Visant paper jumps in heavy trading on Jarden buyout news; market softer; primary stays quiet

By Paul Deckelman and Paul A. Harris

New York, Oct. 14 – The high-yield market was softer for a second straight session on Wednesday, traders said.

But there’s an exception to every rule, and Wednesday’s outlier was Visant Corp., whose bonds surged in heavy trading on the news that the company – best known as the leading producer of school yearbooks, class rings and other such commemorative educational keepsakes – has agreed to be acquired by consumer products manufacturer Jarden Corp.

The latter company’s notes were meantime little changed on expectations that whatever financing it lines up for the $1.5 billion acquisition should have little or no impact on the company’s credit.

Energy-sector names like California Resources Corp. remained under pressure as crude oil prices eased slightly amid more signs of continued sluggish world economic conditions, which are expected to hold down demand for energy.

The primary arena meanwhile remained quiet. A roadshow was scheduled to begin for the sole dollar-denominated deal being marketed, an eight-year offering from medical devices manufacturer Greatbatch Ltd.

Statistical measures of junk market performance turned lower on Wednesday after having been mixed first on Friday and then again on Tuesday, which, in turn, had followed higher across-the-board sessions last Wednesday and Thursday.

Wednesday’s lower session was the first such downside day the indicators have seen since Sept. 29.

Lowell price talk

No deals priced during the Wednesday session in the high-yield primary market.

The news flow remained thin.

Lowell Group set price talk in its £795 million two-part offering of high-yield notes and accelerated the timing.

The deal is comprised of £555 million of seven-year senior secured notes (B2/B+) talked to yield 8½% to 8¾%. Goldman Sachs International will bill and deliver for the secured tranche.

It also includes £240 million of eight-year senior unsecured notes (Caa1/B-) talked to yield 10¾% to 11¼%. Credit Suisse will bill and deliver for the unsecured tranche.

Books were scheduled to close late in the London session on Wednesday, which accelerates the timing, the source said.

When the deal was announced, timing had the roadshow continuing into Thursday.

Goldman Sachs, Credit Suisse, Citigroup, ING and JPMorgan are the joint bookrunners.

Proceeds will be used to fund the leveraged buyout of the Leeds, England-based debt collector by Permira, to redeem Lowell’s 5 7/8% senior secured notes due 2019 and 10¾% senior secured notes due 2019 and for general corporate purposes.

Dollar market dormant

There was no news whatsoever from the dollar-denominated primary market.

There one dollar-denominated deal on the road.

Greatbatch was scheduled to start a roadshow on Wednesday for a $360 million offering of eight-year senior notes (Caa1/B-), an acquisition financing via Credit Suisse and KeyBanc.

Early guidance has the notes coming in a yield range of 8% to 8½%, a trader said.

The deal is set to price early in the week ahead.

Flat flows

The cash flows of the dedicated high-yield funds were slightly positive but essentially flat on Tuesday, the most recent session for which data was available at press time, according to a portfolio manager.

High-yield exchange-traded funds saw $5 million of inflows.

Actively managed funds saw $60 million of inflows.

Meanwhile, dedicated bank loan funds sustained $15 million of outflows on Tuesday.

Visant boosted by sale news

In the secondary arena, a trader said the Visant 10% notes due 2017 had gone home on Tuesday quoted at 83¾ bid but zoomed up to 102¼ on active volume on Wednesday, powered by the news of the planned acquisition of the Minneapolis-based company by Boca Raton, Fla.-based Jarden, a transaction valued at $1.5 billion.

A trader noted that the closing price was right around where the roughly $736 million of outstanding bonds are currently callable.

A second trader, who also saw the bonds up 18½ points on the day at 102¼, said that the Visant bonds were easily the most actively traded name in Junkbondland on Wednesday, with over $110 million having changed hands.

In contrast, the first trader said, “there was not much volume” in Jarden’s 6 1/8% notes due 2022. He saw the notes going home in a 103-to-103¼ bid context, calling that unchanged on the day.

