Connacher prices five-years, Univision, Sealed Air slate deals; new issues firm; funds up 13th time, gain $567 million

By Paul Deckelman and Paul A. Harris

New York, June 11 - Connacher Oil & Gas Ltd. successfully priced an offering of new five-year bonds on Wednesday, high yield syndicate sources said. They also said that terms emerged on another energy credit, Penn Virginia Corp.'s upsized seven-year bond deal, which had priced very late in Wednesday's session.

The new Connacher bonds, and Penn Virginia's as well, were seen to have moved up solidly when they moved into the aftermarket, along with the recently issued bonds of CMS Corp. and Interpublic Group of Cos., Inc.

Meanwhile, Univision Communications Inc. announced plans for a senior secured bond offering, the proceeds of which will be used to fund the tender for one of its outstanding bond issues. Those latter bonds, meantime, moved up solidly.

Sealed Air Corp. also slated a new eight-year deal, expected to be split rated, which could price as early as Friday's session, or Monday's.

Back among the established bonds, Level 3 Communications Inc.'s bonds were higher, as were those of Sprint Nextel Corp., after Wednesday's news that the two telecommunications companies had been in joint-venture talks.

The high-yield market had a positive overall tone on Thursday, but was relatively unchanged, according to a high-yield syndicate official.

"The panic buying has slowed a little," the official commented.

"There is still buying taking place. But investors are not paying just any price in order to get a bond."

Meanwhile the reason that "panic buying" has been seen in the junk bond market - the flood of money deluging institutional investors due to cash inflows and coupon payments - continues.

Junk funds show $567 million inflow

As trading was winding down for the session, market participants familiar with the high yield mutual fund flow statistics generated by AMG Data Services of Arcata, Calif. - a key barometer of overall market liquidity trends - said that in the week ended Wednesday some $566.9 million more came into the weekly reporting funds than left them. It was the thirteenth consecutive inflow, including the $917.8 million cash infusion seen in the previous week, ended June 3.

That 13-week winning streak has generated $8.7 billion of inflows, according to a Prospect News analysis of the AMG figures. With 23 weeks of the year now in the books, inflows have been seen in all but three of them - a losing streak back in late February and early March which saw cumulative outflows of $996 million.

Including the latest week's inflow number, the year-to-date net inflow for the weekly reporting funds has swelled to $11.307 billion, according to the analysis, up from $10.74 billion the week before.

Excluding exchange-traded funds, as some calculations do, inflows in the latest week totaled $454.3 billion, with about $7 billion of total inflows over the last 13 weeks. The previous weekly inflow, calculated on that same basis, was $713.8 billion.

No matter how the fund flows are calculated, the bottom line is that the massive multibillion-dollar flow of funds into high yield is seen as the major catalyst for the relatively strong pace of new issuance and the solidly positive year-to-date returns that have been seen in Junkbondland for most of the first five months of the year and now into the sixth - except for a lull in both the primary and secondary spheres for several weeks that largely coincided with the aforementioned three weeks of outflows.

The sustained inflows have helped the junk market bounce back nicely from last year's staggering 25%-plus loss and sharply reduced primary activity. Total returns so far this year are estimated at an astounding approximately 29%, while the roughly $50 billion of new high yield debt issued so far this year is on pace to easily top last year's anemic primary tally.

A market source also said that in the latest week, funds which report on a monthly basis rather than doing so weekly showed a $680.9 million inflow, versus the previous week's $620.4 million cash addition. That left the year-to-date cumulative inflow for such funds at $9.469 billion, versus $8.788 billion the previous week.

The source further said that on an aggregate basis, consolidating the inflows for the weekly and the monthly reporting funds, a total of $20.776 billion more has come into the funds so far this year than has left them, versus the prior week's aggregate figure of $19.529 billion.

EPFR sees inflows continuing

At another fund-tracking service, Cambridge, Mass.-based EPFR Global, analysts also noted that the junk funds had racked up their 13th consecutive week of inflows, with the $754.38 million cash infusion they calculated pushing the total over those 13 weeks to $8.95 billion and the year-to-date inflow total to $11.2 billion, or over 14% of total assets. In the previous week, it said the funds had seen an inflow of $829.03 million, with a year-to-date inflow total of some $10.5 billion.

While the EPFR junk figures usually point essentially in the same direction as AMG's, the precise weekly and year-to-date numbers almost always differ somewhat due to EPFR's inclusion of some non-U.S. funds in its universe. Cumulative fund-flow totals, whether for AMG or EPFR, can include unannounced revisions and adjustments to figures from prior weeks.

