Ryerson, Regency deals lead nearly $4 billion day; market improves, but funds lose $310 million

By Paul Deckelman and Paul A. Harris

New York, Sept. 27 - The high-yield primary market came roaring back to life on Thursday after Wednesday's quiet session. Almost $4 billion of new paper priced on Thursday, most of it in quick-to-market deals that got done just a few hours after having been announced.

Metals producer Ryerson Inc./Joseph T. Ryerson & Son Inc.'s $900 million two-part offering was the big deal of the session, followed in size by natural gas operator Regency Energy Partners LP/Regency Energy Partners Finance Corp.'s upsized $700 million drive-by offering of 10.5-year bonds.

Also out of the energy sector, Bristow Group Inc., a provider of helicopter services to offshore drilling facilities, choppered in with an upsized $450 million of 10-year notes.

Two quickly shopped deals came out of the telecommunications sector: tw telecom holdings inc.'s upsized $480 million of 10-year notes and ViaSat Inc.'s $300 million add-on to its existing eight-year notes.

Casella Waste Systems Inc. also did an add-on, although its deal was downsized - the only new issue to suffer that fate.

Tranches from Sinclair Television Group Inc. and Wolverine World Wide, Inc. rounded out the day's new-deal action.

But even as those deals were pricing and several other prospective transactions were announced or showed up on the radar screen unannounced, the Junkbondland calendar lost two deals. Syndicate sources heard that Iberian Minerals SA postponed its planned $200 million offering of secured paper, and AdvancePierre Foods Inc. was heard to have withdrawn its scheduled $450 million of five-year notes, instead upsizing its concurrent bank-debt deal.

tw telecom, Bristow, Wolverine and Sinclair all priced early enough in the session to see some aftermarket dealings and all were up. The first three were up by at least 2 points and Sinclair by 1 point.

Traders said that the secondary market generally was clearly stronger, bouncing back after several sessions on the decline, as borne out by improvement in statistical measures of market performance.

But another gauge - money flows into and out of high-yield mutual funds and exchange-traded funds, considered a good barometer of overall liquidity trends - posted its first outflow after 15 consecutive weeks of inflows dating back to early June.

AMG: funds lose $310 million

Near the end of the day on Thursday, market sources familiar with the weekly AMG high-yield mutual fund flow statistics said that in the week ended Wednesday, $310 million more left those funds than came into them.

It was the first outflow seen by Arcata, Calif.-based AMG, a unit of Thomson Reuters' Lipper/FMI division, since the week ended June 6, when the funds hemorrhaged $2.9 billion, the third-largest outflow the company had ever recorded.

In the intervening 15 weeks, inflows totaled about $13.69 billion, according to a Prospect News analysis of the figures, including the $1.36 billion cash infusion seen last week, which ended Sept. 19. Those gains represented a solid comeback from the pattern of weakness that had been prevalent in late May and early June, when the funds lost about $6.43 billion over the space of four weeks, including the big plunge in the June 6 week.

On a year-to-date basis, this week's outflow pulled the cumulative net inflow figure down to about $32.15 billion, including the ETFs, from last week's $32.46 billion total, according to the Prospect News analysis - the peak net inflow level for the year so far.

That year-to-date figure counts monthly reporting funds as well as the weekly reporters, Lipper said.

Inflows have now been seen in 33 out of the 39 weeks since the start of the year against just six outflows.

The loss of money from the mutual funds and ETFs was not really that surprising given the sharp retreat seen in the junk market over roughly the past week.

A trader said that "there's been some share redemption out of the ETFs and some withdrawals out of mutual funds" in the past several days.

EPFR still sees inflow

However, another fund-tracking service whose methodology differs from Lipper's, Cambridge, Mass.-based EPFR Global, saw a net inflow of $1.59 billion in the week ended Wednesday - a rare case where the two tracking services' results diverged.

EPFR's roster of the funds it watches includes a number of non-U.S.-domiciled funds, as opposed to Lipper's method, which surveys strictly domestic funds.

EPFR said that the latest week's inflow was mostly attributable to those non-U.S. funds. It saw U.S.-based funds taking in only $35 million of new cash on the week, well down from last week - a finding that would seem to point in the same direction as Lipper's report of a modest-sized outflow.

EPFR's $1.59 billion inflow for all of the funds it watches was down from the $3.63 billion cash boost seen the week before - the second-biggest weekly inflow number the company had ever seen, surpassed only by the $4.76 billion seen in the week ended Oct. 26, 2011.

The latest week's inflow was the 16th consecutive one the service has recorded. Those cash infusions total about $28 billion, according to a Prospect News analysis of that data.

