American Piping prices; recent deals firm in quiet market; J.C. Penney shrugs off downgrade

By Paul Deckelman and Paul A. Harris

New York, Nov. 20 - The high-yield primary completed what for all intents and purposes was the final full trading session of a holiday-shortened week on Tuesday with a pricing from American Piping Products, Inc., which brought a $100 million five-year secured deal to market. It was the day's only dollar-denominated, purely junk-rated transaction.

Despite a dearth of any other new-deal activity, a hefty coupon and an even heftier yield after pricing at a discount, traders did not see any aftermarket in the new deal from the distributor of specialty pipes, fitting and flanges.

They likewise saw no market in Monday's only deal - the $300 million eight-year deal from energy operator Legacy Reserves LP.

Some trading in new deals was seen here and there, such as last week's transaction from Celanese Holdings LLC as well as in some other relatively recent offerings. Plains Exploration & Production Co. and Virgin Media Finance plc were seen firmer than both their respective issue prices and their initial trading levels.

Away from deals that actually priced, market sources heard that prospective borrower Global A&T Electronics Ltd. had postponed its $625 million notes offer due to market conditions. This was the latest in a series of recent deals, which have either been postponed or pulled altogether, due to a less-friendly market environment.

In the secondary market, a ratings downgrade from Moody's Investors Service had little real impact on J.C. Penney Co, Inc.'s bonds, traders said.

They also said there was not much of anything else doing as the market wound down before the holiday break. While Wednesday is ostensibly a full session, the reality is that things are expected to wrap up relatively early ahead of Thursday's Thanksgiving holiday market close and Friday's recommended half-session.

Statistical indicators of market performance were mostly higher.

American Piping deal

Primary news volume thinned to a trickle on Tuesday, with only a single deal clearing the market.

American Piping Products priced a $100 million issue of 12 7/8% five-year senior secured notes (Caa1/B-) at 98 to yield 13.436%.

The coupon printed on top of coupon talk. The yield came in line with the 13¼% to 13½% yield talk. The reoffer price came in line with the 97.778 to 98.659 price talk.

Imperial Capital ran the books.

Proceeds will be used to repay debt, to redeem preferred stock and founder's stock and to pay a dividend to common stock holders.

One investor, reached after the deal terms circulated, was unable to detect any markets being made in the new American Piping 12 7/8% secured notes due 2017.

Referring to the relatively small size of the deal, the investor, who had not played, remarked: "This is one you buy and you put away."

Slow ahead

The approaching Thanksgiving Day holiday, which gets under way in the United States after Wednesday's close, received much of the blame for Tuesday's dearth of primary market activity.

However, debt capital markets sources on both the buyside and sellside were looking beyond the approaching holiday weekend and warning that primary market activity during the run-up to 2013 will be greatly reduced from that seen during the Labor Day to Thanksgiving interval in the present record-setting year.

One of the big dealers is forecasting as few as five deals for the remainder of 2012, when the market reconvenes after the holiday weekend.

A second-tier high-yield syndicate banker said that some issuers are now being encouraged to wait until the new year to bring their deals, one reason being that the underwriters have already hit their bogeys for 2012 and are looking to the year ahead.

Another reason simply has to do with exhaustion, one buyside source said.

"Capital markets guys are exhausted because they have had so much to push through during the past week and a half," the buysider said, adding that the market disruption caused by Hurricane Sandy aggravated the situation considerably.

Global A&T postpones

Singapore's Global A&T Electronics has postponed its $625 million offering of eight-year senior secured notes (B1/B) due to market conditions.

Merrill Lynch, Credit Suisse, J.P. Morgan and UBS were the managers for the debt refinancing.

It's the seventh deal postponed since the beginning of the month, joining a list that includes one or more tranches from Bombardier Inc., Sealed Air Corp., Epicor Software and BlueScope Steel Ltd.

Four of those seven tranches were in the market from issuers with headquarters outside of the United States.

Also on Tuesday, Rex Energy Corp. pushed its $250 million offering of eight-year senior notes (expected B3/confirmed B-) into the post-Thanksgiving week.

The debt refinancing and general corporate purposes deal via left bookrunner Wells Fargo, and joint bookrunners KeyBanc, SunTrust and RBC, had been expected to price before the end of the Nov. 12 week.

American Piping unseen

The day's only deal to come to market - St. Louis-based industrial pipe and flange producer American Piping Products' $100 million of 12 7/8% senior secured notes due 2017 - priced at mid-afternoon but no trading was seen.

A trader attributed the lack on any action in part to its relatively small size, declaring that he had "not seen or heard 'boo' about it."

He also saw no activity in Monday's only deal to price - Midland, Texas-based energy exploration and production company Legacy Reserves LP's 8% notes due 2020. That $300 million deal had priced at 97.848 to yield 8 3/8%.

The trader opined that the lack of activity in either of those names was likely due at least in part to the fact that "at some shops, if there are three people there whom you talk to, two of them were out" on Tuesday.

"You're seeing that everywhere across the board - except, unfortunately, our place."

A second trader agreed that Tuesday's session was "a light volume day. There are very few players out there today and yesterday in the marketplace."

He said that people "were trying to make something out of nothing - it's pretty tough."

People, the first trader added, "are easing in to the holiday."

Recent deals stay firm

One of the trader said that he didn't see any trading in either the new Walter Energy Inc. 9 7/8% notes due 2020 or Thompson Creek Metals Co. Inc. 9 ¾% senior secured first priority notes due 2017.

Both had priced at Friday at a discount to par to yield 10%. Birmingham, Ala.-based metallurgical coal producer Walter Energy's $500 million deal had priced at 99.302, while Thompson Creek, a Denver-based metals mining concern, brought its $350 million issue to market at 99.076.

Both had been seen solidly higher in Monday's dealings, with Walter's bonds quoted as good as 103 bid before going home in a 1011/2-to-102 bid context and Thompson Creek at 101 bid, 102 offered.

However, he did see some activity in AK Steel Corp.'s new 8¾% senior secured notes due 2018, seeing the bonds still bid around 103 bid in the morning.

The West Chester, Ohio-based manufacturer of specialty steel alloys had priced its $350 million issue at par last Wednesday, and it had edged up to a 100 1/8 to 100 3/8 bid context by Thursday; the bonds jumped on Monday, a trader said, pegging them to around 102 3/4-to103¼ bid.

Several other recent deals were also trading around. Celanese, a Dallas-based global technology and specialty chemicals manufacturer, had priced $500 million of 4 5/8% notes due 2022 at par on Nov. 7.

In Tuesday's dealings, over $10 million of the bonds traded, making it one of the more active names in Junkbondland. The bonds were seen trading at 102 1/8 bid. Celanese's existing 5 7/8% notes due 2021 gained a quarter-point to end at 111 bid.

Plains Exploration's recently issued two-part deal was even busier, with a market source seeing over $15 million of its 6 7/8% notes due 2023 trading just above the 103 bid mark and over $8 million of its 6½% notes due 2020. The Houston-based oil and gas operator had priced $1.5 billion of each issue at par back on Oct. 23, after having upsized the megadeal from an originally announced $2.25 billion.

Virgin Media Finance's 4 7/8% notes due 2022 traded at 101 3/8 bid on Tuesday, on volume of about $8 million.

The New York-based company, which provides cable, phone and broadband service to customers in the United Kingdom, had priced the $900 million of the notes at par on Oct. 25. This was part of a larger $1.544 billion two-part deal that included a tranche of sterling denominated 10-year bonds.

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