Apria leads six-deal, $2.44 billion day; GMAC, Quiksilver up again; funds gain $368 million

By Paul Deckelman and Paul A. Harris

New York, May 21 - The junk market's well-oiled new-deal machine continued to crank out offerings at a fevered pace on Thursday, with a half-dozen deals carrying a collective face value of $2.44 billion equivalent having come to market.

Apria Healthcare Group Inc. won the distinction of having the day's biggest deal, as it priced an upsized $700 million offering of five-year senior secured notes. Market participants now expect the home healthcare services provider's anticipated second tranche of new five-year secured paper to have been downsized by that same $100 million amount when it comes to market - which primary sources say could happen fairly soon, depending on the level of investor demand.

In descending size order, the next biggest offering was European broadband provider UPC Holdings BV, which brought in a $605 million equivalent two-part transaction late in the day.

Canadian natural gas company Gibson Energy ULC and GEP Midstream Finance Corp. came in with an upsized $560 million offering of five-year senior secured notes.

Another energy operator, Berry Petroleum Co., also upsized its $325 million offering of five-year notes.

Ameristar Casinos, Inc. - which tapped the junk market for $500 million in a well-received deal just last week - came back for a second helping, with a $150 million add-on to its original offering, while mining operator and chemical fertilizer company Compass Minerals International Inc. priced a quickly shopped $100 million offering of 10-year notes.

After being freed for secondary trading, the Ameristar, Berry and Compass deals were seen by traders to have moved up, while the Apria deal remained around its issue price. The Gibson and UPC deals came way too late for any kind of aftermarket activity.

From other deals that priced earlier in the week, the new WMG Acquisition Corp., Cellu Tissue Holdings Inc. and Ashland Inc. issues were seen trading well north of their respective pricing levels.

Among established bonds not impacted by new-deal concerns, GMAC LLC's bonds were seen generally higher for a second consecutive session, given a jump-start by a news report indicating the government is ready to give the automotive and residential lender another $7.5 billion in bailout assistance.

In the retail and consumer products sector, swimwear and sports clothing maker Quiksilver Inc.'s bonds firmed smartly for a second consecutive session, although there was no fresh definitive news out of the company that might easily explain such a rise. Retailers were mixed, with Bon-Ton Department Stores Inc.'s bonds seen solidly higher after positive financial results, while Macy's Retail Holdings Inc.'s bonds were down by several points.

Stocks, Treasuries and credit all took a tumble on Thursday, according to a money manager from a high-yield mutual fund.

Junk went along for the ride down, the source added.

Market sources marked cash bonds lower by amounts ranging from 3/8 point to 1¼ points at the close.

However cash inflows - the technical force said to have driven the burst of issuance seen in the run-up to Memorial Day weekend - continued to pour into the high-yield asset class.

Junk funds show $368 million inflow

As trading was winding down for the day, market participants familiar with the high yield mutual fund flow statistics generated by AMG Data Services of Arcata, Calif. - a key barometer of overall market liquidity trends - said that in the week ended Wednesday some $368 million more came into the weekly reporting funds than left them. It was the tenth consecutive inflow, including the $981 million cash infusion seen in the previous week, ended May 13.

That 10-week winning streak has generated around $6.6 billion of inflows, according to a Prospect News analysis of the AMG figures. With 20 weeks of the year now in the history, inflows have been seen in all but three of them - a losing streak back in late February and early March which saw cumulative outflows of $996 million.

Including the latest week's inflow number, the year-to-date net inflow for the weekly reporting funds has swelled to around $9.2 billion, according to the analysis, up from about $8.86 billion the week before.

The massive multibillion-dollar flow of funds into high yield is seen as having been largely responsible for the relatively strong pace of new issuance and the solidly positive year-to-date returns that have been seen in Junkbondland for most of the first nearly five months of the year - except for a lull in both the primary and secondary spheres for several weeks that largely coincided with the three weeks of outflows. The sustained inflows have helped the junk market bounce back nicely from last year's staggering 25%-plus loss and sharply reduced primary activity totals.

A market source also said that in the latest week, funds which report on a monthly basis rather than doing so weekly were up by $17.4 million on the week. The year-to-date cumulative inflow for such funds now stands at $8.168 billion, versus the prior week's $8.151 billion.

The source further said that on an aggregate basis, consolidating the inflows for the weekly and the monthly reporting funds, a total of $17.368 billion more has come into the funds than has left them, versus the prior week's aggregate figure of $16.982 billion.

