Stater, Stone drive-bys, Allen, Genesis wrap $11 billion week; junk funds gain $857 million

By Paul Deckelman and Paul A. Harris

New York, Nov. 12 - The high-yield primary market priced approaching $1 billion of new dollar-denominated debt on Friday, putting the cap on a week which saw some $11 billion of new paper price, the most since mid-summer - and this in a week which had only four trading days to boot.

No really big deals came to market, but there were two suddenly appearing, quickly-shopped offerings from familiar high-yield names Stater Brothers Holdings Inc. and Stone Energy Corp. They joined regularly scheduled forward calendar deals from Allen Systems Group, Inc. and Genesis Energy, LP.

There was also a pair of pricings coming out of Europe, for Kuka AG, priced in euros, and TeeKay Offshore Partners, denominated in Norwegian kroner.

When the new Stater Brothers bonds moved into the aftermarket, they firmed smartly, up more than 2 points on the break. Allen Systems' new issue gained about a point.

Among deals which priced earlier in the week, HCA Inc.'s gigantic 10.5-year deal held on to the gains which it had ground out on Wednesday after having initially struggled.

But Affinion Group Inc.'s eight-year bonds form this past Monday ended the week languishing many points below their issue price.

Away from deals which actually priced, Exterran Holdings Inc., Spencer Spirit Holdings/Spencer Gifts LLC and Rain CII Carbon LLC were all heard hitting the road to market new deals to potential investors. .

Major secondary market indicators were all sharply lower, in line with sliding equity prices and lower Treasuries

Junk funds add $857 million

And as things were wrapping up for the day, market participants familiar with the weekly AMG high yield mutual fund flow numbers compiled by Lipper/FMI - considered a reliable barometer of overall market liquidity trends - said that in the week ended Wednesday $857 million more came into those weekly-reporting funds than left them.

The fund-flow statistics generally circulate in the high-yield market on Thursday afternoons but their release was delayed this week because of the market's closure on Thursday for the Veterans' Day holiday.

It was the 10th consecutive weekly inflow, following the $259 million cash infusion seen in the previous week, ended Nov. 3, according to a Prospect News analysis of the figures provided by market sources. During that time, net inflows have totaled about $5.639 billion, the analysis indicated.

The latest week's inflow brought the year-to-date cumulative total for the weekly reporting funds to $12.434 billion, a new peak level for 2010 according to the analysis. That eclipsed the previous high-water mark of $11.577 billion set the week before.

Inflows have now been seen in 33 out of the 45 weeks since the beginning of the year, while there have been 12 outflows, the analysis indicated.

EPFR sees $717 million inflow

Another fund-tracking service - Cambridge, Mass.-based EPFR Global, whose methodology differs somewhat from AMG - meantime reported a $1.02 billion inflow in the latest week, which followed an $800 million inflow the week before.

As was the case with the AMG number, it was the 10th straight weekly inflow.

Reflecting the difference between the ways AMG and EPFR calculate their respective fund-flow totals, although the two services' numbers generally point toward the same trends - EPFR includes results from certain non-U.S. domiciled funds as well as the domestic funds - its year-to-date net inflow total now stands at $27.5 billion, a new peak level for the year.

Cumulative fund-flow totals, whether for AMG or for EPFR, may be revised upward or downward and could include unannounced revisions and adjustments to figures from prior weeks.

Analysts say the continued flow of fresh cash into Junkbondland - and the mutual funds represent but a small, though quantifiable, percentage of the total amount of money coming in - has fueled the sustained new-deal borrowing binge seen this year and last, as well as the robust secondary market.

Allen sells $300 million

The primary market saw $875 million of dollar-denominated issuance come in four tranches on Friday.

Each of those four deals saw Bank of America Merrill Lynch playing the role of left bookrunner.

Allen Systems Group, Inc. priced a $300 million issue of six-year senior secured second-lien notes (B2/B) at par to yield 10½%, on top of the price talk.

Bank of America Merrill Lynch ran the books for the debt refinancing and dividend-funding deal.

Genesis Energy upsizes

Genesis Energy, LP and Genesis Energy Finance Corp. priced an upsized $250 million issue of eight-year senior notes (B3/B+) at par to yield 7 7/8%, in the middle of the 7¾% to 8% price talk.

Bank of America Merrill Lynch, BMO Nesbitt Burns, BNP Paribas Securities Corp., Deutsche Bank Securities Inc. and RBC Capital Markets Corp. were the joint bookrunners for the acquisition financing.

