Quiet day for primary arena but busy Thursday and Friday seen; new Wind bonds on the rise

By Paul Deckelman and Paul A. Harris

New York, April 9 - The high-yield primary market paused on Wednesday, with no new dollar-denominated, fully junk-rated issues having priced. This was in stark contrast to Tuesday's $4 billion session.

But high-yield syndicate sources were expecting busy new deal activity from a variety of issuers on Thursday and Friday, including Pittsburgh-based coal and natural gas producer Consol Energy Inc., which is shopping a $1.6 billion deal around, and McDermott International Inc., a Houston-based engineering and construction company bringing a $500 million secured offering.

Price talk on the latter deal surfaced on Wednesday, the syndicate sources said.

Another deal seen coming to market before the end of the week is Dallas-based oil and natural gas operator EXCO Resources, Inc.'s $400 million of notes. The company's existing notes were heard to have firmed in active dealings during the session.

Consol's outstanding paper, meanwhile, was also busy.

Among the issues priced on during Tuesday's big session, traders saw continued strong gains in both halves of the dollar- and euro-denominated megadeal from a financing subsidiary of Italian wireless and broadband provider Wind Telecomunicazioni SpA, which had accounted for most of that previous day's robust issuance. The Wind dollar notes were among the day's busiest issues.

Away from the new deals, Rite Aid Corp.'s bonds firmed modestly in active dealings ahead of Tuesday's release of quarterly earnings by the drugstore chain operator.

Statistical market performance indicators turned higher across the board on Wednesday, after having moved lower on Tuesday to break a string of three consecutive mixed sessions.

Monier prices atop talk

The action in Wednesday's high-yield primary came from the euro-denominated market.

In a restructured debt refinancing, German building materials company Braas Monier Building Group SA priced a €315 million issue of floating-rate notes due Oct. 15, 2020 (B1/B-) at par to yield Euribor plus 500 basis points.

The notes priced on top of spread talk.

The deal, which came into the market as a €415 million two-part notes offering that also featured a planned €200 million minimum tranche of secured fixed-rate notes talked to yield 6% to 6¼%, underwent a restructuring. This restructuring saw the fixed-rate notes withdrawn and the concurrent term loan upsized to €250 million from €150 million.

Joint global coordinator Goldman Sachs will bill and deliver. Deutsche Bank was also a joint global coordinator. BNP Paribas and JPMorgan were joint bookrunners.

The Oberursel, Germany-based company plans to use the proceeds from the bonds and term loan, along with a new €100 million revolver, to refinance debt.

Back-loaded week

No dollar-denominated issues were priced on Wednesday as dealers set the stage for what market-watchers are calling a "back-loaded week."

The Thursday and Friday sessions figure to see at least $4.4 billion of active calendar business clear. And that's barring surprises, which are by no means ruled out, sources say.

During the Wednesday session, official price talk surfaced on only one of the eight dollar-denominated deals in the market expected to price during the present week.

McDermott International set official yield talk for its $500 million offering of seven-year senior secured second-lien notes (B1/BB) at 8% to 8¼%, a dramatic reduction in yield from earlier guidance that had the deal coming in the high 8% to 9% area context.

The deal, which is being led by Goldman Sachs, is expected to price on Thursday.

Although at least two other dollar deals are expected to price on Thursday, official talk had not surfaced by the time the Wednesday session closed.

That may reflect a trend, a trader said, adding that increasingly the dealers are putting out official talk the morning of the day the deal is set to price, as opposed to the day before.

Also expected to price on Thursday is Consol Energy's $1.6 billion offering of eight-year senior notes (B1/BB) via joint physical bookrunners J.P. Morgan and Credit Suisse.

The unofficial talk has Consol Energy's notes shaping up at 5 3/8% to 5½%, sources say.

Also, Air Canada is expected to price its $300 million offering of seven-year senior notes (Caa2/B-/B-) on Thursday via J.P. Morgan, Citigroup, Credit Suisse and Morgan Stanley.

The deal is whispered at 8¼% to 8½%, a trader said on Wednesday. However, another trader warned that Air Canada might come with a yield inside of 8¼%.

Friday whispers

Among the deals poised to price during the final session of the back-loaded April 7 week, Atrium Windows and Doors, Inc.'s $300 million offering of five-year senior secured notes (Caa1/B-) is whispered with a 7-handle yield, according to a market source.

Barclays and Deutsche Bank are the physical bookrunners.

The Quad/Graphics Inc. $300 million offering of non-callable eight-year senior notes (B1/B), expected to price Friday via J.P. Morgan, BofA Merrill Lynch, U.S. Bancorp, PNC and SunTrust, is whispered at 6¼%.

FTS International, Inc.'s $500 million eight-year senior secured notes (B2/B-), via Wells Fargo, BofA Merrill Lynch, UBS and Barclays, are whispered in the mid-6% range.

The EXCO Resources, Inc. $400 million offering of eight-year senior notes (B3//), via J.P. Morgan, Wells Fargo, BofA Merrill Lynch and BMO, is whispered in the low 8s.

And Time Inc.'s $500 million eight-year senior notes (B1/BB) are being whispered at 5½% to 5¾%, a trader said.

That deal, via Barclays, Citigroup, BNP, BofA Merrill Lynch, J.P. Morgan, Morgan Stanley and Wells Fargo, is expected to price late this week or early in the week ahead.

Florida East Coast roadshow

The Wednesday session came with news of a single roadshow start.

Florida East Coast Holdings Corp. and Florida East Coast Industries, LLC began marketing a $1.1 billion offering of high-yield notes in two tranches.

