Junk firm as week ends; LINN rises on asset sales; RadioShack refinances; Metaldyne plans deal

By Paul A. Harris and Stephanie N. Rotondo

Portland, Ore., Oct. 3 – The secondary high-yield market was “all the same story, all up” in Friday trading, according to a trader.

Another trader said that the “market is green” as new employment data indicated a strengthening economy.

The latest Labor Department report showed 248,000 non-farm jobs being added in September, pushing unemployment down to 5.9%, the first time the marker has hit below 6% since 2008.

While the market was enjoying the positive tone, some names were also boosted by fresh news.

LINN Energy LLC announced a couple assets sales on Friday, which pushed its debt up. RadioShack Corp. was meantime “up smartly,” in the words of one trader, after it was reported late Thursday that the company had secured new financing from Standard General LP, its largest shareholder.

But even with the market’s firmer feel, the coal sector failed to gain any traction.

“Coal is definitely still better for sale,” a trader said, even Walter Energy Inc., which had risen on Thursday on rumors it was being targeted by BHP Billiton and Rio Tinto.

Metaldyne starts Monday

No deals priced during a quiet Friday session in the primary market which generated just one news nugget.

Metaldyne Performance Group Inc. plans to start a roadshow on Monday for a $700 million offering of eight-year senior notes (B3/B+).

Early guidance has the debt refinancing deal coming with a yield in the high 6% context.

The roadshow wraps up Thursday.

Deutsche Bank, Goldman Sachs, BofA Merrill Lynch, KeyBanc, Morgan Stanley, Nomura and RBC are the joint bookrunners.

Week ahead

The week ahead could be a different story, market sources say.

In addition to Metaldyne, which was announced Friday, Albertson’s Holdings LLC was scheduled to start a roadshow on Friday for a $1,625,000,000 offering of eight-year second-lien senior secured notes (B2/CCC+).

Early guidance for that deal is 7¾% to 8%, according to a trader.

The week ahead could be busy for new issues as long as the market maintains the positive tone it had toward the end of the past week, syndicate officials say.

Look for a familiar high-yield issuer to show up Tuesday with a benchmark deal, a debt capital markets banker advised.

And although news on the fund flows-front for the most recent week was decidedly negative, with dedicated high yield funds seeing $2.28 billion of outflows for the week to the Oct. 1 close, those outflows were weighted toward the early part of the reporting period, with Thursday, Sept. 25 and Friday, Sept. 26 seeing big outflows, sources say.

After that, daily flows became mixed to positive. In particular high-yield ETFs saw substantial inflows during the early part of this week, according to a buyside source.

Hence, although the weekly number was negative, the daily numbers in the last part of the reporting period just concluded, and the early part of the period that will end on Oct. 8 have been generally positive, which suggests that there could be an increased amount of activity in the primary market during the week ahead, sources say.

Indicators gain on new data

With new positive economic data urging the broader markets higher, high yield was also seeing some improvement.

The KDP High Yield Index moved up to 72.24 with a 5.6% yield, compared to Thursday’s reading of 71.96 with a 5.7% yield.

While the recent gains did not repair all the damage of the preceding week, ended Sept. 26, the KDP index did end on firmer ground versus the week before. On Sept. 26 it closed at 71.91, a new 52-week low for the second day. Its yield was 5.75%. The week before, on Sept. 19, it had closed at 72.23 with a 5.63% yeidl.

The CDX Markit Series 22 index meantime gained almost a point Friday, closing at 107 1/32 bid, 107 7/32 offered, according to a market source.

The CDX was more than a point better than the previous week’s close of 105 7/8 bid, 106 1/16 offered but also below the week before’s ending level of 107 11/32.

Recent deals rise

The stronger marketplace was also helping recently priced deals gain ground.

A trader said Burger King Worldwide’s $2.25 billion of 6% second-lien senior secured notes due 2022 dominated trading, with about $40 million of the bonds being exchanged. The trader deemed the issue up over a point at par 5/8.

Another trader said the paper was “up a bit,” trading around par ½.

The deal came Sept. 24 via JPMorgan Securities LLC and BofA Merrill Lynch.

From this week’s business, Zebra Technologies Corp.’s $1.05 billion of 7¼% notes due 2022 were seen “up a good bit,” rising a point to 103½, according to a trader.