Stater brings drive-by

Stater Bros. Holdings Inc. priced a $225 million issue of eight-year senior notes (B2/B+) at par to yield 7 3/8%, at the tight end of the 7 3/8% to 7½% price talk.

Again, Bank of America Merrill Lynch ran the books.

Proceeds, together with cash on hand and proceeds from a new term loan, will be used to purchase, redeem or otherwise retire the company's 8 1/8% senior notes due 2012.

Stone Energy taps 8 5/8s

Finally, Stone Energy priced a $100 million add-on to its 8 5/8% senior notes due Feb. 1, 2017 (Caa1/B) at 100.50 to yield 8.499%.

The reoffer price came cheap to the 100.75 price talk.

Once again, it was Bank of America Merrill Lynch with the books.

The Lafayette, La.-based oil and gas company will use the proceeds for general corporate purposes, which will include the repayment of bank debt and the payment of amounts due related to the acquisition of additional acreage in Appalachia.

$11.7 billion week

With Friday's deals in the mix, the Nov. 9 week closed having seen $11.7 billion price in 31 junk-rated, dollar-denominated tranches.

That extended to $255 billion the year-to-date total of issuance, according to Prospect News data.

The market did run into a little bit of chop during the week, a syndicate banker conceded on Friday.

Investors seemed to be selling recent issues to raise cash for the new deals, with the result that some of those recent-vintage deals sold off.

However there is no sign that the primary market will see anything like a meaningful slowdown, the sell-sider added.

That assertion is based, in part, on continued cash inflows to the high-yield mutual funds.

During the most recent week another $857 million flowed into the funds, according to Lipper-AMG, sources said on Friday.

It was the 10th consecutive inflow.

During that streak the funds saw a total of $5.63 billion come in, according to a debt capital markets banker who watches the funds flows numbers carefully.

Thirty-three of the past 45 weeks have seen positive flows, the banker added.

The year-to-date total is $11.818 billion, into funds that report on a weekly basis.

Wind to roadshow €3.2 billion

Coming with a deal that has been anticipated since early October, Italy's Wind Telecommunicazioni SpA will start a global roadshow on Monday for €3.2 billion equivalent of seven-year senior secured notes (expected ratings Ba2/BB-).

The expected tranche sizes are €2.5 billion and $1 billion.

Credit Suisse and Deutsche Bank are the global coordinators and joint bookrunners.

Banca IMI, Barclays Capital, BNP Paribas, Bank of America Merrill Lynch, Citigroup, Credit Agricole CIB, Goldman Sachs & Co., J.P. Morgan Securities LLC, Morgan Stanley, Natixis Bleichroeder, RBS Securities, UBS and UniCredit are also joint bookrunners.

Proceeds, together with new bank loan, to refinance existing debt ahead of the planned acquisition of Wind's parent, Weather Group, by VimpelCom.

Rain CII Carbon plans deal

Meanwhile, Rain CII Carbon LLC, in conjunction with CII Carbon Corp., will begin a roadshow on Monday for a $400 million offering of eight-year senior secured notes.

Citigroup is the left bookrunner for the debt refinancing deal. Goldman Sachs & Co. and Jefferies & Co. are the joint bookrunners.

Exterran starts Monday

Exterran Holdings, Inc. will begin a roadshow on Monday for its $350 million offering of eight-year senior notes (expected ratings Ba3/BB).

Bank of America Merrill Lynch, Wells Fargo Securities, JP Morgan, BNP Paribas and Credit Suisse are the joint bookrunners.

Proceeds will be used to repay debt under the company's asset-based securitization facility and its revolver.

Spencer Gifts starts roadshow

Spencer Gifts LLC began a roadshow on Friday for its $150 million offering of six-year senior secured notes.

The notes, which will be jointly issued by Spencer Gifts, Spencer Spirit Holdings, Inc. and Spirit Halloween Superstores LLC, are expected to price late in the week ahead.

Wells Fargo Securities and UBS Investment Bank are the joint bookrunners.

The Easton, Pa.-based specialty retailer will use the proceeds to repay debt and to make a distribution to its shareholders.

Quack, quack, quack

A trader quipped that with all of the new deals which came during the week - a rapid-fire barrage of about 30 transactions totaling more than $11 billion of new paper, with many of them rapidly appearing drive-by offerings - "I feel like the Aflac duck," referring to the big insurance company's famously frazzled and furiously quacking television advertising mascot.

"I just want to get out of here, go home, drink some beer and watch some football."

He continued that it was "almost like the issuers felt that the last one in was the rotten egg," as they fell all over one another to get their new deals priced, "one after another."