The deal is coming in tranches of five-year senior secured notes and six-year senior unsecured notes.

Tranche sizes remain to be determined.

Morgan Stanley J.P. Morgan are the joint bookrunners for the debt refinancing and general corporate purposes deal.

Wind bonds busy and better

In the secondary market, traders saw a second consecutive session of robust gains in the new bonds from Wind Acquisition Finance SA, a funding subsidiary of the eponymous Italian telecommunications company.

A trader said that he saw the company's new 7 3/8% notes due 2021 "a couple of times today," pegging them at bid levels between 102½ and 102¾ late in the session.

"They were trading inside of that pretty much all day."

That was well up from the levels around 101½ bid at which those bonds had traded on Tuesday, when they first went into the aftermarket after having priced earlier in the session.

Wind priced $2.8 billion of those notes at par, upsizing the offering from an originally shopped $2.6 billion.

The bonds were part of a larger financing totaling some €3.779 billion equivalent, which also included €1.75 billion of 7% notes due 2021. Those euro-denominated notes also priced at par, after that portion of the scheduled forward-calendar deal was downsized from an originally planned €1.85 billion.

A second trader saw both halves of that deal trading at stronger levels on Wednesday, building upon Tuesday's already substantial aftermarket gains.

He said the 7 3/8% dollar notes were trading at 102 3/8 bid, 102 5/8 offered, calling that up 1 3/8 points from Tuesday's late levels, while the 7% euro-denominated notes got as good as 103 bid, 103½ offered, up 1½ points on the day.

A market source at another shop said that the 7 3/8s were among the most actively traded issues in Junkbondland on Wednesday, seeing more than $12 million having changed hands. He saw the bonds going home at just a shade under 103 bid, or a 11/2-point gain.

Tuesday deals trade around

Among the other issues that had priced on Tuesday, a trader said that the new BMC Software Inc. 9%/9¾% senior contingent cash-pay notes due 2019 continued to trade slightly above the 99.5 price at which the Houston-based IT operations management software company had priced its $750 million quick-to-market deal to yield 9.118%.

The bonds priced via BMC's corporate parent, Boxer Parent Co. Inc., after the transaction was upsized from an originally planned $500 million.

Those bonds had gotten as good as 100¼ bid, 100½ offered in initial aftermarket dealings before falling back later Tuesday to end around a 99¾ to 100 1/8 bid context. On Wednesday, the trader said, they were finishing the day "wrapped around 993/4. It would trade down yesterday, it traded up, and then kind of sideways."

He opined, "it wasn't such great shakes, considering it was such a big deal."

Another Tuesday pricing seen trading around on Wednesday was Navios South American Logistics Inc.'s 7 ¼% notes due 2022, which a trader saw "wrapped around 101."

Earlier in the day, he said, the bonds were trading at either 100¾ or 101 bid, "depending on the mood of the market at that point in the day."

A second trader saw the bonds doing a bit better than that, quoting them finishing up at 101 1/8 bid, 101 5/8 offered, up 3/8 of a point on the day.

The company - a Montevideo, Uruguay-based barge and upriver port logistics subsidiary of Greek shipping company Navios Maritime Holdings Inc. - had priced its same-day $375 million transaction at par, after upsizing it from an originally announced $350 million

Vector Group Ltd.'s add-on to its existing 7¾% senior secured notes due 2021 were down ¼ of a point on Wednesday a trader said, going out at 107 bid, 108 offered.

That was still up from the 106.75 level at which the Miami-based tobacco products company had priced its quickly shopped $150 million addition to yield 6.113%

EXCO, Consol bonds busy

Among the names shopping new deals for Thursday or Friday pricings, a market source saw Consol Energy's existing 8% notes due 2017 little changed around 104 7/16 bid, on volume of over $9 million.

He saw EXCO's 7 ½% notes due 2018 up 5/8 points, ending at 101½ bid, with over $11 million having exchanged hands in round-lot trading and several million of additional volume in smaller odd-lot transactions

A second trader said that EXCO's bonds had "better buyers' and were ending at 101½ bid, 102 offered.

Rite Aid ready for earning

Away from the new deals, Rite Aid's 6¾% notes due 2021 were ¼ of a point better, at 108¼ bid, on strong volume of over $15 million, ahead of the Camp Hill, Pa.-based drugstore chain operator's scheduled Thursday release of its fourth-quarter earnings.

Indicators improve

Statistical junk performance indicators were better across the board on Wednesday, after having moved lower on Tuesday to break a string of three consecutive mixed sessions before that.

The Markit Series 22 CDX North American High Yield index gained 3/8 of a point to end at 107 7/16 bid, 107 9/16 offered, in contrast to Tuesday's 1/32 of a point loss, which had been its third consecutive downturn.

The KDP High Yield Daily index rose by 6 basis points to finish at 75.06, after having edged downward by 1 basis point Tuesday, its second straight setback. Its yield, meanwhile, came in by 3 basis points to 5.22% after Tuesday's 1 bp rise, which had been its second straight increase in as many days.

And the widely followed Merrill Lynch High Yield Master II index resumed its winning ways after Tuesday's rare downturn, which had snapped a seven-session winning streak before that. It rose by 0.057% on Wednesday, after having lost 0.002% on Tuesday.

That improvement raised its year-to-date return 3.297% - a new peak level for 2014 so far. That was up from Tuesday's close at 3.239%, as well as Monday's 3.241% reading, which had been the previous peak level for the year so far.

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