Primary awaits INC as Dynacast, Greif hit road, Fiat does euro deal; recent deals firm again

By Paul Deckelman and Paul A. Harris

New York, July 5 - The high-yield market got back to work on Tuesday following an extended Independence Day holiday break, although there were no pricings seen in the domestic dollar-denominated segment.

The one deal that did price during the day came from Fiat SpA. The Italian carmaker drove by with a quickly shopped two-part €1.5 billion benchmark offering of euro-denominated notes.

The domestic market did generate a little news, though, as syndicate sources saw price talk emerge on pharmaceutical testing company INC Research LLC's $250 million eight-year transaction, which is expected to price after the order books close on Wednesday.

And Dynacast International LLC, a manufacturer of precision die-cast components for automotive and other industrial uses, was heard to be gearing up for a roadshow for its planned $375 million secured paper deal, which is expected to price next week.

Also hitting the road through Friday was a European unit of U.S.-based industrial packaging maker Greif, Inc. It is marketing a €200 million tranche of 10-year notes.

Elsewhere in the euro-denominated sphere, Spanish cable operator Grupo Corporativo ONO SA will shop a €300 add-on to its existing 2018 notes via a conference call on Wednesday, with pricing possible afterwards.

Traders saw the deals from Lawson Software, Inc./SoftBrands, Inc. and InVentiv Health, Inc. continuing to improve in Tuesday's trading. The issues priced last week at steep discounts to par but then firmed smartly in the aftermarket.

Away from those names, not much was happening. Even Friday's busiest names in the non-new-deal market, Nortel Networks Corp. and Eastman Kodak Co., were pretty much unchanged on Tuesday.

Fiat brings €1.5 billion

Much of Tuesday's primary market news emanated from Europe trailing the three-day Independence Day holiday in the United States.

Fiat completed the sale of €1.5 billion of high-yield notes (Ba1/BB/BB+).

The deal included a €900 million tranche of three-year notes that priced at par to yield 6 1/8%. The yield printed at the tight end of the 6 1/8% to 6¼% price talk, which had tightened from initial guidance in the 6¼% area.

In addition, Fiat priced a €600 million tranche of seven-year notes at par to yield 7 3/8%. The seven-year notes also priced at the tight end of price talk, which had been set at 7 3/8% to 7½%. That talk had also tightened from initial guidance in the 7½% area.

Citigroup Global Markets Ltd., Banco Santander, SA, Mediobanca, Royal Bank of Scotland plc, SG CIB and UBS Ltd. were the joint bookrunners for the debt refinancing.

Although the deal launched and priced on Tuesday, the offering had been the subject of a non-deal roadshow that took place during the week of June 6, following which Fiat waited on the sidelines because of volatility in the global capital markets, sources said.

Although the order book was oversubscribed by more than two times, Fiat nonetheless made concessions to the prices of its existing bonds, a market source said.

The Fiat 7 5/8% notes due September 2014 were 105 bid, implying a yield of 5.85%, the source said.

The 6 7/8% notes due February 2015 were 103 bid, implying a 5.91% yield.

And the 6 3/8% notes due April 2016 were 99¾ bid, implying a yield of 6.43%.

Elsewhere, no dollar-denominated issues priced on Tuesday as market players in the United States retook their stations following the holiday

INC Research sets talk

Activity is expected to pick up on Wednesday.

INC Research talked its $250 million offering of eight-year senior notes (Caa1/B-) with an 11¼% to 11½% all-in yield.

In addition to price talk, there was a structural change that increased the call protection for the notes to four years from three years.

The books close at noon ET Wednesday, and the deal is set to price thereafter.

Morgan Stanley & Co. Inc., ING and RBC Capital Markets are the joint bookrunners.

Ono announces add-on

Spain's Grupo Corporativo Ono plans to host an investor call during the Wednesday European market session for a proposed €300 million fungible add-on to its 8 7/8% senior secured notes due Dec. 1, 2018.

The deal is expected to price following the call.