On a year-to-date basis, EPFR has now seen inflows in 34 weeks, with just five weeks of outflows, most of those, as was the case with Lipper, recorded during the stretch from mid-May through early June.

EPFR said that total 2012 inflows in the latest week were $61.1 billion, up from $59.5 billion previously. Those figures include the monthly reporting funds as well as strictly weekly reporters and also include the ETFs.

Cumulative fund-flow estimates, whether from EPFR or from AMG/Lipper, 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 successive record new-deal borrowing binges seen in both 2009 and then in 2010, as well as the robust secondary market seen both years, and continued to be the driver behind 2011's near-record issuance.

Those fund flows are also seen as the key element behind the high-yield secondary market's strong performance so far this year versus other fixed-income asset classes and its active new-deal pace, which has recently surged past 2011's year-to-date totals.

Ryerson complete two-part deal

The primary market returned from the Yom Kippur holiday with all stops out. Thursday saw eight issuers bring a total of $3.83 billion in nine tranches.

Ryerson and Joseph T. Ryerson & Son priced a $900 million two-part offering of notes.

A $600 million tranche of five-year senior secured notes (Caa2/CCC+) priced at par to yield 9%, on top of price talk.

A $300 million tranche of six-year senior unsecured notes (Caa3/CCC) priced at par to yield 11¼%, also on top of price talk.

Bank of America Merrill Lynch, J.P. Morgan Securities LLC, Jefferies & Co., UBS Securities LLC and Wells Fargo Securities LLC were the joint bookrunners for the debt refinancing.

Regency Energy drives by

Regency Energy Partners priced an upsized $700 million issue of senior notes due April 15, 2023 (B1/BB) at par to yield 5½%, at the tight end of the 5½% to 5¾% yield talk.

Citigroup Global Markets Inc. and RBS Securities were the joint physical bookrunners for the quick-to-market debt refinancing, which was upsized from $500 million.

The joint bookrunners were Bank of America Merrill Lynch, Barclays, Credit Suisse Securities (USA) LLC, JPMorgan, SunTrust Robinson Humphrey and Wells Fargo.

Sinclair at the tight end

Sinclair Broadcasting priced a $500 million issue of 10-year senior notes (B2/B) at par to yield 6 1/8%, at the tight end of price talk set in the 6¼% area.

Wells Fargo, Deutsche Bank Securities and JPMorgan were the joint bookrunners for the quick-to-market debt refinancing and general corporate purposes deal.

tw telecom upsizes

tw telecom priced an upsized $480 million issue of 10-year senior notes (B1/BB-) at par to yield 5 3/8%, at the tight end of price talk that was set in the 5½% area.

Credit Suisse and Wells Fargo were the joint bookrunners for the quick-to-market issue, which was upsized from $400 million.

Proceeds will be used for general corporate purposes including refinancing existing convertible notes.

Bristow at the tight end

Bristow Group priced an upsized, restructured $450 million issue of 10-year senior notes (Ba3/BB) at par to yield 6¼%, at the tight end of the 6¼% to 6½% yield talk.

The deal was upsized from $425 million.

A planned $225 million tranche of eight-year notes was withdrawn, and the proceeds were shifted to the 10-year tranche.

Credit Suisse, SunTrust, Bank of America Merrill Lynch, Citigroup, JPMorgan and Wells Fargo were the joint bookrunners for the quick-to-market deal.

The Houston-based offshore transportation services provider to the oil and gas industry plans to use the proceeds to refinance its notes due in 2017 and for general corporate purposes.

Wolverine finishes deal

In a deal that was marketed via an investor roadshow, Wolverine World Wide priced a $375 million issue of eight-year senior notes (B2/B+) at par to yield 6 1/8%, at the tight end of price talk that was set in the 6¼% area.

JPMorgan and Wells Fargo were the joint bookrunners.

The Rockford, Mich.-based marketer of branded footwear and apparel plans to use the proceeds to finance the acquisition of Collective Brands Inc., to repay and terminate its existing credit facility and to repay some of Collective Brands' debt.

ViaSat taps 6 7/8% notes

Elsewhere in drive-by action, ViaSat priced a $300 million add-on to its 6 7/8% senior notes due June 15, 2020 (existing ratings B1/B+) at 103.5 to yield 6.133%.

The reoffer price came in the middle of the 103 to 104 price talk.

Bank of America Merrill Lynch, JPMorgan, Credit Suisse, Morgan Stanley & Co. LLC and Wells Fargo were the joint bookrunners.

Proceeds will be used to fund the tender offer for and/or redemption of the company's senior notes due 2016, with any remaining proceeds for general corporate purposes.

