PHI, R.R. Donnelley, Imperial Metals lead $1.44 billion session; funds see $560 million gain

By Paul Deckelman and Paul A. Harris

New York, March 6 - The high-yield primary sphere had what one trader called "a pretty full day" on Thursday between a slew of pricings totaling $1.44 billion of dollar-denominated, fully junk-rated new paper, several new-deal announcements and activity out of Europe.

No one issue dominated the proceedings; instead, activity was spread around among several names.

PHI, Inc., a provider of air transportation to the offshore energy industry, priced $500 million of five-year notes as a scheduled forward calendar deal. The new bonds took flight when they hit the secondary market.

Canadian mining company Imperial Metals Corp. struck gold with a $325 million regularly scheduled five-year deal that fairly glittered in aftermarket action.

There were also several unscheduled drive-by transactions, including printing and integrated communications services provider R.R. Donnelley & Sons Co.'s upsized $450 million of 10-year notes, which firmed modestly when they began trading.

The day also saw a pair of quickly shopped add-ons to existing bonds from specialty hospitals operator Select Medical Holdings Corp., via a funding subsidiary, and from commercial real estate, investment and financing company Rialto Holdings, LLC.

There was also continued brisk activity in issues that priced earlier in the week, including Wednesday's transactions from Spanish pharmaceuticals maker Grifols, SA and security alarm provider ADT Corp.

Away from the new deals, Gymboree Corp.'s bonds stumbled - ironically not because of anything the youth apparel retailer did, but apparently on investor dismay over disappointing results from sector peer the Children's Place Retail Stores, Inc.

Statistical market-performance measures were down across the board on Thursday after having improved on Wednesday.

But another indicator - the flow of cash into and out of high-yield mutual funds and exchange-traded funds, considered a key barometer of junk market liquidity trends - posted its fourth consecutive sizable weekly gain.

Funds gain $560 million

As things were winding down in Junkbondland on Thursday, market sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said that $560 million more came into high-yield mutual funds and ETFs than had left them in the week ended Wednesday.

It was the fourth consecutive weekly gain seen by Arcata, Calif.-based AMG, a unit of the Lipper analytics division of Thomson Reuters Corp., almost exactly matching the $559 million cash addition seen during the week ended Feb. 26.

That run of inflows also included $804 million during the week ended Feb. 19, on top of a massive $1.45 billion cash addition the week before that, ended Feb. 12 - the biggest cash addition the funds have seen since the week of Oct. 23 last year, when a $2.02 billion net inflow was recorded, according to a Prospect News analysis of the figures.

The four straight inflows, totaling $3.38 billion, represented a strong rebound from the two consecutive large downturns that preceded them - a $909 million outflow in the week ended Jan. 29, followed by a $972 million cash loss in the week ended Feb. 5, which followed three straight inflows at the beginning of the year, according to the Prospect News analysis.

Including the latest week's results, there have now been seven inflows since the beginning of the year, versus the two outflows, resulting in a year-to-date cumulative net inflow of $1.98 billion, according to the analysis.

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

In 2013, inflows were seen in 33 weeks, versus 20 weeks of outflows, with total net inflows for the year tallying up to about $1.27 billion, according to the analysis.

Before the latest weekly number came out, a trader opined that positive fund flows had become so commonplace that a medium-sized new inflow number was "almost inconsequential. I know there's more money coming in tonight and tomorrow [Friday]" as investors look to put cash to work.

Another fund-tracking service, the Cambridge, Mass.-based EPFR Global, meantime reported an inflow for the week of nearly $2 billion, with a year-to-date total north of $8 billion. It too has seen seven inflows in the nine weeks since the start of the year.

EPFR's methodology differs from AMG/Lipper's as its fund universe includes many non-U.S.-domiciled mutual funds and ETFs, as opposed to AMG/Lipper's strictly domestic orientation.

Analysts said that the sustained flows of fresh cash into junk - and the mutual funds and ETFs represent but a small, though very observable and quantifiable percentage of the total amount of investor money coming into or leaving the more than $1 trillion junk market - has been a key catalyst behind relatively the strong performance seen by both the junk primary and secondary markets over the past two years, and which has mostly continued on into the new year.

PHI at the tight end

The Thursday primary market saw five issuers bring single-tranche deals totaling $1.44 billion face amount.

Executions continued to be crisp.

Three of the five tranches priced either at the tight end or the rich end of talk. The other two came on top of talk.

Three came as drive-bys, and two were upsized.

PHI priced a $500 million issue of five-year senior notes (B2/BB-) at par to yield 5¼%.

The yield printed at the tight end of the 5¼% to 5½% yield talk.

UBS Investment Bank was the bookrunner.

The Lafayette, La.-based helicopter services provider plans to use the proceeds to refinance its 8 5/8% senior notes due Oct. 15, 2018, to repay borrowings under its revolver and to fund lease buyouts.

Donnelley upsizes

R.R. Donnelley & Sons priced an upsized $400 million issue of non-callable 10-year senior notes (Ba3/BB-) at par to yield 6%.

The deal was upsized from $350 million.

The yield printed on top of yield talk.