Deutsche Bank AG, Bank of America Merrill Lynch and SG CIB are the global coordinators and joint bookrunners.

The syndicate of underwriters also includes BBVA Securities Inc., BNP Paribas Securities, Credit Agricole CIB, Goldman Sachs International, ING, Morgan Stanley, Natixis Bleichroeder and Banco Santander.

The Madrid-based cable TV operator plans to use the proceeds to repay debt.

The original €700 million issue priced at par on Oct. 19, 2010.

Dynacast starts Wednesday

Dynacast International and financing unit Dynacast Funding Inc. plan to begin a roadshow on Wednesday for a $375 million offering of eight-year senior secured second-lien notes (expected ratings B2/B).

J.P. Morgan Securities LLC and Macquarie Capital are the joint bookrunners.

The Charlotte, N.C.-based manufacturer of die castings plans to use the proceeds to help fund the acquisition of the company by KDI Holdings Inc.

Greif brings debut euro deal

Greif Luxembourg Finance SCA, a Luxembourg-based financing unit of Delaware-based Greif Inc., plans to start a roadshow on Wednesday in London for its €200 million offering of 10-year bullet notes, its debut in the euro-denominated high-yield bond market.

Joint bookrunner Bank of America Merrill Lynch is the global coordinator and will bill and deliver. JPMorgan and RBS Securities Inc. are also joint bookrunners.

Proceeds will be used to refinance debt and for general corporate purposes, including acquisitions.

Dealers eye volatility

The remainder of the post-Independence Day week could be relatively quiet, a syndicate banker said on Tuesday.

Dealers will be cautious, the banker remarked, noting that last week's conspicuous rally in the stock market - as well as in high-yield bonds - gave way to more volatility on Tuesday.

Nevertheless, a modest $3 billion of issuance before Friday's close is not out of the question, the banker said.

One of the deals expected to surface during the week is SRA International Inc.'s $415 million offering of senior notes, which will come via a syndicate of banks led by Bank of America Merrill Lynch, sources said.

Proceeds will be used to help fund the buyout of the company by Providence Equity Partners.

There was no SRA bond announcement on Tuesday.

"The high yield doesn't feel that great," said an official from a syndicate desk.

The series 16 Markit CDX North American High Yield index was trading 3/8 of a point lower just before the Tuesday close after being basically flat earlier in the session, the official added.

Lawson, InVentiv improve

With no freshly priced paper on Tuesday, junk marketers saw continued activity in recently priced deals, particularly the new issues from the merging Lawson Software and SoftBrands and from InVentiv Health.

Both of those deals priced on Thursday at substantial discounts to par and then proceeded to move sharply higher

"They were priced to travel," said one trader, who saw Lawson's 11½% notes due 2018 move up to 98½ bid, 99 offered on Tuesday, while InVentiv's 10% notes due 2018 had pushed up to 98 bid, 98¾ offered.

A second trader declared that "Lawson was rippin'," estimating the bonds at 98¾ bid and suggesting that much of the gain in the bonds came because "they priced it too cheap."

The $560 million issue priced late in the session on Thursday at 92.143 to yield 13¼% and saw no aftermarket dealings that day. On Friday, the bonds jumped to 95½ bid, 96½ offered on the break and then continued to firm as the day wore on, ending around 98 bid, 99 offered.

The official issuers are SoftBrands - like Lawson, a software company - and Atlantis Merger Sub Inc., which will be merged into Lawson when St. Paul-based Lawson is acquired by GGC Software Holdings Inc., an affiliate of Golden Gate Capital and SoftBrands parent Infor Global Solutions, in a $2 billion deal partially funded with the bond-issue proceeds.

Market participants originally thought the deal would price around the middle of last week, after price talk of 11¼% to 11½% made the rounds last Tuesday, but it was delayed as negotiations between the company, its underwriters and bond and bank loan investors dragged on into Wednesday night and then Thursday. Revised terms were finally agreed upon, and the deal was chopped down from the originally announced eight-year issue to the seven years that finally did price, and covenant changes were made.

