Dufry, Tervita, Caribbean price to cap $10 billion week; ATP, AMD slide badly

By Paul Deckelman and Paul A. Harris

New York, Oct. 19 - The high-yield primary market saw a trio deals totaling nearly $1 billion price on Friday, from travel retailer Dufry AG, environmental and energy services operator Tervita Corp. and from lender Caribbean Financial Group Holdings, LP.

The new bonds from Switzerland-based Dufry firmed smartly when they were freed for secondary dealings. Traders saw no trace of Tervita or Caribbean Financial, even though the latter issue priced before the other two.

Those deals pushed the week's total issuance of U.S. dollar-denominated, purely junk-rated paper from domestic or developed-country issuers up to the $10 billion mark, topping the roughly $7 billion of new bonds priced in the week ended Oct. 12, although that previous week lost a trading day due to the Columbus Day holiday observance.

The primaryside activity pace remains red hot, with year-to-date totals running 48% ahead of the pace seen last year at this point on the calendar.

Apart from the deals that priced Friday, the new-issue realm saw Warner Music Group Corp. announce plans for a new eight year notes deal. Syndicate sources said the company will hit the road to begin marketing its notes in Europe and the United States starting Monday.

The sources also heard new deals coming, with less fanfare, from Laureate Education Inc. and from industrial manufacturer Shale-Inland Holdings, LLC.

The forward calendar lost a deal, as countertop and floorings manufacturer Wilsonart International Inc. was heard by the sources to have scrubbed plans for a $300 million bond deal.

Among recently priced issues, technology provider SunGard Data Systems Inc.'s mega-deal moved up on the session despite a generally weaker market tone. More typically, issues such as that from aluminum producer Aleris International Inc. backed slightly off from Thursday's peak levels, but still held on to most of their aftermarket gains. Energy driller Vantage Drilling Co. continued to struggle.

Away from the new deals, energy operator ATP Oil & Gas Corp.'s bonds plunged in very heavy trading, and semiconductor maker Advanced Micro Devices Inc. also took a pounding, the latter on disappointing quarterly numbers. But SuperValu Inc.'s bonds continued to firm.

The supermarket operator's paper bucked a trend of overall market weakness, as junk seemed to follow the lead of stocks, which had their worst close in four months. Statistical junk bond performance measures were lower almost across the board on the day, but were solidly higher than where they had closed out the previous week.

Dufry prices at tight end

The Friday session saw a trio of off-the-run issuers, each bringing a single tranche of notes to raise a combined total of $960 million.

Switzerland's Dufry Finance SCA priced a $500 million issue of eight-year senior notes (Ba3/BB+/BB) at par to yield 5½% on Friday, according to a syndicate source.

The yield printed at the tight end of the 5½% to 5¾% yield talk.

Credit Suisse and Bank of America Merrill Lynch were the joint global coordinators for the debt refinancing deal.

Credit Suisse, Bank of America, Banco Bilbao, Credit Agricole, Goldman Sachs, ING, HSBC, Morgan Stanley, Raiffeisen, RBS, Santander, UBS and UniCredit were the joint bookrunners.

Tervita at the wide end

Tervita priced a $290 million issue of 9¾% seven-year senior notes (Caa2/CCC+) at 98.756 to yield 10%, at the wide end of the 9¾% to 10% yield talk.

Deutsche Bank was the left bookrunner. Goldman Sachs, RBC and TD were the joint bookrunners.

The Calgary, Alta.-based environmental and energy services company plans to use the proceeds to repay debt under its U.S. dollar- and Canadian dollar-denominated revolvers, as well as to pay fees and expenses related to an amendment to its senior secured credit facilities, and for general corporate purposes.

Caribbean Financial at 98

Caribbean Financial Group priced a $178 million 11½% issue of seven-year notes (B3/B/) at 98 to yield 11.926%.

The notes, via bookrunner Jefferies, priced on top of price talk.

The debt refinancing deal played predominantly to high-yield accounts, according to an informed source. The consumer finance company is based in Guaynabo, Puerto Rico-based and operates in Panama, Aruba, Curacao, Trinidad & Tobago, St. Maarten and Bonaire.

Warner Music in dollars, euros

Friday saw a build-out in the calendar for the week ahead.

Warner Music will begin a roadshow on Monday in London for a $635 million dual-currency offering of eight-year senior secured notes.

The deal, which is coming in dollars and euros, is guided in the low 6% yield context, according to a buyside source.

A roadshow in the United States gets underway on Tuesday, and the deal is set to price late in the Oct. 22 week.

Credit Suisse, Barclays, UBS, Macquarie and Nomura are the joint bookrunners for the debt refinancing deal.

Laureate starts Monday

Laureate Education plans to start a roadshow on Monday for a $350 million add-on to its 9¼% senior notes due 2019 (existing ratings Caa1/CCC+).

J.P. Morgan, Barclays, Citigroup, BMO, Credit Suisse, Goldman Sachs, KKR and Morgan Stanley are the joint bookrunners for the debt refinancing.

