Junk gyrates along with stocks, First Data falls on CFO exit; Loyalty Partner postpones deal

By Paul Deckelman and Paul A. Harris

New York, May 25 - High-yield bonds were on the slide on Tuesday, with many of them down by several points, in line with an early plunge in equities, as investors worried about the continuing barrage of bad news out of Greece, Korea and Washington. While stocks managed to bounce back and end pretty much unchanged on the day, junk generally did not share in that rebound, although some issues did manage to cut their early losses down to a more manageable size.

The biggest loser on the day, and in heavy trading to boot, was First Data Corp. The Greenwood Village, Colo.-based electronic transaction processor's bonds nosedived as much as 7 points on the unexpected news that its chief financial officer, Pat Shannon, had resigned, a departure which the company did not explain. Two other senior officials are also leaving in an apparent executive suite shakeup.

Among other multiple-point backsliders were such names as General Motors Corp., Harrah's Operating Co. Inc. and Clear Channel Communications Inc.

One of the few gainers on the session was AMC Entertainment Inc., which completed its previously announced acquisition of 92 cinemas from Kerasotes ShowPlace Theatres LLC in a $275 million deal.

In the primary arena, yet another upcoming deal has been postponed due to adverse market conditions, this one a euro-denominated offering by Germany's Loyalty Partner GmbH.

Syndicate sources meantime heard that TransUnionLLC's leveraged buyout transaction will be partly funded by a $645 million bond offering.

Loyalty Partner pulls deal

The sails of the high-yield primary market continued to luff on Tuesday, as global capital markets remained volatile.

As with the Monday session, the only solid information to surface was negative.

Germany's Loyalty Partner GmbH postponed its €160 million offering of five-year senior secured notes (B3/B) due to market conditions.

JPMorgan was the active bookrunner. Commerzbank was the passive bookrunner.

Proceeds were to be used to refinance debt.

There's still a calendar

The active forward calendar is now pared to four deals, sources reckoned on Tuesday.

Citgo Petroleum Corp.'s roadshow for its $1.5 billion two-part offering of first-lien senior secured notes (Ba2/BB+/BB+) is expected to carry into Thursday.

The Houston-based refiner plans to sell seven-year notes, which come with four years of call protection, and 10-year notes, which come with five years of call protection.

RBS Securities Inc., UBS Investment Bank, BNP Paribas Securities Corp. and Credit Agricole CIB are the joint bookrunners for the debt refinancing and general corporate purposes deal.

Also, Willbros Group, Inc. is roadshowing a $250 million acquisition financing: six-year senior secured second-lien notes (B3/B+).

UBS Investment Bank is the left bookrunner for the deal that is expected to price before the end of the present week. Credit Agricole CIB and Credit Suisse are joint bookrunners.

Meanwhile, Sandusky, Ohio-based amusement park operator, Cedar Fair, LP will also wrap up the roadshow for its $500 million offering of 10-year senior unsecured notes (expected ratings B2/B-) on Thursday.

That deal has been discussed in the 12% yield context, according to a high-yield mutual fund manager.

J.P. Morgan Securities Inc., Wells Fargo Securities and UBS Investment Bank are the joint bookrunners for the debt refinancing.

Finally, DriveTime Automotive Group, Inc. will also wrap up the roadshow for its $200 million offering of seven-year senior secured notes (B3/B) on Thursday.

As is the case with the Cedar Fair deal, the DriveTime debt refinancing has become a process of discovering where in terms of price investors would be interested, the fund manager said.

Jefferies & Co., RBS Securities Inc. and UBS Investment Bank are the joint bookrunners.

Hammered by headlines

Headline news, in and out of the financial section, is taking its toll on select recent issues, according to a buy-side source.

One example is the disaster at the Deepwater Horizon drilling rig in the Gulf of Mexico, which began unfolding on April 20, when the oil well at a depth of 5,000 feet blew out.