The flow of money into and out of the junk bond funds is seen as a generally reliable market barometer of overall high yield market liquidity trends - although they comprise less of the total monies floating around the high yield universe than they used to - because there is no similar reporting mechanism to accurately track the movements of cash coming into the junk market from other, larger sources seen in recent years such as insurance companies, pension funds and hedge funds.

Connacher upsizes

Only one new deal priced Thursday in the primary market.

Connacher Oil & Gas sold an upsized $200 million issue of 11¾% five-year senior secured first-lien notes (B1/BB-) at 93.678 to yield 13½%.

The yield came at the tight end of the 13½% to 13¾% yield talk. The price came within the approximately 6 to 7 points discount talk. The deal was increased from a planned $150 million.

Credit Suisse was the bookrunner for the general corporate purposes deal.

The new Connacher notes traded up a couple of points after pricing, a trader from a high-yield mutual fund said late Thursday.

"It was kind of a boutique-type of deal," the trader commented, adding that investors who knew the credit found value in the new notes while those unfamiliar with the Calgary, Alta.-based integrated oil company skipped the deal.

"I don't think it was hugely oversubscribed," the trader said.

Busiest five-week period ever

The primary market is passing a relatively quiet week, sources observed on Thursday.

At Thursday's close proceeds totaling slightly more than $1.9 billion have been raised in six tranches of notes.

Previous to the present week the primary market passed the busiest five-week period in its history, in terms of dollar amount of issuance, a banker said Thursday.

From the beginning of the May 4 week up until last Friday's close the primary market cranked out more than $5 billion per week, the banker said.

"There has never been a time when the high-yield market priced $5 billion per week for five consecutive weeks," the source remarked.

Noting that the present week's pace is a more sustainable one, the banker said that the lower volume is mostly attributable to potential issuers preparing documents in order to bring deals in the near term.

Asked whether, given the phenomenal amount of cash chasing high yield, issuers might not be coming around to the view that "later may be better than sooner," with the limited supply of new issues possibly driving down issuers' interest rates, the banker expressed doubts.

"At the back of every issuer's mind is this time period last year, when people thought it was going to get better," the banker said.

"Then we had last fall, and the market closed."

Sealed Air plans split-rated sale

Only one new offering came into the market on Thursday, expected to be a split-rated deal.

Sealed Air will host a Friday investor call for its $250 million offering of eight-year senior notes.

Moody's is expected to assign its investment grade Baa3 rating to the notes. The expected rating from Standard & Poor's is a speculative-grade BB+.

The notes are expected to price on Friday or on Monday.

Banc of America Securities LLC, Citigroup, Credit Suisse, Morgan Stanley and RBS Securities are joint bookrunners.

Proceeds will be used for general corporate purposes, which may include the repurchase, redemption or retirement of the Elmwood Park, N.J.-based company's 3% convertible securities due 2033.

The only other deal on deck, expected to price by Friday's close, is Wallace Theater Holdings, Inc.'s $150 million offering of four-year senior secured notes via Jefferies & Co.

The roadshow was scheduled to run until the middle of the present week.

No price talk or other news about the deal surfaced on Thursday.

Proceeds will be used to repay outstanding debt under the Portland, Ore.-based motion picture exhibitor's existing credit facilities and for general corporate purposes.

New Connacher climbs

When the new Connacher Oil & Gas 11¾% notes due 2014 were freed for secondary dealings, a trader saw those bonds at 95 bid, 96 offered on the break.

Another trader a little later on called them 96 bid, 96¼ offered, although a third pegged them at 95¼ bid, 96¼ offered.

The Calgary, Alta.-based independent energy exploration and production company had priced its $200 million deal earlier in the session at 93.678, to yield 13 ½%.

Penn Virginia powers up

It was pretty much the same story for Penn Virginia's upsized $300 million offering of new 10 3/8% notes due 2016, the terms on which circulated in the market in the morning following its late-day pricing on Wednesday.

The Radnor, Pa.-based energy E&P operator had priced those bonds - upsized from the initial $250 million - at 97.003, to yield 11%, but they started out trading at 99 3/8 bid, 99 7/8 offered.

A second trader saw them later in the day at 99½ bid, 100½ offered.

Univision existing bonds zoom on tender news

The news that Univision Communications plans to take out its existing 7.85% notes due 2011 with the proceeds from its upcoming secured bond deal sent those 2011 notes soaring.

A trader saw the Spanish-language media company's bonds as the most active high yield issuer on the day, seeing them having jumped to 99 bid from pre-news levels at 91 1/8, on volume of some $21 million.

Another market source called the bonds nearly 7 point gainers, to 98½ bid.