Shale-Inland to sell secureds

Shale-Inland Holdings, LLC and Shale-Inland Finance Corp. will begin a roadshow on Monday for a $250 million offering of seven-year senior secured notes, which are set to price late in the Oct. 22 week.

UBS is the left lead bookrunner for the debt refinancing deal. Barclays, Deutsche Bank and BMO are the joint bookrunners.

A look at the calendar

Aside from deals announced on Friday, the Oct. 22 week gets underway to a substantial calendar, at least in terms of deal volume.

Shearer's Foods Inc. is in the market with a $210 million offering of seven-year senior secured notes (B3/expected B) via BMO, Barclays and KeyBanc.

The deal, which is expected to price at mid-week, is being discussed in a mid-to-high 9% yield context, according to a trader.

Also, Sidewinder Drilling Inc. is marketing a $225 million offering of seven-year senior notes via Jefferies.

Sidewinder has preliminary guidance of 9½%, according to a buyside source.

Feeling the pinch

High yield felt the pinch from falling stock prices on Friday, the buysider remarked just after the close.

With the Nasdaq composite index falling 2.2% - mostly on negative sentiment generated by tech stocks including Apple, Google and Microsoft - the CDX 19 high yield index finished a point lower, the source said.

Prices of some freshly minted junk bonds also showed the strain.

The Vantage Drilling (Offshore Investment Group Ltd.) 7½% notes due November 2019 (B3/B-), which priced at par on Tuesday in a $1.15 billion issue, were at 98¼ bid 99¼ offered late Friday, the buysider said.

The PPDI (Jaguar Holding Co. I) 9 3/8%/10 1/8% senior PIK toggle notes due October 2017 (Caa1/CCC+/) which priced at 98.064 on Oct. 10 in a $525 million issue, had traded as much as 5 points above issue price, the buysider said, but added that late Friday they were quoted at 102 7/8 bid.

The bright spot is EPL Oil & Gas, Inc., the buyside said.

EPL priced a $300 million tack-on to its 8¼% senior notes due Feb. 15, 2018 (Caa1/B-/) at 99, with an 8.483% yield to worst, on Thursday.

The deal was going out at par ½ bid on Friday, according to the buyside source.

Elsewhere a sellside source said that junk has definitely come under some pressure, and added that even though Lipper AMG reported a modest $52 million of weekly inflows to high yield, the good news was concentrated in the mutual funds. The exchange-traded funds component saw $176.5 million of outflows.

That could explain some of the slippage in bond prices, the sell-sider said.

Dufry does better

When the new 5½% notes due 2020 from Swiss travel retailer Dufry were freed for secondary market dealings, they were seen by a trader to have moved up solidly to 101¾ bid, 102¼ offered.

A second trader, however, said that he "hadn't seen anybody quoting it."

The day's other two issues - from Tervita Corp. and from Caribbean Financial Group Holdings - were not seen trading around on Friday.

SunGard stays strong

A trader said that among the deals that priced on Thursday or before, "some of the deals were holding up," even amid a generally weaker junk bond market. "The overall tone followed stocks - very cautionary," he added.

Disappointing earnings from bellwether names like McDonald's Corp., Microsoft Corp. and General Electric Co. saddled stocks with their biggest loss in four months. The Dow Jones Industrial Average nosedived by 203.43 points, or 1.52%, to close at 13,343.50. The broader Standard & Poor's 500 index dropped by 1.66%, while the Nasdaq composite index - broader still - swooned by 2.19%

But back in Junkbondland, he said, the new deals managed to mostly stave off the weakness that had the market down more than a half-point, on average.

In particular, he said, SunGard Data Systems' 6 5/8% senior subordinated notes due 2019 were "really hanging in there," trading in a 101 to 101¼ bid context all day. "They hung in today in the face of everything," he said.

The Wayne, Pa.-based software and technical services provider's $1 billion drive-by deal - radically upsized from the originally planned $500 million - priced at par on Thursday, and rose to 100 5/8 bid, 101 1/8 offered in initial aftermarket dealings.

On Friday, the trader saw the bonds having actually moved up from Thursday's levels, to 101 bid, 101¼ offered.

A second trader pegged the new bonds at 101 1/8 bid, 101 5/8 offered.

Other deals hold their own

Among the other recent deals, the first trader said, Aleris International's 7 7/8% notes due 2022 "did very well," in managing to retain most of their gains even as the overall market was lower. He saw them trading on Friday at 101¼ bid, 101½ offered.

A trader at another desk located the bonds at 101 1/8 bid, 101 5/8 offered, down about 5/8 point.

The Beechwood, Ohio-based aluminum products company's $500 million of the bonds priced at par on Thursday, after having been upsized from an original $400 million. They traded up to 102 bid in immediate aftermarket dealings, then eased from that peak to go out on Thursday at 101¾ bid, 102¼ offered.

