Consolidated Minerals prices five-year notes; iPayment shops deal; funds lose $186 million

By Paul Deckelman

New York, April 21 - Consolidated Minerals Ltd. priced a slightly upsized $405 million of five-year senior secured notes on Thursday, the only junk deal seen having come to market in a shortened pre-holiday session. The Australian metal miner's new issue firmed by more than a point in the aftermarket.

That deal closed out a shortened week - the domestic debt markets were slated for a full Friday close - which saw nearly $3 billion of new paper come to market, a small fraction of the previous week's total.

While no other deals actually priced, there was some calendar-building going on, as electronic transaction processor iPayment, Inc. and its corporate parent, iPayment Holdings, Inc., began shopping around a two-part offering of notes and debt-and-equity units, for likely pricing in the upcoming week.

Primaryside activity was otherwise muted.

Traders said that recently priced new deals, such as Wednesday's issues from Superior Energy Services, Inc., CDW Escrow Corp. and, especially Community Choice Financial Inc. continued to hold their own.

Secondary trading otherwise was thin and featureless and at its quietest levels of the week, although market indicators generally pointed to a firm tone.

One indicator which did turn negative was high yield mutual fund flows - thought to be a good proxy for overall Junkbondland liquidity trends - which showed a modest downturn in the latest week, after three consecutive weeks of gains.

Junk funds lose $186 million

As the abbreviated session was winding down, market participants familiar with the weekly AMG high-yield mutual fund flow statistics generated by Lipper/FMI said that in the week ended Wednesday $186.3 million more left those weekly-reporting funds than came into them.

It was the first downturn in four weeks, and stood in stark contrast to the $234 million inflow recorded in the previous week, ended April 13. Over the previous three weeks, stretching back to the week ended March 30, net inflows had totaled $1.78 billion, according to a Prospect News analysis of the figures.

Fund-flow patterns began the new year on a roll - cash infusions totaling more than $8 billion were seen over a 14-week stretch from early December of last year up through mid-March, according to the analysis, including the more than $6 billion taken in during the first 10 weeks of this year. Since then, however, fund-flow patterns have been choppy - two weeks of declines in March totaling $1.146 billion, followed by the three weeks of inflows, as noted, and then the outflow in the latest week.

The latest outflow cut the year-to-date cumulative inflow total to $6.68 billion from the previous week's $6.87 billion, the peak level for 2011 so far, the Prospect News analysis said.

Even counting this week's outflow, though, with 16 weeks gone in the year, there have now been 13 inflows recorded against just the three outflows.

EPFR sees $421 million inflow

Another fund-tracking service, Cambridge, Mass.-based EPFR Global, whose methodology differs somewhat from AMG, meantime reported a $421 million inflow in the latest week, the fourth straight gain by the agency's calculations.

That followed a cash addition of $726 million in the week ended April 13 and before that, the $1.49 billion cash injection in the week ended April 6, which the company called a record for the time that it has been tracking fund flows.

The latest week's cash infusion lifted the year-to-date net inflow number above the $18 billion marker from the previous week's $17.7 billion, EPFR said.

The latest week's figures represented a relatively rare divergence between AMG and EPFR, which calculate their respective fund-flow totals differently, although the two services' numbers usually - though not always, as in this case - point toward the same trends most weeks. EPFR includes results from some non-U.S. domiciled funds as well as the domestic funds.

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

Analysts say the continued flow of fresh cash into junk - and the mutual funds represent but a small, though observable and quantifiable percentage of the total amount of money coming in - fueled the record new-deal borrowing binges seen in both 2009 and then in 2010 as well as the robust secondary market seen both years. Both of those trends have been pretty much continuing in 2011 as well.

Consolidated late in the day

Late in the day - long after the official 2 p.m. ET pre-holiday close recommended by the Securities Industry and Financial Markets Association - Consolidated Minerals priced a slightly upsized $405 million issue of five-year senior secured notes.

