CIT Group, Parker Drilling, Woodside Homes, Atlas Resource price; funds jump by $3.3 billion

By Paul Deckelman and Paul A. Harris

New York, July 25 - The high-yield primary sphere kept up a steady drumbeat of activity on Thursday. Over $1.4 billion of new dollar-denominated, fully junk-rated paper from domestic or industrialized-country borrowers came to market in four tranches, down a little from Wednesday's over $1.6 billion.

Commercial lender CIT Group Inc. bought a quick-to-market $750 million of 10-year notes, which were seen by traders a little below their issue price when they reached the aftermarket.

In contrast, the traders said that offshore oilfield service concern Parker Drilling Co.'s $225 million of seven-year notes firmed when they were freed to trade, as did builder Woodside Homes Co. LLC's upsized $220 million of eight-year paper. Energy operator Atlas Resource Partners, LP did $250 million of eight-year notes, but the issue came too late for any real aftermarket activity.

Among other recently priced deals, traders saw good gains in guitar-maker Gibson Brands, Inc.'s five-year secured notes and also saw media concern Gannett Co. Inc.'s five-year notes continuing to trade above their discounted issue price.

And they saw some junk market action in Wednesday's offering of pass-through paper from American Airlines, Inc., although they were down from Wednesday's peak levels.

The overall junk market was seen a little lower in continued quiet trading.

Statistical indicators of market performance turned mixed after having been lower across the board on Wednesday.

And junk mutual funds and exchange-traded funds - a good proxy for overall high-yield liquidity conditions - saw their fourth consecutive weekly inflow on Thursday - one of the largest such cash injections ever seen.

Lipper funds jump $3.3 billion

As Thursday's activity was coming to a close, junk market participants familiar with the fund-flow statistics generated by AMG Data Services said that during the week ended Wednesday, $3.28 billion more came into those funds than left them.

It was the second straight huge inflow seen, topping even the $2.67 billion cash injection recorded in the week ended July 17. In fact, the latest week's inflow was the second biggest, period, since Arcata, Calif.-based AMG, a unit of the Lipper analytics division of Thomson Reuters Corp., began tracking flows of money into and out of the junk funds in 1992, surpassed only by the record $4.25 billion cash addition in the week ended Oct. 26, 2011. Last week's inflow, meantime, was the third biggest on that basis.

The two mega-inflows were, in turn, part of a four-week string of inflows totaling $6.41 billion, according to a Prospect News analysis of the figures, including the $449 million inflow in the week ended July 3 and the relatively meager $12 million blip the week after that.

Those earlier inflows had snapped a string of five consecutive weekly outflows, several of which were in the billions of dollars, totaling around $12.2 billion, according to the Prospect News analysis. Those outflows were driven by investor fears of an end to accommodative Fed monetary stimulus policies.

For the year so far, inflows have now been seen in 18 weeks, against 12 weeks of outflows, and the latest week's giant-sized improvement dropped the cumulative net outflows since the start of the year to about $2.69 billion from the previous week's figure of $5.97 billion, according to the analysis.

Cumulative fund-flow estimates may be revised upward or downward or be rounded off and could include unannounced revisions and adjustments to figures from prior weeks.

The sustained flows of fresh cash into junk - and the mutual funds and ETFs represent but a small, though very observable and quantifiable percentage of the total amount of investor money coming into or leaving the roughly $1 trillion junk market - have been seen by analysts as a key element behind the high-yield secondary sphere's strong performance last year versus other fixed-income asset classes and its record active new-deal pace, which easily topped the $350 billion mark.

It was also seen as one of the major drivers behind the robust patterns of primary activity and secondary strength that had continued for much of this year's first half before fading in recent weeks on Federal Reserve-related investor worries and then followed by the now four-week comeback.

CIT prices $750 million

The Thursday primary market session saw heavy activity from Europe and the United States.

In the dollar-denominated market, four issuers brought single-tranche deals, raising a combined total of $1.43 billion.

Executions tended not to be as brisk as those seen throughout much of the past fortnight.

Two dollar deals priced at the tight end of talk while another came on top of talk, and one came at the wide end.

Chalk it up to residual effects from the secondary market, where cash bonds were as much as a point lower, a fund manager said, adding that Wednesday was the second consecutive day on which the market saw better sellers.

