche Bank Securities and JPMorgan were joint bookrunners.

Three for Friday

The week's final primary market session gets underway with a trio of expected issuers set to price deals.

Amsted Industries Inc. talked its $500 million offering of eight-year senior notes to yield in the 8¼% area.

The books close at 11:30 a.m. ET on Friday, and the notes will price after that.

Morgan Stanley & Co. Inc., Bank of America Merrill Lynch and Wells Fargo Securities are joint bookrunners.

Meanwhile Huntsman International LLC talked its $250 million offering of 10-year senior subordinated notes (Ba3/CCC+) to yield in the 8¾% area.

Pricing is set for Friday morning.

Goldman Sachs & Co. has the lead.

Also Sitel, LLC is expected to price a $300 million issue of eight-year senior notes due 2018 (Caa2), via Goldman Sachs.

New Steel Dynamics strengthens

A trader said that Steel Dynamics' new 7 5/8% notes due 2020 had moved up to about 101½ bid, 102½ offered after having priced earlier in the session at par.

After that, a second trader saw the issue at 101¾ bid, 102¼ offered - and by the time trading had wound down, yet another trader pegged the new issue as high as 102 bid, 102¼ offered.

A market source meantime saw the company's existing 7 3/8% notes due 2012 having firmed more than a point on the day to just under the 104 level.

Parker pops in secondary

A trader saw Parker Drilling's new 9 1/8% notes as having broken at around 101 bid, after having priced at par earlier.

Several traders subsequently quoted the issue as having moved up to 102¼ bid, 102¾ offered.

International Coal climbs

When International Coal Group's new 9 1/8% senior secured notes were freed for aftermarket activity, a trader saw the issue bid at 101 - up solidly from the 99.298 level at which they had priced - but added "that could be higher." He said he had not seen any offerings on the paper as of that point.

However, a little later in the session, that trader reported the bonds trading at 101¼ bid, 102¼ offered.

At another desk, a trader did see the coal mining concern's new bonds as having firmed to 101 bid, 102 offered.

Alion trades

A trader said that the new Alion Science & Technology 12% senior secured notes had gotten as high as par bid after the issue priced earlier at 971/2. However, he had not seen any offerings on the units, consisting of the notes and equity warrants.

Another trader also saw a par bid, but did not report any offerings.

Wednesday deals hold their own

Among issues which priced during Wednesday's session, several traders saw GMAC Financial Services' 8% notes due 2020 having risen to the 98 5/8 bid, 98 7/8 offered level. That was up slightly from the 98.32 level at which the Detroit-based automotive and residential mortgage lender's $1.5 billion behemoth of an offering had priced on Wednesday to yield 8¼%.

One of the traders - noting the fact that there had been some trading in the new GMACs, while he saw no activity in some of the smaller deals which had priced on Wednesday, including Suburban Propane Partners, LP and Prestige Brands, Inc. - opined that "we [as a market] just like those benchmark deals." He said that smaller deals, such as the latter two, often just "don't show up" in the aftermarket.

When queried about how he thought the GMAC deal had actually done, given that it was only trading a little bit above its issue price, he remarked that that was okay, "as long as it's not going down."

He said that he did see Cincinnati Bell Inc.'s new deal - at $625 million large enough to show up on most people's radar screens -- having risen to 99½ bid, 99¾ offered. The Ohio telephone service provider's 8¾% senior subordinated notes due 2018 - upsized robustly from the originally announced $400 million - had priced late in the session Wednesday at 98.598 to yield 9%, but had seen no aftermarket dealings that session due to the lateness of the hour.

At another desk, the new Cincinnati Bells were pegged as good as 99 5/8 bid, 100 1/8 offered.

A market source meantime saw the company's existing 8 3/8% notes due 2014 up nearly ½ point to the 103 level; Cincinnati Bell plans to use proceeds from the new deal to redeem $375 million of the existing '14s.

Market indicators seen mixed

Among bonds not connected with the new-deal market, a trader saw the CDX Series 13 index unchanged on Thursday, quoting the market measure at 99 3/8 bid, 99 5/8 offered, after having gained 1/8 point in each of the three previous sessions.

The KDP High Yield Daily Index meanwhile fell by 9 basis points on Thursday to finish at 71.74, after having risen by 13 bps on Wednesday. Its yield widened by 5 bps to 7.96%, after having come in by 4 bps on Wednesday.