New Stater bonds strong

The trader said that aftermarket investors took to Stater Brothers' new eight-year bonds almost as if the San Bernardino, Calif.-based supermarket chain operator was giving away free bags of groceries with them, pushing the new issue up handsomely when it hit the aftermarket. He quoted the issue at 102 bid, 102¾ offered, well up from their par issue price earlier in the session.

A trader at another desk likewise saw the bonds at 102¼ bid, 102¾ offered.

Allen paper pops

The day's other deal which priced early enough to have an aftermarket, Allen Systems Group's six-year secured notes, also did well when they were freed for trading.

A trader saw those bonds move up to 101 bid, 101½ offered, while a second saw the Naples, Fla.-based software company's new bonds at 100¾ bid, 101 offered. The bonds had priced at par earlier in the day.

The new deals from Lafayette, La.-based oil and gas exploration and production operator Stone Energy and Houston-based natural gas pipeline operator Genesis Energy came to market too late Friday for dealings, traders said.

HCA bonds healthy

Among recently priced issues, traders saw Nashville-based hospital operator HCA Holdings' new 7¾% senior notes due 2021 hanging in around the 100¾ bid, 101 offered level at which that $1.525 billion behemoth of an offering had finished on Wednesday.

The quickly shopped mega-deal had priced at par earlier that session, had struggled early on in the aftermarket, even actually trading a little below issue for a while, but then had recovered later on along with the overall market to end the day on the upside

Affinion still afflicted

But the same could not be said for Affinion Group's $475 million offering of 7 7/8% notes due 2018.

A trader saw those bonds on Friday "getting plastered," beaten down to 94 bid, 95 offered.

The Norwalk, Conn;-based marketing and consumer loyalty program company had priced its deal this past Monday at 99.247 to yield 8%, but in the words of another trader, "they never were able to get out of their own way," ending Monday's session down around 2 points from issue and continuing to slide southward as the week wore on.

Indicators thrown for a loss

Away from the new-deal world, a trader saw the CDX North American Series 15 HY index ending down 1 3/8 points on Friday to finish at 109 9/16 bid, 100¾ offered, after having lost 1/8 point on Wednesday.

The index thus finished well down on the week from the 102¾ bid, 102 5/16 offered level at which it had finished the previous Friday, Nov. 5.

The KDP High Yield Daily index meantime retreated 11 basis points on Friday to finish at 74.80, on top of the 33-bps slide seen on Wednesday. Its yield rose by 4 bps to 7.10%, after having ballooned upward by 15 bps on Wednesday. The index thus showed a decline on the week from the previous Friday's 75.21% reading, while its yield rose from 6.91% a week earlier.

And the Merrill Lynch High Yield Master II index failed to rise for a second consecutive session, falling by 0.338% on Friday after having declined by 0.26% on Wednesday - its first decline since Oct. 20, after 14 straight advances. The retreat pushed its year-to-date return down to 14.937%, the first time since Nov. 3 that it has been below 15%, from 15.301% on Wednesday and down further versus Tuesday's level of 15.602%, its peak level for 2010. It was also down from its week-earlier reading of 15.405%, after having posted week-over-week gains for the previous 10 weeks, dating back to late August.

Advancing issues trailed decliners for a second straight session on Friday; they fell behind on Wednesday after nine straight sessions on top. The losing issues led the gainers on Friday by a better than seven-to-five margin, widening their bulge from seven to six on Wednesday.

Overall activity, represented by dollar-volume levels, fell by 31% on Friday, after having dwindled by 29% on Wednesday ahead of the next day's holiday.

Away from the new deals, a trader described Friday's session as "a snooze-fest. It was very quiet."

A second agreed that the session was "a big yawn today. The market overall was down at least ¼ to ½ point. Things were weaker, and even if things didn't trade, people just dropped their levels."

Yet another trader said that "the market was a little bit nervous following stocks" - which swooned on Friday to their worst levels in three months, following the U.S. failure to get the other G-20 nations on board with a plan to boost world economic activity.

There were also worries on Wall Street that worries that China might put the brakes on its surging economy - which would slow down demand for raw materials, and that prospect sent prices of energy and metals issues tumbling.

Despite that investor angst, though, the junk trader said, "some issues did well" - at least in the new-deal sector.

But non-new-deal secondary names continued to ease; a trader saw Dean Foods Inc.'s 7% notes due 2016 down around 92¾ bid, after having begun the week above par; the Dallas-based food processing firm's bonds began cascading downward earlier in the week after it reported considerably weaker than expected third quarter numbers and announced the unexpected departure of its respected chief financial officer, effective at the end of the month.

© 2015 Prospect News.
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