The second trader also saw InVentiv's $390 million issue of 10% senior notes due 2018 at 97½ bid, 98½ offered. "The market was very firm here," he said.

InVentiv, a Somerset, N.J.-based provider of clinical and consulting services to the health-care industry, priced its deal on Thursday at 95 to yield 11.031%, at the rich end of the 94 to 95 price talk, and the bonds had gotten as good as between 96½ and 97 in Thursday's secondary trading. They were seen having moved up to around 97½ bid in Friday's relatively thin pre-holiday dealings.

Like the Lawson transaction, InVentiv, too needed a little surgery before it was able to price. The deal had been originally shopped around the market as an eight-year issue maturing in 2019, but the company abandoned that plan and instead opted to make its offering a mirror tranche to its existing $275 million of 10% notes due 2018, which priced a year ago. The new bonds carry the same terms as the original issue but are non-fungible with those earlier bonds.

Proceeds from the deal will help fund the acquisition of PharmaNet Development Group, a Princeton, N.J.-based provider of drug-development services.

Market signals turn mixed

Away from the new-deal arena, traders saw a generally firm tone in Junkbondland, although statistical measures of market performance turned mixed on Tuesday after three sessions of improvement late last week.

A trader saw the series 16 CDX North American High Yield index off by 3/8 of a point, ending at 101 7/8 bid, 102 offered, after having jumped by 11/16 on Friday. There had been no real trading in that market on Monday due to the holiday.

But the KDP High Yield Daily index gained 7 basis points on Tuesday to finish at 75.22, on top of the 9-bps gain recorded on Friday. Its yield declined by 3 bps to 6.82% after narrowing by 2 bps on Friday.

And the Merrill Lynch High Yield Master II index showed its fifth consecutive gain on Tuesday, up by 0.213%, on top of the 0.065% gain notched on Monday, when there was only very thin trading by mostly non-U.S. accounts, and following Friday's breath-taking 0.726% advance, the biggest seen since early January.

The latest gain lifted the index's year-date return to 5.374% on Tuesday, up from 5.151% on Monday and 5.082% on Friday, which had been the first time the cumulative return figure edged above the psychologically potent 5% mark since June 13. However, the index remains well down from its year-to-date peak level of 6.071%, which was reached back on May 20.

A trader said Tuesday's session was "like a summer Friday" as market participants straggled back into the office after the three-day weekend's festivities.

"It was very dull," a second trader agreed.

At another desk, a trader opined that while things were "very firm, they were very slow. Hopefully, they'll pick up [Wednesday]. It's a big vacation week." He said "a lot" of people were still out.

'For all the wrong reasons'

"We had over $300 million of outflows last week," one of the traders noted. The figure was $321 million to be precise, according to market participants who follow the weekly high-yield mutual fund-flow numbers put out by Lipper/AMG. It was the fifth consecutive week in which more money left those funds than came into them, amounting to a hemorrhage of over $6 billion during that time.

With that kind of loss of cash from the funds, whose ups and down are considered a good barometer of overall junk market liquidity trends, "you would have thought that more money would be leaving the marketplace," he said, "but bids are filling back in and the market is moving back up to where we were a few weeks ago. Weakness has brought some buyers in."

With that dynamic going on, "the market definitely had a firmer tone to it today, although not a lot of people were in. It was very light volume."

He said, "There was no one name in particular that was super-duper active."

Reflecting the market's better tone, he recounted that United Rentals North America Inc.'s 10 7/8% notes due 2016 had been trading about three weeks ago at 110 1/8 bid, 110 3/8 offered. But on Tuesday, he saw the Greenwich, Conn.-based equipment-rental company's notes having moved up to around a 113-114 context on no real news.

"So big, fat coupons are still trading at a high dollar premium."

