Millennium Offshore prices to cap $7.2 billion week; storm threat leads many to early exit

By Paul Deckelman and Paul A. Harris

New York, Feb. 8 - The high-yield primary sphere closed out the week with just one pricing on Friday, as a threatened blizzard bore down on the Northeastern United States, causing many junk market participants to make an early exit.

Some stuck around long enough to see Millennium Offshore Service Superholdings LLC, a provider of offshore oil rigs based in the Persian Gulf's United Arab Emirates, price its $225 million offering of five-year senior secured notes. There was no immediate aftermarket trading in the bonds.

Several other transactions which were anticipated during the session, including possible pricings from telecom operator Fairpoint Communications Inc., international wireless provider NII International SCA and fish producer Cooke Aquaculture Inc., never did appear, and were floated off for pricing during the coming week.

Millennium Offshore's deal capped a week which saw $7.2 billion of new dollar-denominated, fully junk-rated paper price in 17 tranches, according to data compiled by Prospect News - well down from the $13.7 billion which came to market in 34 tranches the previous week.

Year-to-date junk issuance of $49.7 billion is running about 27% ahead of the pace maintained by this time last year, according to the data.

With so many junk market participants located in New York or other Northeast business centers having left early ahead of winter storm Nemo, if they had come in at all, and even some outside the region having done likewise because there was not much going on, trading was restrained, even in the big, well-received new deal that Virgin Media had priced during Thursday's session, as well as regular on-the-run credits.

Statistical measures of junk market performance meanwhile turned mixed after four straight sessions of mostly lower readings, but they remained down from where they had been a week ago.

Millenium Offshore prints at 9 ½%

United Arab Emirates-based Millennium Offshore Services priced Friday's sole high-yield deal, a $225 million issue of five-year senior secured notes (B2/B) which came at par to yield 9½%, on top of the yield talk.

Initial guidance was in the low-to-mid 9% yield context, according to an investor.

The dividend-funding deal, which had an audience among high-yield investors as well as with emerging markets investors, was led by Goldman Sachs.

One portfolio manager had a look at the deal but backed away because of apprehensions surrounding the company's operations in Egypt, which remains in the throes of political volatility.

The week ahead

Elsewhere, the threat of severe winter weather muted activity during Friday's primary market session.

Fairpoint Communications' $300 million 6.5-year senior secured notes (B2/B), via Morgan Stanley, Credit Suisse and Jefferies, which was understood to be possible Friday business, is now moved into the Feb. 11 week, market sources said.

Earlier in the week the deal was talked at 8½% to 8¾%.

NII International Telecom, formerly Nextel International, was also scheduled to price before the end of the week. However on Friday there was no news on the deal

An investor said that the dealers are taking orders at levels ranging from 10½% and 12%, trying to build a book. The deal may be upsized, the investor said.

A different money manager said that there are $2 billion of orders for bonds at 12%.

There was no formal price talk as the week came to an end.

J.P. Morgan, Credit Suisse, Goldman Sachs and Morgan Stanley are the leads.

Millennium unseen in secondary

Several traders queried by Prospect News did not see any initial aftermarket dealings in the new Millennium Offshore Services 9½% senior secured notes.

The United Arab Emirates-based provider of offshore oil rigs to the energy industry had priced its offering at par.

A trader noted the lack of activity, even though the issue had come to market around the middle of the afternoon, New York time, which would normally leave ample opportunity for trading, although perhaps not on a wintery Friday afternoon with a blizzard coming.

"I think Goldman [Sachs] priced them at 1 or 2'oclock [ET] and that was about it. I think they just put it away."

Tervita trades up

The trader said he did see a little bit of trading at his shop in the new 8% secured notes due 2018 from Tervita Corp., which priced on Thursday at par. He saw the Calgary, Alta.-based environmental services company's paper trading in a bid range of 101 to 1011/4, after having priced at par. The paper had not been seen in the aftermarket Thursday following its pricing late in the session, but was freed for dealings on Friday.

Tervita priced that $600 million tranche of notes as part of an $850 million equivalent deal that also included a tranche of Canadian dollar bonds. That dual-currency deal had been downsized earlier from an originally announced $1.1 billion equivalent size, with $250 million shifted into a planned bank loan. .

Not much Virgin Media action

The trader also said that owing to the weather-related lack of overall activity, "I didn't see much trading in the Virgin Media [issue] on Friday.

A second trader quoted the company's new 5 3/8% senior secured notes due 2021 at 102 bid, 102¼ offered, about unchanged from the level they had moved up to after pricing on Thursday at par. He saw the company's 6 3/8% senior unsecured notes due 2023 at 103 3/8 bid, 103¾ offered, also unchanged from Thursday's aftermarket levels following their par pricing.

Virgin Media, a New York-based provider of cable, phone and broadband service in the United Kingdom, had sold $1 billion of the secured bonds on Thursday through its Lynx I Corp. subsidiary and $530 million of the unsecured notes through its Lynx II Corp. unit, along with similar sterling-denominated bonds. Those tranches were all part of a £2.3 billion equivalent four-part deal, part of the financing for the company's $16 billion acquisition by international media tycoon John Malone's Liberty Global Inc.

Virgin's existing bonds had traded busily during the week both on anticipation that such a merger deal would be announced and then, after it was, on investor response to the deal.

On Friday, its 4 7/8% notes due 2022 were seen by a market source about unchanged at 101 5/16 bid, on respectably heavy round-lot volume of some $22 million. Its 5¼% notes due 2022 were seen down slightly, at 101 3/8 bid, with about $4 million of the bonds having changed hands.

Storm scuttles attendance

With what was being billed by some of the media as the biggest Northeast winter storm in years coming, many shops in New York and elsewhere were operating with skeleton crews who left early, if anyone was in at all.

A random telephone check of about a half-dozen Wall Street firms at the normally busy hour of 4 p.m. ET elicited not a single pick-up.

Even market participants outside of New York were calling it an early day; one such trader, located far from where the storm was scheduled to hit, said that he had left his office at 3 p.m. local time because "there was just nobody around" to do any transactions with.

He opined that with nothing really going on, "most real-money guys were on the sidelines. ETFs were relatively quiet today, and there were only a few mutual fund bid lists.

"All in all, it was relatively quiet."

Market signs turn mixed

Statistical junk market performance indicators broke out of a four-session rut on Friday, with several actually showing positive readings. However, the signs were lower across the board from their levels at the end of the previous week on Feb. 1.

The Markit Series 19 CDX North American High Yield gained 1/16 point on Friday to close at 102 3/32 bid, 102 7/32 offered, after having eased by 1/32 point on Thursday.

However, it remained below its week-earlier reading of 102 5/8 bid, 102 7/8 offered.

The KDP High Yield Daily Index posted its first gain after four straight losses, rising to 75.17, up 6 basis points on the day, after retreating by 19 bps Thursday.

But its yield rose for a fifth straight session, edging up 1 bp to 5.74%, after widening by 5 bps on Thursday.

Those levels still compare unfavorably with the previous Friday's 75.70 index reading and 5.35% yield.

The widely followed Merrill Lynch High Yield Master II index suffered its fifth consecutive downturn on Friday, dropping by 0.043%, after having lost 0.109% on Thursday.

Friday's loss lowered its year-to-date return to 1.035% from Thursday's 1.078%. It was also well down from its peak level for 2013 so far of 1.991%, set last Monday, Jan. 28.

The index lost 0.379% on the week, its second consecutive weekly loss after 10 previous weekly gains. Its year-to-date return at the end of the previous week stood at 1.419%.

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