A second source saw the bonds down 3/8 point at 103¼ bid, but with only about $4 million having traded.

Jarden said that it was evaluating what form its financing for the Visant purchase would take – perhaps bonds, perhaps bank debt or equity – or just funding it from excess cash on hand.

At the Gimme Credit independent investment advisory firm, senior analyst and director of high-yield research Kim Noland noted that the Visant acquisition “is not huge in the context of Jarden's $10 billion in revenue plus management said there was about $600 [million]-$700 [million] cash on hand, so even if the purchase is partially debt-financed, we don't expect a big change to its credit quality.”

Noland said that her firm’s expectation is that the BB-rated Jarden “will refinance the expensive 10% Visant bonds which are currently callable at 102.5 at its much lower cost of capital.”

Sun Products pops

Elsewhere, a trader noted that Sun Products Corp.’s 7¾% notes due 2021 were among the most active issues, with over $19 million having traded during the session, firming to around the 90¾ bid mark.

A second trader also saw the bonds at that level, which he called “pretty active today” and up between 1 point and 1¼ points on the session.

But he said that he had seen no fresh news up to that point about the Wilton, Conn.-based manufacturer of detergents, household cleansers and other consumer products that might explain the sudden activity in the paper.

Energy names off again

Energy-related credits were generally lower on the session on Wednesday amid continued feeling in the commodities markets that crude oil prices will remain weak on muted world demand for oil due to economic problems in many areas.

The benchmark West Texas Intermediate crude grade for November delivery lost 2 cents on the session Wednesday, ending at $46.44 per barrel, after having dropped by 44 cents per barrel on Tuesday.

That helped hold prices of energy issues back including Los Angeles-based oil and natural gas exploration and production operator California Resources. Its 6% notes due 2024 sank by 1 5/8 points to 67 3/8 bid, with over $40 million of the bonds having traded.

Oklahoma City-based oiler Chesapeake Energy Corp.’s 5¾% notes due 2023 lost 1 point to end at 70½ bid, on volume of over $17 million.

Indicators turn lower

Generally speaking, a trader said, “the market was a little squishy today. It wasn’t off by much, but it was a little softer.”

Accordingly, statistical measures of junk market performance turned lower on Wednesday after having been mixed first on Friday and then again on Tuesday, which followed higher across the board sessions last Wednesday and Thursday.

Wednesday’s lower session was the first such downside day the indicators have seen since Sept. 29.

The KDP High Yield Daily index suffered its first loss after having pushed higher over the previous six straight sessions and in seven out of the previous nine sessions. It finished off by 11 basis points on Wednesday, closing at 67.19, after having edged up by 1 bp on Tuesday.

For a second straight session, the index’s yield – which normally moves inversely to the index, rising when the index falls and vice versa – did not conform to the usual pattern; the yield also fell on Wednesday, coming in by 1 bp to end at 6.57%, its first narrowing after Tuesday’s 2 bps widening. It was the yield’s sixth such tightening in the last seven sessions and seventh in the last 10 trading days.

The Markit Series 25 CDX North American High Yield index saw its second straight loss on Wednesday, dropping by 5/32 point to finish at 101 5/8 bid, 101 11/16 offered. That followed Tuesday’s ½ point downturn. Before that, the index had been unchanged on Monday, when it was published despite the Columbus Day market close. It had also eased by 1/16 point on Friday, following stronger finishes last Wednesday and Thursday.

The Merrill Lynch North American Master II High Yield index was also down for a second consecutive session Wednesday, backtracking by 0.074%, on top of Tuesday’s 0.178% retreat – its first loss after having posted gains in six consecutive sessions and in seven out of the previous nine sessions.

Wednesday’s loss increased the index’s year-to-date deficit to 0.642% from 0.569% on Wednesday, although that’s still a considerably smaller cumulative loss than the 3.069% year-to-date loss seen on Oct. 2 – the most red ink for the year so far and the index’s lowest level since Oct. 5, 2011, when the market measure had shown a 3.834% year-to-date deficit.

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