EPFR sees inflows continuing

At another fund-tracking service, Cambridge, Mass.-based EPFR Global, analysts also noted that the junk funds had racked up their 10th consecutive week of inflows, with the $283 million cash infusion they calculated pushing the year-to-date inflow total to some $8.7 billion. In the previous week, EPFR said the funds had seen a $1.14 billion inflow - the largest weekly inflow since the service began keeping track of weekly changes in the funds several years ago.

While the EPFR junk figures usually point essentially in the same direction as AMG's, the precise weekly and year-to-date numbers almost always differ somewhat due to EPFR's inclusion of some non-U.S. funds in its universe. Any and all cumulative fund-flow totals, whether for AMG or EPFR, can include unannounced revisions and adjustments to figures from prior weeks.

The flow of money into and out of the junk bond funds is seen as a generally reliable market barometer of overall high yield market liquidity trends - although they comprise less of the total monies floating around the high yield universe than they used to - because there is no similar reporting mechanism to accurately track the movements of cash coming into the junk market from other, larger sources seen in recent years such as insurance companies, pension funds and hedge funds.

$2.44 billion in seven tranches

The drag felt in stocks, Treasuries and throughout much of credit seemed not to have been a big factor in the high-yield primary, a syndicate official commented after Thursday's close.

Six issuers priced a face amount of $2.44 billion equivalent in seven tranches of notes.

Apria upsized

Apria Healthcare Group priced an upsized to $700 million issue of 11¼% senior secured notes, series A-1, due Nov. 1, 2014 (Ba2/BB+) at 97.050 to yield 12%.

That yield came 25 basis points wide of the original price talk of 11½% to 11¾%. However talk on the deal widened to 12% with the upsizing of the deal from $600 million, market sources said.

The issue price came toward the cheap end of the 2 to 3 points of discount talk.

Banc of America Securities, Wachovia Securities and Barclays Capital were joint bookrunners for the bridge refinancing.

In upsizing the series A-1 offering, Apria shifted $100 million from the senior secured notes, series A-2, due 2014 (B1), downsizing that tranche to $310 million from $410 million.

The deal met headwinds, according to a high-yield mutual fund manager.

The books were not heavily subscribed even at 12%, the source added.

The fact that the company is not highly leveraged augured in the deal's favor, the source added.

UPC prices two-parter

Meanwhile, UPC Holding priced an upsized $605 million two-part senior unsecured notes transaction (expected ratings B2/B-).

The deal included $400 million of 9 7/8% eight-year notes which priced at 92.427 to yield 11¼%. Both the coupon and the yield were spot on the price talk.

In addition UPC priced a €150 million add on to its 9¾% notes due April 14, 2018 at 89.147 to yield 11¾%, on top of price talk.

The deal went well and was many times oversubscribed, according to an informed source.

Credit Suisse, BNP Paribas, JP Morgan and Morgan Stanley were joint bookrunners for the general corporate purposes deal.

UPC priced €65.6 million of the 9¾% senior notes due April 2018 at a discount of 16½%. That deal settled on April 30. Those notes were an add-on to a new issue of notes which figured in an exchange offer involving the company's 7¾% senior notes due 2014 and its 8 5/8% senior notes due 2014.

Gibson upsizes

Elsewhere Canadian midstream company Gibson Energy ULC, along with GEP Midstream Finance Corp., priced an upsized $560 million issue of 11¾% five-year first-lien senior secured notes (B1/BB-) to yield 12½%.

The yield came at the wide end of the 12¼% to 12½% yield talk. The issue price was in line with the 2 to 3 points of original issue discount price talk.

The deal went well, according to an informed source.

People liked the credit and were especially impressed with the management team, the source added.

Canadian accounts played a part, as expected.

UBS Investment Bank was left bookrunner for the bridge refinancing. RBC Capital Markets and RBS Greenwich Capital were joint bookrunners.

Berry Petroleum at tight end of talk

Berry Petroleum priced an upsized $325 million issue of 10¼% five-year senior notes (B2/B) at 93.546 to yield 12%.

The yield was printed at the tight end of the 12% to 12¼% price talk.

The deal, which was upsized from $300 million, went very well, according to an informed source.

Wachovia, RBS, BNP Paribas, SG Americas and Calyon Securities were joint bookrunners for the debt refinancing deal.

Ameristar, on reverse inquiry

Two of Friday's deals were a.m.-to-p.m. drive-by deals - announced early in the morning and priced before the close.

Ameristar Casinos priced a $150 million add on to its 9¼% senior unsecured notes due June 1, 2014 at par, on top of the price talk.