CIT Group, which brought Thursday's sole drive-by deal, priced the biggest deal.

CIT's $750 million issue of 5% 10-year senior notes (Ba3/BB-/BB) came at 99.031 to yield 5 1/8%.

The yield printed at the tight end of the 5 1/8% to 5¼% yield talk.

Early Thursday, the company announced a benchmark-sized offer that came with initial guidance in the 5¼% area.

J.P. Morgan Securities LLC, Barclays, Credit Suisse Securities (USA) LLC and Morgan Stanley & Co. LLC were the bookrunners for the general corporate purposes deal.

Atlas at wide end

Atlas Resource Partners priced a $250 million issue of 9 1/8% eight-year senior notes (Caa1//) at 99.297 to yield 9 3/8%.

The yield printed at the wide end of yield talk that was set in the 9¼% area.

Deutsche Bank Securities Inc. was the lead bookrunner for the acquisition financing.

Parker Drilling at tight end

Parker Drilling priced a $225 million issue of seven-year senior notes (B1/B+) at par to yield 7½%.

The yield printed at the tight end of the 7½% to 7¾% yield talk.

Goldman Sachs & Co., Wells Fargo Securities LLC, BofA Merrill Lynch and RBS Securities Inc. were the joint bookrunners for the debt refinancing and general corporate purposes deal.

Woodside Homes atop talk

In Wednesday's only upsized deal, Woodside Homes and Woodside Homes Finance Inc. priced a $220 million issue of senior notes due Dec. 15, 2021 (Caa1/B/) at par to yield 6¾%, on top of yield talk.

Credit Suisse, Moelis, Citigroup Global Markets Inc. and Wells Fargo were the joint bookrunners for the deal, which was upsized from $200 million.

The North Salt Lake, Utah-based homebuilder plans to use the proceeds to refinance its existing second-lien notes and put cash on its balance sheet.

No-shows

Although Thursday's deal volume was respectable, it was not complete, sources said. At least two deals that had been expected to price were no-shows at press time.

LSB Industries, Inc. had been expected to price its $400 million offering of eight-year senior notes (Ba3/B+), sources said.

However terms were unavailable at press time.

The deal was talked in the 6¾% area on Wednesday.

Two anchor accounts were reported to be holding out for investor-friendly tweaks on the restricted payments covenant, a fund manager said Thursday evening.

Nor were terms available at press time for the Alliance One International, Inc. $790 million offering of eight-year senior secured second-lien notes (Caa1/B-), sources said.

The deal is talked to yield in the 9¼% area.

Picard prices FRN

In an active European high-yield primary, France's Picard Groupe SAS priced a €480 million issue of six-year floating-rate notes (Ba3/BB-/BB) at par to yield Euribor plus 425 basis points.

Global coordinator Credit Suisse will bill and deliver. BNP, Credit Agricole, Goldman Sachs, Morgan Stanley, Natixis and SocGen were the joint bookrunners.

The Fontainebleau, France-based frozen food company plans to use the proceeds to repay debt.

CeramTec at tight end

Germany's CeramTec priced a €306.7 million issue of eight-year senior notes (Caa1/CCC+) at par to yield 8¼%, at the tight end of the 8¼% to 8½% yield talk.

Joint bookrunner Deutsche Bank will bill and deliver. RBC and UBS were also joint bookrunners.

Proceeds will be used to help fund the purchase of the company by Cinven from Rockwood Holdings Inc.

Gamenet atop talk

Italian online gaming company Gamenet SpA priced a €200 million issue of five-year senior secured notes (B1/B+) at par to yield 7¼%, on top of yield talk.

Global coordinator and joint bookrunner UBS will bill and deliver. Credit Suisse was also a global coordinator and a joint bookrunner. UniCredit and Banca IMI were also joint bookrunners.

The Rome-based company plans to use the proceeds to repay debt, including shareholder loans.

Flex-Van starts roadshow

There were a pair of roadshow announcements on Thursday.

Flexi-Van Leasing, Inc. began a roadshow Thursday in New York for a $250 million offering of five-year senior notes (expected ratings B3/BB-).

BofA Merrill Lynch is the left bookrunner. Wells Fargo is the joint bookrunner.

