Sprint, SuperValu, J.C. Penney trade in otherwise quiet session, primaryside remains paused

By Paul Deckelman and Paul A. Harris

New York, Aug.28 - The high-yield primary sphere resumed its late-summer siesta on Wednesday, syndicate sources said, with no new deals either pricing or even being announced.

Not counting the anomaly of Tuesday's unusual Norwegian kroner-denominated offering for energy processing and transportation company Teekay LNG Partners, LP, the new-deal market has now gone eight consecutive sessions without seeing a new deal denominated in either dollars or euros.

And the sources said that even after the looming Labor Day holiday weekend in the United States, which traditionally marks the end of the summer season and the start of the usually much busier fall period, new-deal activity is probably not going to pick right up, but will likely start to heat up later in September.

The most recently priced deals, meanwhile, were seen by traders to be jostling around, with coal producer Foresight Energy LLC's bonds and fellow energy credit NuStar Logistics LP quoted a little firmer, but tw telecom holdings inc. seen a bit lower on the day.

Also in the telecommunications area, Sprint Nextel Corp.'s paper saw some activity, perhaps driven by news of a sizable jobs cut at the Number-Three U.S. wireless operator.

There was also relatively brisk trading in the bonds of retailers SuperValu Inc. and J.C. Penney Co. Inc.

Overall, though, traders said that activity was sparse, and they predicted things would only get worse in the run-up to Labor Day

Statistical market-performance indicators were mixed for a third consecutive session.

September may hit $45 billion

The primary market remained quiet on Thursday, as no deals were announced and none were priced.

Market volumes were very low, and the ranks of market participants remain thin, as expected, a trader said.

"People are expecting September to get off to a somewhat slow start," the trader said, noting that the Labor Day holiday on Sept. 2, and Rosh Hashanah, which takes place Sept. 4-6, should keep the ranks of market participants thin, and could constrict primary market activity.

Nevertheless, depending upon market conditions, September issuance is expected to come to between $25 billion and $45 billion, the trader said.

"We don't expect anything big out of the gates, on Tuesday [Sept. 3].

"And the market for drive-by deals may not get cranked up until the week of Sept. 9.

"September will likely be a back-loaded month."

Recent deals trade around

After having been pretty much silent during Tuesday's session, a trader said that some of Junkbondland's recently priced offerings had moved around a little on Wednesday, although on no great volume.

He saw Foresight Energy's 7 7/8% notes due 2021 up ¼ point on the day at 99½ bid, 100½ offered.

The St. Louis-based thermal producer, along with its Foresight Energy Finance Corp. funding subsidiary, priced $600 million of the bonds at 99.276 on Aug. 16 to yield 8%. The deal was upsized from $500 million originally.

He saw NuStar Logistics' 6¾% notes due 2021 up ½ point at 99¾ bid, 100½ offered. The San Antonio, Texas-based provider of petroleum terminaling and storage services priced its $300 million deal at par on Aug. 14.

However, others among the recent issues were seen to have eased a little bit.

The trader saw both halves of tw telecom's quick-to-market $800 million two-part deal a bit lower, pegging its $6 3/8% notes due 2023 off by 3/8 point at 98¾ bid, 99½ offered. The Littleton, Colo.-based network services provider's $350 million offering had priced at par on Aug. 12

The other half of that deal - its $450 million 5 3/8% notes due 2022, which had been structured as a mirror tranche to the company's existing bonds - lost ¼ point to end at 94¾ bid, 95½ offered. The bonds had priced at 96.25 to yield 5.913%.

Windstream Corp.'s 7¾% notes due 2021 were off by ¼ point Wednesday at 101¼ bid, 102½ offered. The Little Rock, Ark.-based telecommunications company's quickly shopped $500 million add-on to its existing notes priced at 103.5 on Aug. 12, to yield 7.171%.

A trader at another desk saw Iron Mountain Inc.'s 6% notes due 2023 off by 1/8 point Wednesday at 99½ bid. The Boston-based information technology and document storage company priced its $600 million of the bonds - upsized from the originally announced $450 million - at par on Aug. 8, as part of a two-part drive-by offering that also included a Canadian dollar-denominated tranche of eight-year notes.