That being said, he declared that "the market is trading up for all the wrong reasons - we have a big number coming out on Friday," when the Labor Department is scheduled to release the non-farm payrolls figure for June - and investors will be carefully studying that data for signs that may tell them whether the economy still has some growth in it or whether it has stalled out. The non-farm payrolls report for May showed that the economy had added only 54,000 jobs during that period - well below Wall Street expectations, which heightened market concerns that the economy had, in fact, stalled.

With so important a data point looming, the trader suggested that "a lot of people are in a wait-and-see mode." He said, "It was a rough June for them, a little bit of a roller-coaster ride. A lot of people don't know whether to cover their positions or go short, or whatever.

"Some people lost money [in June], and they're just waiting and re-evaluating.

"A lot of people are marking their portfolios and seeing how they can start the third quarter off."

Nortel eases slightly

Among specific issues that had been moving around on Friday, a trader said that Nortel Networks' 10¾% notes due 2016 were at 104½ bid, 105 offered on Tuesday, down around a half-point from the 105-106 level at which those bonds had settled on Friday after jumping about 8 or 9 points on news of a better-than-anticipated $4.5 billion auction of the bankrupt Canadian communications technology manufacturer's rich portfolio of patents.

The winning bid, by a consortium of high-tech heavyweights like Apple, Microsoft, Research In Motion and Ericsson, was about five times the original $900 million bid submitted by Google. The difference will provide a bigger return to Nortel bondholders and other creditors when the company is liquidated.

The trader said that there was "decent volume on those."

A market source at another desk said that the company's convertible notes, such as its 1¾% notes due 2012 and its 2 1/8% notes due 2014, were steady versus Friday's levels.

Kodak stalls out

Eastman Kodak's bonds were "sort of stopped," with its 7¼% notes due 2013 around 90-91, a trader said, off a little from the 91 level at which the bonds had been seen going home on Friday. That, in turn, was down from levels as high as 94, which the paper had held earlier in the week in anticipation that the Rochester, N.Y.-based photographic products and digital imaging technology company would get a favorable ruling from a government panel considering its patent-infringement case against smart phone makers Apple and Research In Motion.

But instead of getting a definitive ruling that the companies had improperly used Kodak patents in production of their popular iPhone and Blackberry devices, respectively, the panel issued an inconclusive statement that partially reversed and partially affirmed a preliminary ruling on the case issued earlier this year and pushed the date for a final ruling off till the end of next month.

The trader said there were just "a couple of small trades" in the 7 1/4s.

He also saw the company's 9¾% senior secured notes due 2018 at 91 bid, 92½ offered and its 10 5/8% second-lien notes due 2019 at 93 bid, 95 offered, which he called "about where they were" at mid-morning on Friday.

A second trader said that the Kodak bonds were "about where they were Friday."

NewPage holds gains

Elsewhere, a trader saw NewPage Corp.'s 11 3/8% first-lien notes due 2014 trading around 93-93½ bid, calling that "pretty much unchanged" from the higher levels to which the Miamisburg, Ohio-based coated-paper manufacturer's bonds had risen last week from lows in the 88-89 area after the company announced that it had, indeed, made the scheduled $100 million coupon payment on those bonds that came due Thursday, putting to rest considerable market speculation about whether it would or would not pay the coupon, which in turn had caused price gyrations in its bonds over the previous two weeks.

He quoted the 10% second-lien notes due 2012 at 30-32, which was up from recent low levels in the mid-to-upper 20s. He called the latter bonds unchanged.

"I don't think I really saw much activity in the name," he said. "There were a couple of trades in the 11 3/8s, maybe five or six trades, [but] not much volume at all. I'd say the 11 3/8s were unchanged on a little activity, and none in the 10s."

He meantime said that NewPage sector peer Catalyst Paper Corp.'s notes were "sort of in the same church, different pew."

He quoted the Richmond, B.C.-based paper manufacturer's 11% senior secured notes due 2016 at 85 bid, 86 offered, while its 7 3/8% notes due 2014 were at 62 bid, 64 offered. "That's where they were all day - it was quiet."

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