The Kenilworth, N.J.-based provider of equipment to the intermodal transportation industry plans to use the proceeds to repay bank debt and fund a distribution to shareholders.

Southern States Cooperative, Inc. plans to start a roadshow during the week ahead for a $130 million offering of eight-year senior notes via bookrunner BMO.

The Richmond, Va.-based supplier of agricultural products and services plans to use the proceeds to refinance debt.

Parker, Woodside rise

In the secondary sphere, several traders saw Parker Drilling's new 7½% notes due 2020 having moved up when they were freed for aftermarket activity.

One saw those bonds at 100½ bid, 100¾ offered, while a second pegged them in a 100¾ to 101¼ bid context. Both levels were up from par, where the Houston-based provider of contract drilling services to the offshore energy industry had priced its $225 million issue.

At another shop, a trader saw the bonds even better, locating them at 101½ bid, 101 7/8 offered.

Woodside Homes' new 6¾% notes due 2021 also gained ground when they were freed to trade, with a market source quoting them having gotten as good as 101¼ bid, 101¾ offered.

The North Salt Lake City, Utah-based builder's upsized $220 million offering had priced earlier at par.

CIT slips in trading

But the day's biggest deal, CIT Group's 5% notes due 2023, was seen by a trader having eased when it moved into the secondary.

He saw the New York-based commercial lender's quickly shopped $750 million deal at 98¾ bid, 99 3/8 offered - down from its 99.031 pricing level.

CIT's existing paper also saw some activity, with its 5 3/8% notes due 2020 losing 1¼ points to finish at 106 bid, with over $6 million of the bonds having changed hands.

Its 4¼% notes due 2015 were even busier, with turnover of over $13 million. Those bonds lost ¼ point on the day to end at 103½ bid.

Gibson gets better

Among the deals that came to market on Wednesday, a trader said that Gibson Brands' 8 7/8% senior secured notes due 2018 had improved solidly, trading up to 103 bid, 103½ offered, although he said that he "didn't see many markets" in them.

The Nashville-based guitar and piano manufacturer's $225 million deal had priced at par on Wednesday after having been upsized from an originally planned $200 million.

Among Wednesday's other transactions, a trader said that Gannett's 5 1/8% notes due 2018 "were still above their issue price" at 99¼ bid, 99¾ offered.

The McLean, Va.-based publisher of USA Today and other newspapers had priced its quick-to-market $600 million issue at 98.566 to yield 5 3/8%. The deal was upsized from an originally announced $500 million.

Michaels Stores Inc.'s 7½%/8¼% senior PIK toggle notes due 2018 hung in around their issue price at par bid, 100½ offered.

The Irving, Texas-based art supplies retailer's $800 million drive-by deal had priced at par on Wednesday after being upsized from $700 million.

American loses altitude

And a trader said that American Airlines' new 4.95% class A pass-through certificates due 2023 "kind of weakened today," going out at 100¾ bid, 101 offered, although that was still above their issue price.

The Fort Worth, Texas-based airline operator had priced $1,408,000,000 of those certificates on Wednesday, when they traded as high as 101 3/8 bid, 101 5/8 offered in the secondary.

Market indicators turn mixed

Statistical junk market performance indicators turned mixed on Thursday after having been lower across the board on Wednesday.

The Markit Series 20 CDX North American High Yield index rose by 3/16 point to end at 105 15/32 bid, 105 17/32 offered, its first gain after three straight losses. On Wednesday, it had fallen by 7/16 point.

But the KDP High Yield Daily index saw its third consecutive loss on Thursday, sliding by 30 bps to go out at 74.09. On Wednesday, it had fallen by 16 bps.

Its yield rose by 11 bps to close at 5.90%. It gained 5 bps on Wednesday.

And the widely followed Merrill Lynch High Yield Master II index lost 0.374%, its second straight loss. On Wednesday, the index - which had previously bucked the negative trend - finally posted a 0.326% loss, snapping an 11-session winning streak that dated back to July 9.

The loss dropped the index's year-to-date return to 3.536% from 3.925% on Wednesday.

The return was down from its peak level for the year so far of 5.835%, recorded on May 9, though up solidly from its 2013 low point of 0.384%, set on June 25.

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