Casella downsizes

Casella Waste Systems priced a downsized $125 million add-on to its 7¾% notes due Feb. 15, 2019 (Caa1/B-) at 98.51 to yield 8.051%.

The reoffer price and yield came in line with price talk.

Bank of America Merrill Lynch and JPMorgan were the joint bookrunners for the add-on, which was also marketed on a roadshow.

The Rutland, Vt.-based solid waste collection, disposal and recycling service plans to use the proceeds, along with a concurrent public offering of common stock and borrowings under its credit facility, to refinance its existing 11% senior second-lien notes due 2014.

Talking the deals

Dealers set the table for a busy Friday session, as price talk rolled out on several of the deals expected to price before the weekend.

Alpha Natural Resources, Inc. talked its $500 million offering of non-callable 5.5-year senior notes with a yield in the 10% area.

Citigroup is the left bookrunner. Barclays, JPMorgan, Bank of America Merrill Lynch and RBS are the joint bookrunners.

PDC Energy, Inc. talked its $400 million offering of 10-year senior notes (B3/B-) to yield 7½% to 7¾%.

JPMorgan, Bank of America Merrill Lynch, Wells Fargo, BMO, Credit Agricole, RBS and Scotia are the joint bookrunners.

Nufarm Australia Ltd. upsized its offering of seven-year senior notes (/BB-/) to $325 million from $300 million and talked them to yield 6¼% to 6½%.

Credit Suisse, Deutsche Bank, Jefferies and UBS are the joint bookrunners.

And Croatia's Agrokor DD set price talk for its dual-currency offering of seven-year senior notes (expected B2/confirmed B) on Thursday.

A $300 million tranche is talked with a yield in the 9% area, and a €250 million tranche is talked with a yield in the 9¼% area.

JPMorgan will bill and deliver for dollar-denominated notes. BNP Paribas will bill and deliver for the euro-denominated notes.

BNP, JPMorgan and UniCredit are the joint bookrunners.

Getty starts Friday

Getty Images Inc. plans to start a roadshow on Friday for a $750 million offering of eight-year senior notes (Caal/CCC+).

However, the deal is set to be downsized to $550 million upon the finalization of the $200 million upsizing of the concurrent term loan, taking it to $1.9 billion from $1.7 billion.

The deal is set to price mid-to-late next week.

JPMorgan, Goldman Sachs, Barclays, Credit Suisse and RBC are the joint bookrunners.

Proceeds will be used to help fund the $3.3 billion purchase of Getty Images by the Carlyle Group and management from Hellman & Friedman and to repay existing bank debt.

First Quantum plans roadshow

First Quantum Minerals Ltd. plans to start a roadshow on Friday in London for its $350 million offering of seven-year senior notes.

Citigroup and Jefferies are the joint global coordinators.

Citigroup will lead the roadshow in London, which is set for Friday and for Thursday, Oct. 4.

Jefferies will lead roadshows on the east and west coasts of the United States, which are set for Monday through Wednesday.

BNP Paribas is the joint bookrunner.

Proceeds will be used for general corporate purposes.

Pulled deals

Also on Thursday came news of some business withdrawn from the market.

AdvancePierre Foods withdrew its $450 million offering of five-year senior notes (Caa1/CCC+) from the market on Thursday and shifted the proceeds to its credit facilities.

Deutsche Bank, Barclays, Credit Suisse, Morgan Stanley and BMO were the joint bookrunners.

And Iberian Minerals postponed its $200 million issue of five-year senior secured notes.

As reported, price talk in the 10% area surfaced a week ago. However, pricing on the deal moved well wide of that official talk, market sources say.

Citigroup, BNP and Standard Chartered Bank were the underwriters.

Calendar dominates secondary

In the secondary market, a trader said that although performance was generally better Thursday after the rough patch that junk hit over the last several sessions, "the new issues were dominating things."

A second trader agreed that "it looks like the market is trying to firm, but the focus is on the [new-issue] calendar."

At another desk, a trader noted the flood of Thursday morning new-deal announcements, at least five of which actually did price during the session - the deals from tw telecom, Bristow, Sinclair, ViaSat and Regency. Add to that, he said, the deals announced earlier in the week that were pricing on Thursday - Wolverine, Ryerson and Casella - as well as other deals that were already on tap for pricing on Friday.

The bottom line, he said, is that the issuers and underwriters "are trying to jam them all in between now and 5 p.m. [ET] Friday, which I think is insane."

He theorized that the deal deluge might be partially due to issuers perhaps unnerved by the past week's junk market weakness and looking to get their deals done now before the overall junk market retreats any further and yields continue to back up.

But he also said that investment banks keeping one eye on the third-quarter league tables, which close Friday, are also pushing deals along. "They're all scrambling for league-table ranking and all of that stuff."