A trader said that Lennar Corp.'s 4¾% notes due 2022 "were hanging in there," right around the par level at which the Miami homebuilder had priced its quick-to-market $350 million deal.

Another trader said the bonds were hovering around par bid, 100¼ offered, unchanged on the session.

The new Energy Future Intermediate Holdings Co. LLC $253 million add-on to its existing $250 million of 6 7/8% senior secured first-lien notes due 2017 were seen trading into a 103¾ bid. The Dallas-based utility operator and merchant power producer - heir to the old TXU Corp. name and legacy - had priced the quick-to-market deal on Thursday at 103.375 to yield 5.972%. The bonds initially got as good as 104, but fell back to close at 103¼ bid.

Vantage still vanquished

A trader said that "the only deal that really got slammed this week" was Vantage Drilling's 7½% senior secured first-lien notes due 2019.

"That got hit," he declared, quoting the bonds offered at 99.

He was at a loss to explain the relatively poor performance of the Houston-based offshore energy contract drilling company's $1.15 billion issue, which had priced at par on Tuesday but struggled to stay above, or even at that level. After trading as high as par bid, 100¼ offered on Wednesday, the bonds headed south, dropping below the 99 level on Thursday and still staying there.

ATP battered down

In the secondary market, another energy name - ATP Oil & Gas - was clearly one of the big losers of the day, with over $100 million of the Houston-based exploration and production company's 11 7/8% second-lien notes due 2015 having changed hands, easily the busiest name in the junk market on Friday. On Thursday, volume had only been around $5 million.

A trader quoted those bonds around 17½ bid, 18½ offered, down more than 4 points on the session, ascribing the decline to "all kinds of rumors" floating around about the company, which filed for Chapter 11 protection earlier in the year.

A market source at another desk saw the bonds drop as low as 16¼ bid before coming up from that nadir to end at 18 3/16 - still down 3¾ points on the day.

Another trader cited a disappointing report about the company's oil and natural gas reserves.

"There was some [reserve] report that came out," he said. The report "didn't meet the numbers [the market] was expecting."

AMD on the slide

Also on the downside was Sunnyvale, Calif.-based semiconductor marker Advanced Micro Devices, whose 7¾% notes due 2020 were in freefall all day. They had finished on 98¼ bid on Thursday - but opened down at 91 on Friday, dropped as low as 86, and came back up only slightly to finish just under 87, for about an 11 point loss on the session. Volume was about $14 million.

The bonds - and the company's New York Stock Exchange-traded shares, which also took a beating - fell after AMD on Thursday reported a net loss of $157 million on revenues of $1.27 billion. That compared to a profit of $97 million on revenues of $1.69 billion the year before.

The swing to a loss was due in large part to declining PC sales, as consumers switch to tablets and smartphones.

On the loss, the company also said it was cutting about 15% of its workforce or about 1,800 jobs.

AMD also was not so optimistic on its fourth quarter.

Come Friday, Moody's Investors Service responded to the dismal earnings by downgrading the company's rating to B1 from Ba3. The ratings remain on review for a potential further downgrade.

SuperValu still strong

On the other hand, SuperValu's 8% notes due 2016 were up for a second straight session on Friday, despite the overall market weakness and despite the Eden Prairie, Minn.-based supermarket operator's own less-than-favorable quarterly numbers.

The bonds - which had risen 3 points on Thursday, on market-leading volume of $29 million, were up by another 2½ points Friday, closing out at 89 7/8 bid, a market source said. During the session, they had gotten as good as 901/4.

A trader cited statements by company executives on Thursday's conference call, indicating that its review of strategic options, possibly including the sale of part or all of the company, was continuing and that SuperValu had received expressions of interest on a possible transaction of some sort from at least several at this point unidentified parties.

Indicators off but up on week

Statistical indicators of junk market performance were mostly lower on Friday, after having turned mixed on Thursday and being higher over the first three days of the week.

Compared to last week's levels, though, they were higher across the board.

The Markit Group CDX North American Series 19 High Yield Index fell for a second straight session on Friday, losing 11/16 point to 100 5/8 bid, 100¾ offered. On Thursday, it had fallen ½ point.

However, the index was up from the levels seen last Friday at 99 11/16 bid, 99 13/16 offered.

The KDP High Yield Daily Index eked out a fifth consecutive advance, rising by 1 basis point to 74.76. It was up 6 bps on Thursday.

Its yield was unchanged at 5.94%, after three straight sessions on the decline.

Those levels compare favorably with the week-ago index reading of 74.28 and yield of 6.06%.

The widely followed Merrill Lynch U.S. High Yield Master II Index posted a loss Friday, after six consecutive winning sessions, as it dipped by 0.051%, versus Thursday's 0.092% gain.

That dropped its year-to-date return to 13.398%, down from Thursday's 13.455% - the peak level for the year so far.

However, on the week, the index gained 0.604%, its third straight weekly gain. Last week, it was up by 0.172%, with the year-to-date return ending the week at 12.717%.

Stephanie N. Rotondo contributed to this report

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