Recent new bonds firmer

A trader saw solid firming in some of the other bonds which have come to market this week, quoting Interpublic's new 10% notes due 2017 at 100¼ bid, 100¾ offered. That was well up from the 97.958 level at which the New York-based advertising and marketing company had priced its $600 million deal - upsized from $500 million originally - on Wednesday to yield 10 3/8%.

He also saw CMS' $300 million of new 8¾% notes due 2019 trading as high as 101¼ bid, 102 offered.

The Jackson, Mich.-based electric power generating company priced those bonds on Tuesday at 98.374 to yield 9%.

A market source saw the Interpublic bonds having pushed as high as 101 bid, 1011/2, with the CMS paper peaking at 101¾ bid, 1021/4.

Among other deals from the week, that source located Spokane, Wash.-based paper producer Clearwater Paper Co.'s 10 5/8% notes due 2016 at 100½ bid, 100¾ offered. The company had priced that $150 million of paper on Monday at 98.792 to yield 10 7/8%.

And he saw Rite Aid Corp.'s 9¾% notes due 2016 at par bid, 100½ offered. That was well up from the 98.196 level at which the Camp Hill, Pa.-based Number-Three U.S. retail drugstore chain had priced that $410 million of the bonds - upsized slightly from $400 million originally - to yield 10 1/8%.

Another trader saw the new bonds doing even better at 101 bid, 101½ offered.

He meantime saw its established 10 3/8% notes due 2016 up ½ point at 91½ bid, 92½ offered, though on "not much activity."

Market indicators seen mixed

Apart from the new deals, a trader saw the CDX Series 12 High Yield index - which eased by ¼ point on Wednesday - gaining ¾ point Thursday to end at 84 7/8 bid, 85 1/8 offered.

The KDP High Yield Daily Index, which had risen by 44 basis points on Wednesday, actually retreated by 6 bps on Thursday to close at 63.34, while its yield widened by 6 bps to 10.31%.

In the broader market, advancing issues - which had led decliners for an amazing 17th consecutive session on Wednesday - did it again on Thursday, by a margin of around seven to five.

Overall market activity, measured by dollar-volume totals, rose by 14% versus Thursday's levels.

A trader said that "once again, we had a better tone. There was buying going on," certainly given a boost by the continued easy liquidity which the high yield universe has enjoyed over the last three months.

"Wow," he said, when informed of the AMG numbers, adding "that's impressive.

"I guess no one wants to miss the bottom, and the rally."

Level 3 leaps higher

Among specific names, that trader saw Level 3 Communications' bonds solidly better, pushed upward by the news that circulated in the market on Wednesday that the that it had been in joint venture talks with Sprint Nextel Corp.

He saw Broomfield, Colo.-based internet backbone operator Level 3's 12¼% notes due 2013 having hopped up to 96½ bid, versus 92¼ bid on Wednesday, with $5 million traded. Its 9¼% notes due 2014 firmed to 83 bid, a gain of more than 3 points, on $6 million.

And Level 3's floating-rate notes due 2015 gained 1½ points to 671/2, though on volume of only $2 million.

Overland Park, Kan.-based wireless operator Sprint Nextel's bonds meantime were a little better, its 8 3/8% notes due 2012 up 5/8 point at 991/2. Its 7 458% notes due 2011 gained 3/8 point to 99 3/8.

The Wall Street Journal reported on Wednesday that the two companies are in early talks over a possible joint venture to combine their long-distance units.

Parts makers gain on Chrysler conclusion

A trader saw American Axle & Manufacturing Holdings Inc.'s 5¼% notes due 2014 "skyrocketing" up to 43 bid from a prior round-lot level at 34, on $9 million traded. News reports said that auto-supplier stocks and bonds were up on the official closing of the sale of Chrysler LLC to Fiat SpA, since it means the company will not fall into liquidation, which could have played havoc with the suppliers.

Another trader saw American Axle's bonds at 46, which he called "up a good bit" from odd-lot levels Wednesday around 43, and "up a lot" from the low 30s context at which those bonds traded at the beginning of the week. He saw "a decent amount" of the bonds traded.

"It seemed like the auto parts guys were quoted on lists" Thursday, he said.

The trader saw General Motors Corp.'s bonds generically trading at 11-12, "pretty unchanged."

Another trader saw GM's 8 3/8% bonds due 2033 "up a touch" at 121/4, versus 11¾ on Wednesday. Some $8 million of the bonds traded.

Ford Motor Co.'s 7.45% bonds due 2031 were "pretty much unchanged" at 67 bid, 69 offered, a trader said.

Another trader quoted the Fords at 68¾ bid, up ¾ point on the day, on $6 million traded.

However, at another desk, a trader said those Ford long bonds actually fell a point to 68 bid, 70 offered.

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