Just one day before that blow out, Houston-based offshore oil and gas development and production company ATP Oil & Gas Corp. - which has no immediate exposure to the Deepwater Horizon disaster, according to the investor - priced a $1.5 billion issue of 11 7/8% five-year senior secured second-lien notes (Caa2/B/) at 99.531 to yield 12%

Those notes were trading Tuesday at 84 bid, 86 offered, the buy-sider said.

These are uncertain times for the oil and gas sector, said the buy-sider, who keeps a close watch on it.

It remains to be seen whether energy companies will continue to have access to deepwater reserves.

And, should government curtail deepwater drilling, the market is wondering whether shallower reserves, some of which are presently off limits, will become available for development.

Meanwhile, the global economic slowdown continues to take its toll on crude oil prices, which dropped another 2% on Tuesday.

Weaker demand from China - now embroiled in economic difficulties of its own - has exacerbated the oil sector's problems, the buy-side source said.

Chinese property developers sink

The weakness in the Chinese economy is also taking a toll on deals done earlier in the year by Chinese property developers who came to the dollar-denominated high-yield primary market to raise cash, sources say.

These issuers include Renhe Commercial Holdings Co. Ltd., Fantasia Holdings Group Co. Ltd., Kaisa Group Holdings Ltd., Agile Property Holdings Ltd., Country Garden Holdings Ltd. and Evergrande Real Estate Group, Ltd.

Evergrande's 13% guaranteed senior notes due Jan. 27, 2015, which priced at par in a $600 million issue on April 13, were at 90 bid, 92 offered on Tuesday, according to a buy-side source, who added that the notes had traded as high as 102 bid, 103 offered not long after the deal was priced.

Concerns over the impact of Chinese tightening of credit conditions, and measures to slow the pace of property price appreciation, hit hard in the property sector, where there has been a lot of issuance, an Asia-based bond trader wrote in a Tuesday email to Prospect News.

"The Asian credit market has not been trading well," the trader wrote, adding that high yield was the first to crack, having enjoyed a spectacular first four months of 2010.

The troubles of the property sector subsequently followed through to the rest of Asian high yield, the trader added.

Market indicators head south

Among bonds not connected with the new-deal market, a trader saw the CDX Series 14 index unchanged at 92 7/8 bid, 93 3/8 offered on Tuesday, after having eased by 1/8 point in each of the previous two sessions.

The KDP High Yield Daily Index meanwhile slid by 86 basis points on Tuesday to 68.99, after having gained 23 bps on Monday. The index's yield gapped out by 27 basis points on Tuesday to 9.20%, after tightening by 6 bps on Monday.

Advancing issues trailed decliners for an eighth straight session on Tuesday, with the gap between the two widening out to better than two to one from the relative handful of issues -- only a couple of dozen out of the nearly 1,400 bonds tracked - which had separated the two on Monday.

Overall market activity, represented by dollar-volume levels, jumped by 50% on Tuesday, after having fallen by 40% on Friday and another 12% on Monday from the previous day's pace.

One trader characterized Tuesday's session as "a roller-coaster day," as junk paralleled the course that equities took early in the session, when stocks plunged, carrying the bellwether Dow Jones Industrial Average temporarily below the psychologically potent 10,000 mark intraday, although a late-session comeback erased most of those losses and left the Dow only down 22.82 points, or 0.23% - it had been down over 250 points earlier - at 10,043.75. Other indexes also staged late-session comebacks to end down only marginally or, in the case of the Standard & Poor's 500, actually up slightly.

"When I got in the car this morning, I heard the S&P [index] down 32 points, like it was nothing, and I said 'holy smoke,' and it finished up fractionally by 0.38 point."

However, he said that while the stock rebound was powerful, the bond bounce was muted at best.

"Yeah, I guess" there was an upturn in high yield, but he added that "it seemed like there was a lot less activity in the afternoon than there was in the morning."

