GM debt declines in sympathy with equity; Chesapeake at recent highs; OPTI, NewPage active

By Stephanie N. Rotondo

Portland, Ore., Feb. 24 - The secondary high-yield market was pulled in different directions during Thursday trading, according to traders.

"There was lots going on and in lots of different directions," a trader said. "We did try to have a bit of a rally today, but it sort of faded at the end."

The trader also noted that it was an "absent news day," giving bonds little reason to move around much.

"It started out kind of soft," another trader said, blaming the weakness on the declining equity markets and "stuff going on overseas."

General Motors Corp. announced its fourth-quarter and full-year earnings on Thursday and the bonds initially traded up on the news. But as the company's stock fell, oil prices rose and Mideast turmoil continued, the bonds ended the day a couple of points lower.

In the energy arena, Chesapeake Energy Corp. debt was trading at its recent highs, according to a market source. The bonds held in even after the company reported a fire at one of its natural gas storage sites.

Meanwhile, market mainstays, such as OPTI Canada Inc. and NewPage Corp., remained active, though with no news to speak of. OPTI's debt gyrated throughout the session, closing a bit weaker than on Wednesday, while NewPage was hanging in there.

Market indexes mixed

Market indexes were mixed on Thursday, as traders reported that the secondary market attempted to rally throughout the day.

However, the rally "sort of faded at the end," a trader said.

The KDP High Yield Index reading was 75.77 with a 6.73% yield, down from Wednesday levels of 75.88 with a 6.69% yield.

But the CDX North American High Yield Index inched up just a tad to 103 5/8 bid, 103 7/8 offered.

The "wishy-washyness" of the market was further demonstrated in the performance of recent new deals. For example, Clear Channel Communications Inc.'s new 9% priority guarantee notes due 2021 traded up to 101 bid, 101 3/8, according to one trader. But retailers Burlington Coat Factory Warehouse Corp. and Claire's Sores Inc. were at their lows, he said, at par bid, par ¾ offered and 99 bid, 99¼ offered, respectively.

AMG sees $492 million inflow

No issues were priced during Thursday's primary market session.

Cash bonds were lower on the day by ½ of a point to ¾ of a point, according to a buyside source.

The bonds of DISH Network Corp. were down half a point to a point when the company reported that it incurred an unexpectedly high number of subscriber losses during the fourth quarter of last year.

Meanwhile, the high-yield mutual funds saw $492 million of inflows for the week to Wednesday, according to market sources who cited a weekly report from Lipper-AMG.

The latest inflow follows the previous week's $375 million inflow and is the 12th consecutive positive weekly flow going back to Dec. 8. During that stretch, the funds reporting weekly have seen $7.583 billion of inflows, according to an analysis of the data by Prospect News.

With the final full week of February in the books, all of 2011's weekly funds flow numbers to date have been positive ones. Year-to-date inflows now total $5.53 billion.

"We haven't seen one negative day this year," said a high-yield mutual fund manager commenting on the latest Lipper-AMG number during a late Thursday telephone conversation.

Talking the deals

Although the primary market put up a goose egg on Thursday, in terms of new issues, Friday figures to see some junk bonds price.

Goodrich Petroleum Corp. talked its $225 million offering of eight-year senior notes (Caa1/CCC+) with a yield in the 8¾% area on Thursday.

The books close at 10 a.m. ET on Friday, and the deal is set to price thereafter.

J.P. Morgan Securities LLC, Jefferies & Co., BMO Nesbitt Burns, BNP Paribas, RBC Capital Markets, Wells Fargo Securities and Bank of America Merrill Lynch are the joint bookrunners.

Meanwhile, South Africa's Foodcorp Ltd. talked its planned €415 million offering of seven-year notes with an 8¾% to 9% yield.

J.P. Morgan Securities LLC and Barclays Capital are the bookrunners.

MEMC starts roadshow

One new offering took its place on the active forward calendar.

MEMC Electronic Materials, Inc. began a roadshow on Thursday for its $500 million offering of eight-year senior notes (B1//), which is set to price during the week ahead.

Bank of America Merrill Lynch, Deutsche Bank Securities and Goldman Sachs & Co. are the joint bookrunners.

The St. Peters, Mo.-based company plans to use the proceeds for general corporate purposes. These would include working capital, capital expenditures and the construction of solar power projects, as well as acquisitions, investments, strategic transactions and joint ventures.

Easing into March

Things have been slow in the primary market, a high-yield mutual fund manager said on Thursday.

Market players taking vacations and potential issuers' stale financial numbers now undergoing refreshment are among the reasons, the buysider said.