It was driven by reverse inquiry, according to a high-yield mutual fund manager who believes that only those parties involved in the reverse inquiry received substantial allocations.

Banc of America Securities, Wachovia Securities and Deutsche Bank Securities ran the books for the fungible add-on.

Proceeds will be used to prepay and permanently retire a portion of the he Las Vegas-based gaming and entertainment company's revolver.

Compass Minerals oversubscribed

Also bringing an a.m.-to-p.m. drive by was Compass Minerals International, which priced a $100 million issue of 8% 10-year senior notes at 97.497 to yield 8 3/8%.

The issue came at the tight end of the 8½% price talk.

Although investors voiced concerns about the small size of the deal, it ended up being two- to three-times oversubscribed, according to an informed source.

The Compass Minerals deal is tied with Rock-Tenn Co. for the distinction of bringing the smallest deal year to date. However Rock-Tenn priced its deal at par. So in terms of proceeds raised, Compass Minerals is the year's smallest deal so far.

Credit Suisse, JP Morgan and Goldman Sachs & Co. ran the books for the debt refinancing and general corporate purposes deal.

On to Memorial Day

Thursday's business clears the active forward calendar, sources say.

No new issues or announcements are expected before Friday's early close, ahead of the three-day Memorial Day weekend in the U.S., they add.

However given all the cash that has come into the asset class - $6.6 billion over the past 10 weeks - the primary market is expected to quickly regain its footing as during the final week of May.

Ameristar add-on trades up

When the new Ameristar Casinos 9¼% add-on notes due 2014 were freed for secondary dealings, a trader saw them not far from their par issue price at 100½ bid, 101 offered.

At another desk, a trader saw the Las Vegas-based regional gaming operator's $150 million of new bonds having pushed as high as 101 bid, 101½ offered.

That rise replicates the gains posted by the company's original 91/4s, $500 million of which priced at 97.097 on May 12 to yield 10%; the new bonds quickly moved up to the par level and were seen pretty much staying there in the days which followed.

Berry is better

Several traders saw Berry Petroleum's $325 million of 10¼% notes due 2014 - upsized from the originally planned $300 million - trading up to 95 bid, 96 offered. The Denver-based exploration and production company's deal had priced earlier at 93.546 to yield 12%.

New Compass bonds seen heading north

A trader saw Compass Minerals International's new 8% notes due 2019 trading at 98¾ bid, 99¾ offered. That was up from the 97.497 level at which the Overland Park, Kan.-based salt and chemical mining company priced the $100 million offering earlier in order to yield 8 3/8%.

Apria hangs around issue

However, a trader saw Apria Healthcare's $700 million of new 11¼% senior secured notes due 2014 at 97¼ bid, 98 offered. That was little changed from the 97.05 level at which the Lake Forest, Calif.-based home healthcare services provider's bonds - upsized from the originally planned $600 million - priced earlier in the day to yield 12%.

Market participants saw no secondary dealings in the two late-breaking pricings, for Amsterdam-based broadband provider UPC Holdings and for Calgary, Alta.-based natural gas operator Gibson Energy.

Some recent deals holding gains

Looking at some of the new deals which priced earlier in the week, a trader said the new WMG Acquisition 9½% senior secured notes due 2016 - which had priced on Tuesday at 96.28 to yield 10¼%, but which had then pushed up by several points to around the par bid level - "came off that level just a little bit," but still called them "pretty much unchanged on the day." He saw the New York-based music content company's $1.1 billion offering - upsized to mega-deal status from its originally planned $500 million - ending on Thursday at 99½ bid, par offered.

Also "kinda hanging in" around the par level, as a trader put it - actually above it, at 100¼ bid, 101¼ offered - was Covington, Ky.-based chemical maker Ashland Inc.'s $650 million of 9 1/8% notes due 2017. Those bonds - upsized from the originally planned $600 million - priced Tuesday at 96.577 to yield 9¾%, and then proceeded to move upward.

Alpharetta, Ga.-based tissue-paper maker Cellu Tissue Holdings Inc.'s 11½% notes due 2014 were seen by a trader at 98½ bid, 99 offered. The company's $255 million of senior secured bonds - upsized from the originally planned $230 million - priced at 96.368 on Tuesday to yield 12½%.

Other recent paper around issue

However, not all of the recently priced offerings have moved up, even though most of the paper had priced at a steep discount to par.

A trader saw Corrections Corp. of America's 7¾% notes due 2017 at 97½ bid, 98 offered. He called that "pretty much unchanged" from the 97.116 level at which the Nashville-based operator of private prison facilities had priced its $465 million of the bonds - upsized from the original $300 million - to yield 8¼%.