Sprint Nextel active, mixed

Away from the new deals, Sprint Nextel's bonds were seen mixed, on relatively decent volume for a late-summer session.

Its 6% notes due 2022 gained 1/8 point on the session to end at 93 3/8 bid, on volume of over $9 million. Besides those round-lot trades, there was a fair amount of trading in smallish odd-lot pieces. Near the close, the bonds moved up to above the 95 mark, but just on a series of smaller trades.

Its 6% notes due 2016 were seen down 1/8 point at 106¼ bid, with over $4 million having changed hands by the close.

The Sprint Nextel 7% notes due 2020 were about 3/8 point lower at 102 7/8 bid, with over $2 million having moved.

Its New York Stock Exchange-traded shares were down 9 cents, or 1.33%, at $6.66. But volume of 13.2 million shares was less than half the norm.

The Overland Park, Kan.-based Number-Three U.S. wireless carrier announced on Tuesday that it will cut about 800 customer-service jobs. However, the overall workforce size will stay in the 40,000 area, it said.

The cuts represent the largest employee reduction since Japanese wireless carrier SoftBank Corp. acquired a controlling stake in Sprint Nextel last month.

Sprint Nextel recently shut down the old Nextel network that it had acquired back in 2005 when what was then Sprint Corp. acquired the former Nextel Communications Inc. As it shut down the Nextel operation, the company migrated the Nextel legacy customers over to its own Sprint network platform, making the functions of the laid-off employees essentially redundant.

SuperValu, Caesars busy

Among the larger traders on Wednesday afternoon, was SuperValu's 8% notes due 2016. The Eden Prairie, Minn.-based supermarket chain operator's notes were seen down 1/8 point at 109 1/8, on round-lot volume of over $12 million.

Caesars Entertainment Corp.'s 10% notes due 2018 were seen by a trader to be unchanged at 58 bid, with over $12 million having traded.

The Las Vegas-based gaming giant's 11¼% notes due 2017 were likewise unchanged at 102¾ bid, on volume of more than $5 million.

Its NYSE-traded shares gained 95 cents or 4.53%, to end at $20.63, investors apparently heartened by the Tuesday announcement that the city of Boston had reached an agreement on a proposed casino facility at the city's Suffolk Downs horse racing track. Final approval has to come from Massachusetts state gaming regulators.

Penney bonds mixed

J.C. Penney's 5.65% notes due 2020 were seen by a trader to have finished about unchanged on the day at 76 1/8 bid, with over $7 million traded.

A second trader agreed that there was "not much movement" in the issue, quoting it trading in a 75¾ to 76¾ context.

The underperforming Plano, Texas-based department store chain operator's 7.95% notes due 2017 finished at 87 bid, 87¼ offered, about unchanged on the day. Over $2 million of the bonds had traded.

Its 7.40% notes due 2037 actually gained 1½ points, ending at 69¼ bid, but on volume of only $1 million.

Market indicators stay mixed

Statistical junk market performance indicators were mixed for a third consecutive session on Wednesday.

The Markit Series 20 CDX North American High Yield index rose by 5/32 point to close at 103 13/16 bid, 104 offered, after having dropped by 13/16 point on Tuesday, its second straight loss.

The KDP High Yield Daily index meanwhile fell by 2 basis points Wednesday to end at 73.04, after having risen over the previous three consecutive sessions, including Tuesday, when the index was up by 5 bps.

Its yield moved up by 1 bp to 6.33%, after having declined by 2 bps on Tuesday.

The widely followed Merrill Lynch High Yield Master II index was lower by 0.009% on Wednesday, after having been unchanged on Tuesday to break a two-session winning streak.

The loss dropped the index's year-to-date return to 2.592%, off from the 2.601% reading recorded on both Monday and Tuesday. That return remained well down from its peak level for the year so far of 5.835%, recorded on May 9, though still up solidly from its 2013 low point of 0.384%, set on June 25.

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