Primary remains on hiatus; secondary mixed as stocks slide; Bombardier off on Lear troubles

By Paul Deckelman and Paul A. Harris

New York, Aug. 24 – The high-yield primary market remained in its mid-summer holding pattern on Wednesday. Syndicate sources again reported no new deals having been announced, let alone having priced, a situation that is expected to continue at least until after next week’s Labor Day holiday weekend.

The secondary market also remained quiet on Wednesday, traders said.

Recently priced new deals mostly continued to trade at a premium to their respective issue prices and in some cases were even adding to those gains, such as the deals from Tallgrass Energy Partners, LP and Big Tex Trailers, although activity remained on the quiet side.

The overall market, which has recently been seen as well bid for, softened a little on Wednesday to more of a mixed bag, at least partially affected by the retreat in the equity markets.

One notable loser on the day was Bombardier, Inc., whose bonds lost some altitude after the Canadian aircraft manufacturer reported slower sales for its Learjet line of business jets, saying it would transfer some employees to other operations – and hinting that it could still announce layoffs if need be.

Bonds of private prison operator GEO Group, Inc. remained better bid for on Wednesday, continuing to rebound following last week’s swoon on the news that the Department of Justice will begin phasing out the use of privately run corrections facilities such as those run by GEO. However, sector peer Corrections Corp. of America, whose paper had also been improving, was mixed on the day.

Statistical market performance measures turned mixed on Wednesday after having been better across the board on Tuesday. It was their third mixed session in the last four trading days.

Source predicts busy September

The primary market remained dormant on Wednesday. Sources continue to forecast that the dormancy will remain until after the conclusion of the Labor Day holiday weekend.

However, there will be new issue activity during that post-Labor Day week, a syndicate banker said on Wednesday.

And September will be a busy month in the primary market, the source added.

Modest positive flows

The daily cash flows of the dedicated high-yield bond funds remained modestly positive on Tuesday, the most recent session for which data was available at press time, a trader said.

High-yield exchange-traded funds saw $12 million of inflows on the day.

Actively managed funds saw $45 million of inflows on Tuesday.

Dedicated bank loan funds, meanwhile, saw $52 million of inflows on Tuesday.

Market softens a little

In the secondary arena – which had been seen as mostly firmer over the past session or two – a trader said that the market “kind of gave it up a little bit” on Wednesday.

“We were hanging in there for most of the day, but then this afternoon, it kind of felt a little softer after equities rolled over.”

The stock market bellwether Dow Jones industrial average retreated by 65.082 points, or 0.35%, ending at 18,481.48, while other, broader indexes followed pretty much the same trajectory.

The trader also noted that “oil has obviously been down and down the whole day,” further dampening enthusiasm.

He said that with “no new issues to speak of, the secondary flows have been pretty light.”

Wednesday, he said, was “a pretty decent day in terms of secondary volume,” at least for mid-August, but he added that the day’s focus – at his shop, anyway – was “a little bit of high-yield secondary but more of loans.”

Bombardier hits turbulence

Among specific issues, a market source noted that Bombardier’s 7½% notes due 2018 were down by as much as 4 points, to the 101 bid area.

He cited the news that the Montreal-based aircraft and railroad equipment maker’s Learjet line of light business aircraft is having trouble.

Bombardier said that it was planning to transfer some workers from its Learjet production line to other parts of the operation.

The company also refused to rule out the possibility of layoffs at Learjet’s facilities in Wichita, Kan.

Bombardier has several other operations in that area.

Learjet’s sales have been hurt in recent months both by an overall softness in the market for smaller business jets such as its seven-to-nine-passenger planes and competition from other industry players such as Embraer SA and Textron Inc.

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