Meanwhile, MarkWest Energy Partners LP's $150 million add-on to its existing 6 7/8% notes due 2014, "kind of came and went," said a trader, who "saw better buyers." He pegged the Denver-based natural gas company's bonds, which had priced on Wednesday at 78 bid to yield 12.593%, at 78½ bid, 79½ offered.

Traders were seeing no traces of some of the week's other deals for such issuers as Scientific Games International Corp., Bio-Rad Laboratories Inc., and Hughes Network Systems, LLC/HNS Finance Corp. A trader said of the latter deal, -- an upsized $150 million add-on tranche of 9½% senior notes due 2014 - that it had "gotten put away" after pricing at 90.935 to yield 12%. "That one I did not see."

Speaking generally, he opined that 'it's weird - the names that came [to market] two weeks ago have really dried up. You don't see as much of that trading as you have historically." Instead, he said, what's happening now is that a new issue will usually trade "in a one- or two-day window, and then it kind of just disappears, replaced by the next flavor of the month."

Teck trek continues

However, there's an exception to every rule - and the trader said that the $4.225 billion three-part offering which Teck Resources Ltd. brought to market back on May 5 was still actively trading around.

"They're extremely high-beta," he said, noting the sharp volatility in the Vancouver, B.C.-based mining and energy concern's bonds.

For instance, he said that the 10¾% notes due 2019 - $1.85 billion had originally priced at 94.893 to yield 11 5/8%, and then had moved up to above the par bid level, along with their accompanying five-year and seven-year tranches, only to then start giving those gains back - were back trading around par bid, 101 offered. He said that earlier in the week, the bonds had been as low as 96 bid, 96½ offered, but then "bounced right back up," even getting as good as 102 bid, 102½ offered on Wednesday. He said the bonds had moved up "on no news, but they gave a point, 1½ points back today."

He said that "within that 4 or 5 point range, they just keep pushing them up, pushing them down."

He also saw Teck's $1.315 billion of 9¾% note due 2014, which had priced at 95.27 on May 5 to yield 11%, gone up to par and then back down, at 98½ bid, 99½ offered Thursday. Its $1.06 billion of 10¼% notes due 2016, which had priced at 94.654 on May 5 to yield 11 3/8%, were now hovering at 98 bid, 99 offered.

"They are all very active," he said, "but it's the longer one that moves around the most."

Market indicators seen easier

Back among the established issues with no new-deal connections, a market source saw the CDX Series 12 High Yield index - which had eased by ¼ point on Wednesday - fall back by another ½ point on Thursday, finishing at 79¼ bid, 79¾ offered.

The KDP High Yield Daily Index, which had zoomed by 69 basis points on Wednesday, dipped by 5 bps on Thursday to end at 60.73, while its yield inched up by 1 bp to 11.20%.

Advancing issues, after having led decliners for a third straight session on Wednesday, by a better than two-to-one ratio, continued to outpace them on Thursday, by a better-than four-to-three margin.

Overall market activity, measured by dollar-volume totals, fell by about 6% from Wednesday's levels on the final full trading session of the week before the Memorial Day holiday break; the junk market will only see an abbreviated session Friday, with a 2 p.m. ET early close recommended by the Securities Industry and Financial Markets Association, followed by a full market close on Monday.

A trader said that there was "not a lot to report. It was extremely quiet, with very little activity."

A second trader said that Thursday's junk market "didn't track equities or Treasuries, with the sell off on the long end of Treasuries and stocks. Our market pretty much held in there. "While he called market activity levels "rather muted ahead of the long weekend, we did see some stuff getting done. Call it a rather muted day, but also still pretty active." I think accounts were trying to get as much down as they could today because [Friday] is probably going to be a real snoozer."

"Yet another trader agreed, predicting that Friday "is gonna be an ugly day." He recommended that anyone having to do any kind of business on Friday get it done early, because "if someone has done whatever stuff he has to do in the morning, and then he doesn't have to be there - he won't be. If you have to call anyone, you'd better do it by 12."

Bellwether bonds back off

A trader detected an easier tone to the market. He noted that several of the big, liquid bonds sometimes regarded as market bellwethers because of their size and widespread distribution were a little lower, "which is not surprising, based on where stocks are," with the benchmark Dow Jones Industrial Average ending down 129.91 points, or 1.54%, at 8,293.13, while other equity indexes were also lower.

For instance, he saw popular market bellwether issue First Data Corp.'s 9 7/8% notes due 2015 down ½ point at 66, on $7 million traded - about one-fifth of the number of the Greenwood Village, Colo.-based financial transaction processor's bonds that traded Wednesday.