High yield syndicate sources said that the 8 7/8% notes due 2016 priced at 99.5032 to yield 9%, at the mid-point of pre-deal price talk for a 9% area yield. However, initial guidance on the deal had been in the mid-8% range

Many investors had pretty much given up their widespread expectations that the deal would price on Thursday, especially once the officially recommended early closing time had come and gone and many participants on both the buyside and the sellside had hit the exits ahead of the three-day holiday.

Before the deal actually did price - even though most people were gone by then - a trader expressed puzzlement as to why it had not come up until that point.

"I don't know what happened to it - I haven't heard anything. It seems like it's been out there, but no follow-through at all. Was it that there just wasn't interest in it?"

Several traders opined that the deal would likely come on Monday - but a short time later, word spread in the market that the St. Helier, Australia-based mining concern's deal had, in fact, finally priced.

The issue was slightly upsized from the $400 million amount the company originally announced on April 8. It was marketed to investors via a global roadshow and was brought to market by joint book-running managers Deutsche Bank Securities Inc. and Citigroup Global Markets Inc.

The company, which specializes in mining in industrial metals like manganese and nickel, plans to use the nearly $403 million net proceeds from the bond sale to repay shareholder loans and for general corporate purposes.

A trader quoted the new bonds at 101 1/8 bid, 101 5/8 offered in the aftermarket, versus their slightly sub-par issue price.

A $3 billion week

The Consolidated Minerals deal brought the amount of new dollar-denominated paper priced during the week by mainstream junk issuers to just under $3 billion, according to new issuance data compiled by Prospect News - less than half of the roughly $7.6 billion of new paper which came to market during the previous week.

Besides the Consolidated Minerals transaction, there was just a handful of deals which priced during the week - Belgian limestone producer Carmeuse SA did an upsized $450 million of 6 7/8% senior secured noted due 2018, which priced at par on Monday.

On Tuesday, Birmingham, Ala.-based healthcare real estate investment trust Medical Properties Trust, Inc.'s $450 million of 6 7/8% notes due 2021 priced at par, as did German materials handling systems manufacturer Dematic SA's $300 million of 8¾% senior secured notes due 2016.

On Wednesday, Superior Energy Services, a New Orleans-based provider of drilling and other services to the offshore energy industry, came to market with an upsized $500 million drive-by offering of 6 3/8% notes due 2019, which priced at par.

CDW, a Vernon Hills, Ill.-based provider of technology products and services, priced a sharply upsized $450 million add-on to the $725 million of 8½% notes due 2019 that it had sold at the end of March, both at par.

And Community Choice Financial, a Hawthorne, N.J.-based lender, placed an upsized $395 million of 10¾% senior secured notes due 2019, at par.

A trader predicted that after the temporary drop off in primaryside activity this week and perhaps next - largely connected to the relative absence of players in the market on this Spring Break week, bracketed by the Passover and the Easter/Good Friday holidays, with many people taking vacation time - "we're going to see more new deals blasting right in there" once schedule anomalies are cleared up and things get back to normal.

iPayment slates two-part deal

One deal which is expected to price in the upcoming week is the two-part offering from Nashville-based credit- and debit-card transaction processor iPayment Inc. and its corporate parent, iPayment Holdings, Inc.

iPayment Inc. plans to sell $375 million of seven-year senior notes, while its corporate parent is bringing a concurrent $150 million offering of units consisting of 7.5-year holdco payment -in-kind toggle notes plus equity warrants.

High-yield syndicate sources heard that the two-part deal is expected to price this coming Thursday.

The straight bond portion will be brought to market via bookrunners J.P. Morgan Securities, LLC , Merrill Lynch, and RBC Capital Markets LLC, while J.P. Morgan will be the sole underwriter for the holdco units.

The company plans to use the net proceeds from the offering of the notes and the units, together with borrowings under a proposed new $375 million six-year senior secured credit facility, for debt repayment, including all of its existing senior secured credit facility borrowings and its $194.5 million remaining outstanding 9¾% senior subordinated notes due 2014, from the $205 million sold back in 2006.

It also plans to use some of the proceeds to make a distribution to its indirect corporate parent, iPayment Investors, LP, which will enable the latter entity to redeem all of its existing PIK toggle notes and, subject to certain conditions, all of the equity interests in the limited partnership and its general partner held by the company's chairman and chief executive officer, Gregory S. Daily.