Another trader said that while the stock market definitely bounced, "I don't know that we bounced, although we did stabilize," as the downside movement seen earlier stopped, leaving bonds still down multiple points.

Yet another trader characterized the market as "heavy" throughout the day, seeing "more selling" in the afternoon, even as stocks were turning back up.

First Data falls on CFO leaves

A trader said that First Data Corp. was "the big mover today, after the CFO resigned and the bonds got beat up a little bit."

He saw the 9 7/8% notes due 2015 fall as low as 76¾ bid, before going out at 78¾ -- still well down from Monday's level around 84.

"Those things got beat up the most," he declared. "They didn't come back too much, maybe a little bit toward the end."

At another desk, the 10.55% notes due 2015 were seen having finished the day at 74 bid, and the 11¼% notes due 2016 at 62 bid, 64 offered, which the trader said were all down 4 to 5 points on the day, on "a lot of volume."

Early Tuesday morning, First Data announced that Pat Shannon, its chief financial officer, had decided to resign his post. Shannon agreed to stay on during a transition period. His last day will be June 30.

Ray Winborne, controller, has been promoted to acting chief financial officer.

Shannon's departure was not the only one announced, either. Bob DeRodes, executive vice president of global operations and technology, is leaving the company too. Replacing him is chief technology officer, Kevin Kern.

Grace Chen Trent, executive vice president of communications also resigned from the company, effective June 30.

Chatter in the market is that KKR & Co., the owner of First Data, might be looking to alter the company's leadership in an effort to have more control. Earlier this month, the Atlanta-based credit card payment processor reported a net loss of $240 million for the first quarter.

Calls to the company seeking comment on the leadership changes were not returned Tuesday.

Harrah's trades heavily

A trader said that Harrah's Operating Co.'s issue of 10% notes due 2018 "was another active one," although he saw the Las Vegas-based gaming giant's bonds as having "improved a little during the day."

He said that the bonds last traded at 77, up from the day's low around 74 3/8, "so that bounced up a little bit," although it remained below the 78 level at which it had finished on Monday.

"First thing this morning, they hit a 75 bid, so they ended down a point, but it was worse than that earlier, at the bottom."

The trader said "a bunch of bonds were down 3 or 4 points, but it seemed like First Data and Harrah's were the names today."

Community Health can't come back

A trader saw Community Health Systems Inc.'s 8 7/8% notes due 2015 - sometimes seen as something of a market bellwether because of its great size and wide distribution -- as having come down to 100¾ bid going home, down from 101 3/8 earlier. On Monday, the Franklin, Tenn.-based hospital operator's bonds had traded in a 102-102½ range

"They were down more than a point and didn't come back."

Good show for AMC

One of the few significant upsiders on the session was Kansas City, Mo.-based movie theater operator AMC Entertainment's 8% notes due 2014, which were quoted by a market source up by nearly 4 points to 102½ bid.

AMC announced on Tuesday that it has completed its $275 million acquisition of 92 movie houses, mostly in the Midwest, from smaller competitor Kerasotes ShowPlace LLC for $275 million. The acquisition of those theaters, collectively having nearly 1,000 screens, will strengthen AMC's status as the second-biggest movie theater operator in the United States, where it will now have 380 theaters featuring 5,325 screens, second only to Regal Entertainment Group, which has 545 theaters with 6,739 screens.

As part of the transaction, Knoxville, Tenn.-based Regal agreed to buy nine theaters from AMC in Illinois, Indiana and Colorado for an undisclosed sum of cash plus two Regal theaters, enabling AMC to pass government antitrust scrutiny. Kerasotes meantime will keep three of its theaters in Minnesota, New Jersey and Chicago.

Regal's Regal Cinemas Corp. unit last week announced that it had postponed a planned $250 million add-on to its 8 5/8% notes due 2019 due to unfavorable market conditions.

-Stephanie N. Rotondo contributed to this report

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