Advancing issues were ahead of decliners for a tenth consecutive session on Thursday, although their winning margin was just a couple dozen issues out of more nearly 1,600 tracked.

Overall activity, measured by dollar-volume levels, fell about 10% from Wednesday's pace.

A trader said that "basically overall, it seemed like a positive market." He said that he doesn't pay too much attention to the numerical indexes, but "the things that I've been watching all seem to have been moving up."

Another trader said that he saw "little flurries of activity here and there," with most of the action taking place in "off the run names."

First Data bonds slide

First Data Corp.'s bonds were sliding badly in very heavy trading on Thursday after the electronic payments processor reported fourth-quarter numbers which on the surface seemed favorable - but which in reality were not. Adding to the uncertainty about its prospects, First Data announced that its CEO, Michael Capellas, will leave that post to take a position with First Data's owner, Kohlberg Kravis Roberts & Co.

A market source saw over $60 million of the company's 10.55% senior PIK notes due 2015 having changed hands by the close, making it easily the busiest credit in Junkbondland on Thursday. The bonds lost some 7 points to end at the 85 level.

'The company's 11¼% senior subordinated notes due 2016 dropped more than 2 points to just below the 82 level, with over $20 million traded, while its 9 7/8% notes due 2015 were seen off nearly 4 points, trading under 88 bid, also in fairly active dealings.

As to what was battering those bonds, a trader pointed to the fourth-quarter earnings figures. While net losses for the quarter were $338 million - a considerable improvement from the year-earlier red ink of $3.2 billion, which included a more than $3 billion writedown - its adjusted EBITDA fell to $530 million from $645 million in the 2008 quarter.

"The quarterly results came in "slightly below estimates," another trader said, "and the outlook for 2010 was not great."

Yet another trader laid the blame on the impending departure of CEO Capellas. "It's never good news when the CEO gets up and leaves. People don't like change - the CEO walking out on the company is usually not a good sign" - even if, as in this case, it seems to be more a case of KKR wanting Capellas to work directly for them, rather than the idea of the executive jumping ship.

At another desk, a trader declared that "the fact that Capellas left, and they missed on earnings did not give people a warm and fuzzy feeling. Additionally, this market is getting pricey - people are looking for things to sell, and bad news brings out the sellers."

A further surge for Psychiatric Solutions

Psychiatric Solutions Inc.'s 7¾% senior subordinated notes due 2015 continued to push upward on speculation that the Franklin, Tenn.-based provider of behavioral health services might be trying to sell itself . That buyout buzz had pushed those bonds up by around 4 points in brisk trading on Wednesday.

In Thursday's dealings, a trader saw the bonds trade up to about 102 - Wednesday's high-water mark - up from the 100¾ at which the paper had been seen going home on Wednesday.

He said the bonds were "all over the place," but that "not a lot of trades took place.

The bonds jumped on Wednesday afternoon after the Wall Street Journal's online edition reported that the company is in talks to be acquired by private-equity firm Bain Capital, looking for a deal that would give it around a 25% premium to its current market price, and would include the assumption of Psychiatric Solutions' outstanding $1.2 billion of debt, including the $220 million of 2015 bonds.

Bain Capital did not comment on the report. Psychiatric Solutions - without naming specific names of any would-be buyers - confirmed Wednesday that it "has been approached by third parties in connection with a potential acquisition of PSI."

New Catalyst bonds push upward

A trader saw Catalyst Paper Corp.'s new 11% notes due 2016 "up a point or two" in the 101½ bid, 102 offered area, trading on a when-issued basis.

The Richmond, B.C. -based coated paper company is issuing the 11s to the former holders of its old 8 5/8% notes due 2011, most of which were tendered back to the company in a recently concluded exchange offer. With almost all of them having been tendered, the trader said that for all intents and purposes, the old bonds "are gone."

Another trader saw the new 11s start at 101-102, and tighten to around 101 3/8-101 5/8

Auto issues steady

A trader said that General Motors Corp.'s benchmark 8 3/8% bonds due 2033 were "about the same" trading in a 31-32 context, on "some trading, not a lot." However, GM domestic arch-rival Ford Motor Co.'s 7.45% bonds due 2031 were also unchanged at 90 bid, 91 offered, he said.

Another trader saw the GM benchmark bonds at 32½ bid, 33½ offered, which he called up ½ point, while seeing the Ford long bonds steady at 89½ bid, 90½ offered.

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