Harrah's activity trails off; Dynegy rebound halted; McJunkin seen lower; Mueller deal awaits

By Paul Deckelman and Paul A. Harris

New York, Aug. 18 - Things were back to normal on Wednesday for holders of Harrah's Operating Co. Inc.'s 10% secured notes due 2018, which had gyrated around at mostly lower levels on Tuesday on extremely heavy volume of over $100 million. In Wednesday's dealings, the Las Vegas-based casino giant's paper was much, much less active and pretty much unchanged around or just below the 81ish levels it traded at on Tuesday.

Dynegy Holdings Inc.'s bonds - which had been on the rise over the previous two sessions as they bounced back from the downturn seen Friday - were seen once more heading south, their rebound apparently over.

Traders saw light activity in the widely traded "go-go" names, but did see some moves in more off-the beaten-track paper, including such names as McJunkin Red Man Corp. and Mohegan Tribal Gaming Authority.

After a breathtakingly busy prior week, when an estimated more than $15 billion of new paper priced, on top of the early week's sizable deals from notable issuers, like Toys 'R' Us - Delaware, Inc. and NRG Energy, Inc. - the latter a solidly upsized mega-deal that came to market on Tuesday - the new-deal arena sank back on Wednesday. No junk was seen to have priced - the first time that's happened in 25 sessions, or since July 14.

Primaryside players did hear price talk emerge on Mueller Water Products, Inc.'s $225 million offering of 10-year notes, which is expected to price on Thursday. Out of Europe came news that German industrial equipment manufacturer Dürr AG is shopping a five-year €100 million deal around.

Meantime, NRG's new deal, and the Toys 'R' Us issue, were being quoted around the same levels they held late Tuesday.

Mueller Water price talk

For the first time in nearly a month, the high-yield primary market put up a goose egg on Wednesday.

No issues priced.

Atlanta-based drinking water systems manufacturer Mueller Water Products generated the session's only news.

The company talked its $225 million offering of 10-year senior notes (B1/B+) with a 9% area yield.

The deal is set to price on Thursday.

Bank of America Merrill Lynch and Goldman Sachs & Co. are joint bookrunners for the bank debt refinancing.

Near, if not here

The long crawl to autumn is about to get under way in the primary market, the dealers said during Wednesday conversations.

In fact, it may already be under way, sources added.

However, the high-yield syndicates are still apt to roll out a deal or two before the Labor Day break, a banker said.

What's certain is that the audience is thinning out, said the source, referring to the institutional investors.

E-Land a September possibility

A dollar-denominated deal, which E-Land Fashion China Holdings Ltd. kicked off in mid-July and subsequently crossed the radar in the North American market, has been sidelined, a Singapore-based trader said at the close of the Asian session on Wednesday.

The Shanghai-based woman's apparel company marketed a $200 million offering of three-year senior unsecured notes (Ba2/BB-) via bookrunner Morgan Stanley.

The proceeds were to fund capital expenditures and to expand E-land Fashion's network.

The market is hearing that E-Land might give it another go in September, the trader added.

However, there were a lot of questions on the credit when the deal was being marketed in July, the source specified.

The same questions would likely surface again should E-Land choose to have another try in September, the trader added.

Meanwhile, as has been the case in the United States, a supply-demand imbalance has recently dragged some of the higher quality Asian high-yield corporates higher, the trader remarked.

"We have had decent supply in July and August, but nothing like the U.S.," the source commented, referring to the history-making issuance in the U.S. junk bond market during the summer.

"Still, it was a significant amount of supply - for this market," the source added.

"And the deals are trading well."

A Wednesday bid from a decent-sized buyer of China property lent a good tone to that sector, the trader added.

Market indicators stay firm

Away from the new-deal sector, a market source saw the CDX North American HY Series 14 index gain ¼ of a point on Wednesday, to 97 ½ bid, 98 offered, on top of Tuesday's 5/8 point rise.

The KDP High Yield Daily index meantime eased by 1 basis point on Wednesday to end at 71.92, after having shot up by 18 bps on Tuesday. Its yield, however, came in by 1 bp Wednesday, to 8.23%, after having tightened by 8 bps on Tuesday.

The Merrill Lynch High Yield Master II index finished higher for a third straight session on Wednesday, continuing to bounce back after having been down for the previous four sessions last week. Its year-to-date return rose by 0.14% to end the day at 8.628%, up from 8.476% on Tuesday. However, it still remains below its peak level for 2010 so far, the 9.085% recorded on Aug. 9.

Advancing issues also led decliners for a third straight session on Wednesday by around a seven-to-six margin for a second consecutive day.

Overall activity, represented by dollar-volume levels, was about steady on Wednesday, after having jumped by 69% on Tuesday.

A trader characterized Wednesday's market as "a little boring. There's a lot of that going around."

Harrah's hurricane subsides

Harrah's Operating's 10% second-lien senior secured notes due 2018 were trading more normally on Wednesday; a trader said that he had only seen about $16 million of those bonds changing hands, well under the move than $100 million of that paper, which was moving around on Tuesday after Apollo Global Management LLC and possibly other large bondholders were rumored to have but a sizable block of the bonds up for sale in order to pocket the handsome gains that have been notched since they acquired those bonds in an exchange offer last year.

A trader quoted the 10s "right around 81," about the level at which those bonds had finished up during Tuesday's dealings.

He said he had seen "some trading - but not huge."

A second trader saw those bonds going out "wrapped around 81," with volume "nowhere near where it was [Tuesday]."