He opined that this puts potential buyers in a difficult position, as "some of these deals need more than a cursory look."

For instance, he said, "the ones that aren't [refinancings] - they pay a dividend, or things like that - I would stay away from those in many cases.

"You can do re-fi deals as drive-bys because you already know what you've got," in terms of the issuer being a known quantity, "but something that's adding leverage or another layer [of debt] in the cap structure you'd want a little more time to look at."

Meanwhile, one of the other traders, noting recent redemptions from the high-yield mutual funds and ETFs, suggested that "that seems to have stabilized. There's been a little more equilibrium between the deal flow and the funds flow" with those fund redemptions. "So there's a whole bunch of deals pricing."

He noted that the equity markets - which frequently influence behavior in other risk assets such as junk - are "probably trading below where they were when they announced the current round of QE."

He declared that "the easy part of the market," where money just kept "coming into the marketplace and then you had every new issue pretty much blow out the doors no matter where you priced it, is maybe more difficult, because it seems like the cash flow situation has moderated a bit."

Day's deals trade up

Among the deals that priced early enough in Thursday's session to hit the aftermarket, all were up, and some were up by as much as 2 points or more.

That was the case with tw telecom's $480 million offering of 5 3/8% notes due 2022. After the Littleton, Colo.-based telecommunications services provider's quick-to-market deal was upsized from an originally announced $400 million and priced at par, a trader saw the bonds at 102 bid. A second also saw them there and with a 102 1/8 offered level.

Traders saw Bristow Group's 6¼% notes due 2022 trading between 102¼ and 1023/4. The Houston-based provider of helicopter transportation to offshore energy operators priced its quickly shopped deal at par after upsizing it from $425 million.

Wolverine World Wide's 6 1/8% notes due 2020 jumped to 102¼ bid, 103¼ offered. The Rockford, Ill.-based apparel and footwear maker priced its $375 million issue at par after a short roadshow.

Hunt Valley, Md.-based broadcaster Sinclair Television Group's 6 1/8% notes due 2022 went home "wrapped around" 101, a trader said, after that $500 million drive-by deal priced earlier at par.

The ViaSat, Regency, Ryerson and Casella deals came too late in the session for any kind of aftermarket.

Among deals that priced earlier in the week, a trader said that Irish pharmaceutical concern Elan Corp.'s new 6¼% notes due 2019 "are having a nice run," seeing that $600 million quick-to-market deal having moved up to 100 7/8 bid. The bonds priced on Tuesday at par after being upsized from an originally announced $500 million and then moved up to 100¾ bid, 101¼ offered. But they dropped back to 99½ bid, par offered during Wednesday's junk market retreat.

ADS Waste Holdings Inc.'s $550 million of 8¼% notes due 2020 were trading Thursday at 101 bid, 101½ offered. The Jacksonville, Fla.-based solid-waste disposal company's forward calendar deal - downsized from an originally shopped $750 million - priced at par on Tuesday.

Existing bonds do better

Away from the new-deal market, a trader said that "a few things were gyrating around" among the existing issues. Chrysler Group LLC's bonds were up from Wednesday's lows, with the Auburn Hills, Mich.-based carmaker's 8% notes due 2019 finishing at 107½ bid and its 8¼% notes due 2021 motoring as high as 109.

"Some of the stuff that got hit the hardest over the last two days is up about a point, while some of the stuff that backed off and didn't trade a lot was maybe flat to up anywhere between a quarter and a half [point]."

Indicators improve

Statistical indicators of junk market performance meantime were up on Thursday after five straight sessions of going south.

The Markit Group CDX North American Series 19 High Yield index stood at 99 14/16 bid, par offered.

The index's level was not really comparable to its levels on Wednesday or before, as Wednesday marketed the "roll," or semiannual shift to a new series. Some credits that had been in the old series 18 index were removed, and other new credits were added.

But the KDP High Yield Daily index broke out of a five-session slump Thursday, gaining 2 basis points to end at 74.25 after having plunged by 38 bps on Wednesday.

Its yield held steady at 6.04% after having risen for five straight sessions, including Wednesday's 12-bps increase.

And the widely followed Merrill Lynch U.S. High Yield Master II index also snapped a five-session losing streak on Thursday, rising by 0.181%, versus Wednesday's 0.556% retreat.

That lifted its year-to-date return to 11.938%, up from Wednesday's 11.736%, which was the first time that year-to-date figure had been below 12% since Sept. 11, when it finished at 11.651%.

However, the year-to-date level remains below its 2012 peak level of 12.814%, set last Wednesday, Sept. 19.

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