Earlier in the week, a debt capital markets banker tipped Prospect News that a "dividend holdco" deal is headed to the market in the near term.

That will likely be Bumble Bee Foods, the buysider said. The investor had little other information to offer, except that JP Morgan is expected to be involved.

The initial deal tip came on Tuesday.

Since then, the high-yield appears to have become somewhat ahead of itself, the fund manager remarked, adding that should political instability in the oil-producing realms of northern Africa and the Middle East push gasoline prices in the United States back up to $4 per gallon, things could get tough in the high-yield market.

In any case, March is apt to come into the primary market like a lamb, the investor said, noting that in addition to vacations and stale financial numbers, the early part of the February-March crossover week figures to have limited new issue activity owing to the fact that the JP Morgan Global High Yield & Leverage Finance Conference will be held in Miami from Monday through Wednesday.

There will be some activity in the early part of March, the investor said, professing the expectation that in addition to offerings already in the market, an energy deal should surface during the week ahead via left bookrunner RBC Capital Markets.

However, primary market activity is apt to remain somewhat slow into the middle part of March, at which time - barring the unforeseen - the new deal market is primed to once again be off to the races, the investor said.

GM debt declines

General Motors' debt was "fairly active," a trader said, as the company announced its first return to profit for the year, its first since 2004.

Still, the bonds traded "much higher in the morning, they ended the day down a couple points," the trader said, as rising oil prices and Mideast turmoil concerned investors.

He said the most active note was the 8 3/8% notes due 2033, closing at 33 bid, 33½ offered, down from the day's high around 351/2.

The 7.20% notes due 2011 were also weaker, trading around 31.

"Those correlate much more to the stock at this point than the underlying [condition of the company]," he said. The stock (NYSE: GM) fell below its IPO price on Thursday, closing at $33.02 per share, down $1.57, or 4.54%.

Another trader said the benchmark 8 3/8% notes finished "off a little bit" around 331/2, while another market source placed the paper at 32 bid, 33 offered, down a deuce.

For the year of 2010, the Detroit automaker posted a profit of $4.7 billion, compared to a $21 billion loss in 2009. The fourth quarter also showed a profit at 4510 million, or 31 cents per share. That compared to a loss of $3.5 billion in the same quarter of 2009.

Fourth-quarter revenue came to $36.9 billion, and $135.6 billion was reported for the full year.

The price of oil meantime fell $1.41, or 1.44%, to $96.69 a barrel. However, earlier in the session, oil hit well over $100 per barrel. The end-of-the-day reversal was being blamed on rumors that Libyan leader Muammar el-Qaddafi had been shot.

The United States is claiming no knowledge of any shooting.

Elsewhere in the autosphere, Ford Motor Co.'s 7.45% notes due 2031 were seen trending higher at 109 bid, 110 offered.

Chesapeake at recent highs

A trader said that Chesapeake Energy bonds were unchanged "after their recent highs, maybe up a tick in spots."

He quoted the 6 5/8% notes due 2020 at 104¾ bid, 105 offered, the 6 7/8% notes due 2018 at 106 bid, 106¼ offered, the 9½% notes due 2015 at 123 bid, 123½ offered, the 7¼% notes due 2018 at 109¾ bid, 110¼ offered and the 7 5/8% notes due 2013 at 111½ bid, 112 offered.

On Tuesday, the company reported earnings, showing a fourth-quarter net income of $180 million, or 28 cents per share. That compared to a fourth-quarter loss of $530 million, or 84 cents per share, in 2009.

The earnings release followed news out Monday that the company was selling its Fayetteville Shale unit to BHP Billiton for $4.75 billion in cash.

The company continued to make headlines come Wednesday, as a fire broke out at the company's Powers well site in Avella, Pa. The fire was extinguished after three hours, but not before injuring three workers.

The cause of the fire was unknown and an investigation was underway.

OPTI moves, NewPage unchanged

Market mainstay OPTI Canada and NewPage continued to be active, even without any credit-specific news out.

A trader said OPTI's subordinated debt - the 7 7/8% and 8¼% notes due 2014 - "had a huge run up," gaining about 4 points before "giving some back." He pegged the paper around the 55 mark, up from opening levels around 52 and down from the intraday high around 56.

He added that about $70 million to $80 million of the bonds changed hands.

The trader also saw the NewPage 10% notes due 2012 at 661/2, which was unchanged. About $25 million to $30 million traded, the trader said.

At another desk, OPTI's bonds were deemed "up a couple points," also around that 55 level, while NewPage's 10% notes were seen at 661/2. The 11 3/8% notes due 2014 were "unchanged to down a quarter" at 993/4.

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