He also saw Franklin, Tenn.-based hospital operator Community Health Systems Inc.'s 8 7/8% notes due 2015 off 5/8 point at 971/2, on $9 million traded. Philadelphia-based uniform provider and food service operator Aramark Corp.'s 8½% notes due 2015 lost 3/8 to end at 941/2, on $8 million traded.

He said the most actively traded issue, Houston-based natural gas company El Paso Corp.'s 8% notes due 2032, ended down 3/8 at 97 1/8 bid, on $32 million of turnover.

Quiksilver bonds glitter

With upside issues relative few and far between, a trader noted that for a second straight session the bonds of Huntington Beach, Calif.-based sports apparel and equipment maker Quiksilver Inc. were several points higher.

He said that the company's 6 7/8% notes had moved up to around 59 bid on Wednesday from prior levels in the mid-50s, and continued to climb on Thursday, pushing up to 641/4, "a really nice move," on relatively busy mid-afternoon volume of some $14 million.

There was no firm new positive news out on the company, which makes swimwear and other action sportswear, footwear and accessories aimed toward its core market of youthful surf, snow and skateboarding dudes and dudettes - whether authentic boarders or wannabes alike.

However, the trader noted that there had been all kinds of chatter around for months on the possibility of Quiksilver making asset sales, possibly to larger competitor VF Corp. Earlier in the year, Quiksilver bonds had risen on buzz that the company might be close with inking a deal to sell its DC Shoes product line to VF, although there was also talk that it had held talks on selling the whole company outright to athletic shoe powerhouse Nike Inc. - transactions that never did materialize.

Speculation of asset sales within that apparel industry activewear niche ratcheted up a little this week as VF's chief executive officer, Eric Wiseman told the Bloomberg news service in an interview that his company is in "active discussions" on possible acquisitions of companies or product lines. Wiseman did not mention Quiksilver specifically, nor for that matter did he identify any other potential acquisition targets. However, in declaring that "there are lots of really interesting discussions about brands that may be appropriate," Wiseman said that VF, considered to be the world's largest clothing maker, is now particularly focused on expanding its profitable outdoor, action sports and sportswear segment - Quiksilver's area of expertise.

Another trader, seeing those bonds "up a couple" of points to 61½ bid, 63½ offered, had a less dramatic explanation for the rise over the previous few sessions, saying the bonds "were all just reversing what happened late last week. We were kind of at these levels, and then the bonds dipped down, for what seemed like no reason. So now, we're just coming back to where we were."

Bon-ton is better

A trader saw Bon-Ton's 10¼% notes due 2014 up a point on the day in round-lot dealings, pegging the York, Pa.-based department store operator's bonds at 44 bid, on volume of $14 million, making the issue one of the more actively traded names on the day.

Another trader, however, noted that the Bon-Ton bonds were more volatile than that small gain would suggest - he said that the bonds had "jumped 14 points" from their levels earlier in the week to Thursday's intra-day highs, on "a lot of volume." He said the bonds had been trading in the 30s earlier in the week, and had finished Wednesday around 40 bid. Then on Thursday, he said, the bonds had opened at 44 bid, then got as far up as 50 bid, 50.5 offered, before coming off that peak level to end at around 47 bid on the day.

That followed the release of fiscal first-quarter numbers which, while still showing a loss, were not as bad as some in the market had feared. The company also reported adequate liquidity and plans to continue cutting debt.

However, elsewhere in the sector, a market source saw Macy's 7.45% notes due 2017 down more than 4 points on the session to the 85 level, in busy trading. There was no fresh news seen out on the Cincinnati-based department store operator.

GMAC gains roll on

A trader said GMAC LLC's bonds continued to firm, just as they had on Wednesday on news reports indicating GMAC was in line for $7.5 billion more of government bailout money, on top of the $5 billion it has already received. He said its 8% bonds due 2031 were "a little better" at 75 bid, 76 offered, "up yet again for a few more points --- about 3 or 4 - from [Wednesday]."

He called its 7¾% notes due 2010 "always active," seeing them end at 96½ bid, 97 offered, "up maybe a point or two."

GMAC, another trader said, "continued to have a decent tone."

However, at another desk, a trader actually saw the Detroit-based automotive and residential lender's 73/4s down on a strictly round-lot basis at 95½ bid, versus 96 on Wednesday, with $10 million traded. He did see the 8s better by 2 points at 73 bid, but said that had come on only $3 million of trading.

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