That deal priced Tuesday, coming downsized from $1.25 billion but at the tight end of talk.

Morgan Stanley & Co. LLC and JPMorgan Securities were the joint bookrunners.

McClatchy up again

In recently topical names, McClatchy Co.’s 9% notes due 2022 continued to gain momentum, pushing up almost 2 points to 112 ¾ in “very active” trading, a trader said.

The bonds have been climbing higher since Wednesday, when the Sacramento, Calif.-based newspaper publisher and online web page operator announced that it had closed on its sale of its 25.6% stake in Classified Ventures LLC, which operates the online automotive shopping website Cars.com, to Gannett Co. for $631.8 million.

McClatchy’s net proceeds from the sale will come to about $408 million. Classified Ventures’ several other owners also sold their stakes in the company to Gannett.

LINN selling assets

LINN Energy bonds got a boost Friday as the company announced two different asset sales.

A trader saw the company’s 6½% notes due 2019 putting on about 1½ points to finish around par 3/8, while the 8 7/8% notes due 2020 gained ½ point to 105¼.

Another market source called the 7¾% notes due 2021 up 1¾ points at 103½ bid.

LINN Energy is selling all of its assets in the Granite Wash and Cleveland fields in Oklahoma and the Texas panhandle to private affiliates of EnerVest Ltd. for $1.95 billion. Additionally, the company is selling oil fields in the Permian Basin in west Texas to private equity company KKR for $350 million.

Both deals are expected to close in the fourth quarter.

Proceeds are expected to finance LINN’s $2.3 billion acquisition of assets from Devon Energy Corp., which closed in August.

RadioShack gets some relief

Late Thursday, news outlets reported that cash-strapped RadioShack had inked a deal with Standard General to refinance about $590 million of bank debt ahead of the holiday season.

Come Friday, the Fort Worth, Texas-based electronics retailer’s 6¾% notes due 2019 were “up smartly,” a trader said.

The trader said the bonds were up 7 points from the last round-lot trades on Sept. 26, pegging the debt at 41¾.

Another trader said the name “bounced,” though he noted that there was “not a lot of volume.”

The trader saw the bonds trading “anywhere between 41 and 45.” He remarked that short-covering could have been at least partially responsible for the gains, adding that “there’s lots of CDS in this one.”

Standard General is taking the lead on a refinancing package that will refinance a $535 million asset-backed revolving credit line from GE Capital.

The New York-based hedge fund recently upped its equity stake in RadioShack to 9.8% from 7.08%.

The new credit facility will also see participation from new investors, according to a regulatory filing.

Sears higher

Elsewhere in the retail space, Sears Holdings Corp.’s 6 5/8% notes due 2018 were up slightly – albeit amid few trades – as that company also secured new money recently.

A trader placed the notes at 90 3/8, up nearly half a point.

On Thursday, the Hoffman Estates, Ill.-based company announced it was selling a majority of its 51% stake in Sears Canada for as much as $380 million. Of that amount, about $168 million of the shares will be sold to ESL Investments, the hedge fund run by the company’s chief executive officer, Edward Lampert. Fairholme Capital Management LLC is also expected to participate.

Upon completion of the sale, Sears will hold 12 million shares in Sears Canada, down from 52 million shares.

“If you can’t sell it, push it onto shareholders,” wrote Gimme Credit LLC analyst Evan Mann in a comment out Thursday afternoon.

No gains for coal

Walter Energy’s bonds “drifted back in a little bit” Friday, after rallying Thursday on rumors it was a takeover target of BHP and Rio Tinto, a trader said.

The trader said the 11% PIK toggle notes due 2020 fell to a 46 to 47 range, which compared to the previous day’s highs “north of 50.”

A second trader saw both the 8½% notes due 2021 and the 9 7/8% notes due 2020 slipping ½ point, to 29½ and 32½, respectively.

Other coal names were also under pressure.

A trader said Arch Coal Inc.’s debt “continued to get smacked,” placing the 7¼% notes due 2021 in a 44 to 45 context.

Another trader said the name was “still down” even as the rest of the market was perking up.

He saw the 7¼% notes falling 1¼ points to 45, while the 7¼% notes due 2020 declined a point to 52½.

The 9 7/8% notes due 2018 were called off 1¼ points at 54¾.

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