New deals hold their own

Among the deals which priced on Wednesday, a trader noted that Community Choice Financial's 10¾% senior secured notes due 2019 were trading around 102¾ bid - a touch below the 103 level seen on Wednesday's break, but still well up from the par level at which the $395 million issue, upsized from $370 million originally, "so they're holding their own."

Another trader said that at his shop, "yesterday [i.e. Wednesday] we were very busy trading in the company's bonds late in the day." On Thursday, he said, the issue opened up around 103-1031/4, "and never moved."

Superior Energy Services Inc. seemed to be living up to its name in the aftermarket; the $500 million issue of 6 3/8% notes due 2019 which priced at par on Wednesday but then firmed to levels as good as 101¼ bid, 101¾ offered, was seen on Thursday continuing to hang in around 101.

CDW's 8½% notes due 2019 were quoted offered at 102, after the $450 million add-on deal had priced at par earlier in the day.

Going back a little further, a trader saw Nortek Inc.'s 8½% notes due 2021 trading at the 100¼ level "a couple of times, and then that died." The Providence, R.I.-based maker of heating, cooling and ventilation products for residential and commercial construction, priced $500 million of the notes at par back on April 12.

And a trader said that Columbus, Ohio-based retailer Limited Brands Inc.'s 6 5/8% notes due 2021were "continuing strong," seeing the bonds at the 103 bid level, at least. Limited priced $1 billion of the notes at par just a month ago, on March 22.

Indicators mostly firmer

Away from the new-issue realm, a trader saw the CDX North American Series 16 HY index off by ¼ point on Thursday, ending at 102 7/16 bid, 102 11/16 offered, after having gained 7/16 point on Wednesday.

For the week, the index ended slightly below the 102¾ bid, 103 offered level it held at the end of the previous week, on Friday April 15.

The KDP High Yield Daily Index meantime was up by 4 basis points on Thursday to finish at 75.93, after having gained 10 bps on Wednesday. Its yield declined by 2 bps Thursday to 6.53%, after having come in by 4 bps on Wednesday.

For the week, the index showed modest improvement from the previous week's close at 75.82 and its 6.58% yield

The Merrill Lynch High Yield Master II Index rose for a third consecutive session on Thursday, by

0.07%, on top of the 0.113% gain seen on Wednesday. That lifted its year-to-date return to 4.983%, a new peak level for the year, from 4.91% on Wednesday, the previous zenith.

The index rose by 0.2.42% on the week, lifting it above the 4.788% level at which it had finished the previous Friday.

Advancing issues beat decliners for a second straight session on Thursday, although their margin of victory dropped to not-quite five to four, in from the nearly seven-to-five bulge seen on Wednesday.

Overall market activity, as measured by dollar-volume levels, slid by 44% on Thursday, after having declined by about 5% on Wednesday from the previous session's levels.

A trader said that the day "just never really got started.

"Overall, I would say the market was unchanged and largely ignored."

He continued that "it sure seemed like a lot of dealers disappeared early on in the day - and that was about it - if they came in at all."

"We really weren't seeing anything," a second trader said, "we were really pretty slow, just talking to the few accounts that were in today."

"Today was almost a non-existent day, from the beginning," another agreed. "For all intents and purposes, it was a holiday day," although he added that "the market had a strong tone to it, across the board."

Community Health still busy

Among specific names, with not much trading going on, Community Health Systems Inc.'s 8 7/8% notes due 2015 remained relatively busy, just as its been for the past two weeks in connection with its ongoing, and increasingly ugly, takeover fight with smaller rival Tenet Healthcare Corp., which definitely does not want to be absorbed by Franklin, Tenn.-based hospital operator Community Health.

A trader saw the bonds "up a little bit," trading at 101½ bid. "They were kind of framed" in a par-102 context.

He noted that a little more than a week ago or so, the bonds were around 103-1031/2. "They traded up [Thursday] as opposed to where they were framed to trade, but as the same time, over the past weeks, they're trading down.

A second trader, though, saw the bonds at 102½ bid, 102¾ offered, "so they're not off by too much."

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.