A market source at another desk who also saw fairly brisk trading in the bonds, though well within a normal range, said they had eased by about ¼ of a point, to just under 81.

There was no official cause given for the heavy activity on Tuesday, although some market participants believed that Apollo - which along with private-equity firm TPG capital LP own all but around 10% of the gaming company's stock - and perhaps TPG or other large bondholders, had decided to cash out of their positions in the 10s, whose current price around 80 cents on the dollar represents a sizable gain from levels of around 37 cents at which the companies acquired the bonds around a year ago.

Dynegy back on the downside

Elsewhere, Houston-based power generating company Dynegy Holdings' bonds were seen slipping from the highs at which they ended trading on Tuesday.

Dynegy "was pretty quiet - we didn't see too much of it," said one trader, who quoted the company's 7¾% notes due 2019 around a point lower on the day at 68 bid.

Another market participant saw those bonds down a deuce on the day at 67 bid.

The Dynegy bonds had been firming on Monday and Tuesday, after they had fallen sharply last Friday, with the 73/4s dropping to lows around 64 from previous levels around 70 on news of a scheduled buyout of the company - a transaction that raised bondholders' hackles.

Dynegy had agreed to be acquired by the Blackstone Group LP for $543 million in cash in a deal valued at $4.7 billion, including debt assumption. However, bond investors were apparently taken aback by the fact that there is no change-of-control provision in the bonds' indentures that could force Blackstone to buy them back at levels above par. They also worried about the prospect that Blackstone may add to Dynegy's already considerable leverage.

McJunkin, Mohegan get mauled

A trader said that "most of the real go-go names" that usually trade around in active volume "were pretty much unchanged today." Nonetheless, he said that "there were some big moves in off-the-run issues."

One such credit, he said, was McJunkin Red Man's 9½% senior secured notes due 2016, which "got hit on the back of earnings," although he had no details about the Houston-based industrial piping manufacturer's financial performance.

He saw the bonds slide to 91 bid, 92 offered , well down from prior levels around 97 bid, 99 offered.

Another name that he saw taking some lumps was Mohegan Tribal Gaming Authority's 6 1/8% notes due 2013.

He said that the bonds fell to 80½ bid, down about 3 or 4 points on the day, although at another shop, a trader said there was a late trade - though not terribly large - that pushed them back up to around 84 at the close.

There was no fresh news out on the Uncasville, Conn.-based operator of the Mohegan Sun casino.

Solo stronger; numbers not

A trader said that Solo Cup Co.'s 10½% senior secured notes due 2013 "got a little traction" despite less-than-stellar earnings the company recently reported.

He saw the bonds having moved up to 101½ bid, 102 offered on Tuesday from prior levels at 100 5/8 bid, 100¾ offered on "a lot of activity." Those bonds firmed to around 103 on Wednesday - at one point going as high as 104, although a market source cautioned that the days' dealings were all smallish odd-lot trades.

Solo's 8½% senior subordinated notes due 2014 moved as high as 88½ bid from Tuesday's closing levels around 853/4, although all of that movement came in small pieces. Late in the day, there was a sizable trade at 86 bid, up perhaps a ¼ of a point on the day.

The trader said that the second-quarter earnings, which had actually been released last week, "were a little bit disappointing, but their management gave a very good presentation, very professional," reassuring the bondholders. He said "a lot" of bonds had traded.

Solo, a Lake Forest, Ill.-based maker of paper and plastic disposable cups, plates and utensils, posted a net loss for the fiscal second quarter ended June 27 of $39.7 million versus a $6.9 million profit a year earlier, even though net sales in the latest period rose to $419 million from $395 million a year ago.

Zion bonds better on stock deal

A trader said that Zion Bancorp.'s bonds firmed on the news that the Utah-based financial services company plans to sell $200 million of stock in order to raise capital and maintain its existing liquidity position.

He saw Zion's 7¾% notes due 2014 "up slightly, maybe ½ point," at 105 bid, 105 ½ offered.

He also saw its 5½% notes due 2015 at 94½ bid and its 6% notes due 2015 at 95¾ bid, both up ½ a point.

"Any time they are raising money," a trader said, "its always good for bonds," especially on what otherwise was "a sleepy day."

New NRG bonds seen steady

Among the recently priced issues, a trader said that NRG Energy's new 8¼% notes due 2020 had moved up to around 101 in initial aftermarket action on Tuesday, with "a lot of trading" going on at that level.

On Wednesday, he said the bonds were in a two-sided market at 101 bid, 101½ offered versus the par level at which the Princeton, N.J.-based power generating company had priced its $1.1 billion offering on Tuesday, upsized from the originally announced $750 million.

Another trader did not see any of the new bonds circulating on Wednesday.

Among its existing issues, NRG's 7¼% notes due 2014 gained about a point on the day to end a bit over 103 bid, after having ascended to as high as 104.

Toys trades at same level

A trader said the new 7 3/8% senior secured notes due 2016 issued by Toys 'R- Us - Delaware were still anchored around 101¼ bid, 101½ offered.

That's not far from the levels at which the Wayne, N.J.-based specialty retailer's paper has been trading ever since Monday, when it firmed to that neighborhood after $350 million of the notes were priced at par.

Existing Mueller paper easier

With the market awaiting a likely pricing on Thursday of Mueller Water Products' new deal, a market source said that the Atlanta-based industrial piping and flow-control products manufacturer's existing 7 3/8% notes due 2017 were lower.

Those bonds were seen going home at 88 1/8 bid, down 1 5/8 point on the day.

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