BofA Merrill Lynch was the left bookrunner for the debt refinancing. Citigroup Global Markets Inc., J.P. Morgan Securities LLC, Mitsubishi UFJ Securities, U.S. Bancorp Investments Inc. and Well Fargo Securities LLC were the joint bookrunners.

Imperial atop tightened talk

Imperial Metals priced a $325 million issue of five-year senior notes (B3/B-) at par to yield 7%.

The yield printed on top of yield talk that had been revised tighter from earlier talk of 7¼% to 7½%.

JPMorgan and BMO Securities were the joint bookrunners.

Proceeds, along with proceeds from a new C$200 million senior secured credit facility, will be used to repay debt, to fund capital expenditures related to the Red Chris project and for general corporate purposes.

Select Medical taps

Select Medical Corp. priced a $110 million add-on to its 6 3/8% senior notes due June 1, 2021 (B3/B-) at 101.5 to yield 6.033%.

The reoffer price came at the rich end of the 101 to 101.5 price talk.

JPMorgan, Goldman Sachs & Co., BofA Merrill Lynch, Morgan Stanley & Co., RBC Capital Markets Corp. and Wells Fargo were the joint bookrunners for the quick-to-market deal.

Proceeds, along with cash on hand, will be used to pay down the company's revolver that will be used to repurchase 10 million shares of Select Medical Holdings Corp.'s common stock from Welsh, Carson, Anderson & Stowe IX, LP and WCAS Capital Partners IV, LP at $10.95 per share for a purchase price of $109.5 million. If the company does not use proceeds from the revolver for the repurchase, it will use the notes proceeds, together with cash on hand, to consummate the repurchase.

Rialto doubles size

Rialto Holdings and Rialto Corp. priced an upsized $100 million add-on to their 7% senior notes due Dec. 1, 2018 (B2/B) at 102.25 to yield 6.307%.

The deal was upsized from $50 million.

The reoffer price came at the rich end of the 102 to 102.25 price talk.

Deutsche Bank Securities Inc. was the bookrunner for the general corporate purposes deal.

Emeco downsizes, sets talk

Looking to the Friday session, Australia's Emeco Pty. Ltd. talked a downsized $335 million offering of five-year senior secured notes (Ba3/BB-) to price at discount not to exceed 2.5 points and to yield 10¼% to 10½%.

The deal was downsized from $360 million.

In addition to the downsizing, call protection was increased to three years from two years. The equity clawback was extended to cover the length of the non-call period, increased from two years. The equity clawback premium was decreased to 35% from 40%.

The deal, led by Credit Suisse Securities (USA) LLC, is set to price Friday.

Catamaran for Friday

Also on Friday, Catamaran Corp. plans to price a $500 million offering of non-callable seven-year senior notes (/BB+/).

BofA Merrill Lynch, JPMorgan and SunTrust Robinson Humphrey are joint bookrunners.

The Schaumburg, Ill.-based pharmacy benefit management company plans to use the proceeds to repay $300 million of revolver debt and for general corporate purposes.

AuRico Gold roadshow

AuRico Gold Inc. plans to begin a roadshow on Friday for a $300 million offering of eight-year senior notes (expected ratings B3/B).

The deal is set to price late in the week ahead.

Joint global coordinator and joint bookrunner RBC will bill and deliver. Credit Suisse is also a joint global coordinator and joint bookrunner. Scotia is a joint bookrunner.

The Toronto-based gold exploration and mining company plans to use the proceeds to repurchase convertible notes via a tender offer, to repay bank debt and for general corporate purposes, which may include funding capital expenditures to support organic growth.

Avis Budget taps 6% notes

In Europe, Avis Budget Finance plc priced an upsized €200 million add-on to its 6% senior notes due March 1, 2021 (expected ratings B2/B) at 106.75 to yield 4.847%.

The deal was upsized from €150 million.

The yield printed at the rich end of the 106.5 to 106.75 price talk.

Joint bookrunner Deutsche Bank will bill and deliver. Credit Agricole, BofA Merrill Lynch and JPMorgan were also joint bookrunners.

Imperial Metals rules

In the secondary arena, the best performer on the day among the new or recently priced bond deals was Imperial Metals' 7% notes due 2019. A trader quoted the Vancouver, B.C.-based precious metals and base metals mining company's bonds at 102¼ bid, 102¾ offered, well up from their par issue price earlier in the session.

A second trader pegged the bonds at 102¼ bid, 103¼ offered, while yet another had them in a 102¼ to 102½ bid context.

The first trader suggested that the strong secondary showing was "kind of amazing, because they started out at nearly 8% [Wednesday] morning and they priced it at 7% this afternoon, and it still traded up by over 2 points," pushing the yield below 6½%.

"Everybody and their brother wanted a piece of it."

He said that the company "is essentially a copper miner - so go figure. Maybe copper is the new gold."

The company actually does mine copper, along with molybdenum, lead, zinc - and gold as well.

PHI, Donnelley up in secondary

PHI's 5¼% notes due 2019 gained a little altitude in the aftermarket after having been initially quoted at 100½ bid, up from their par issue price.

A trader saw the notes later at 100¾ bid, 101 offered, while at another shop, the bonds were quoted at 100 7/8 bid, 101 3/8 offered.

R.R. Donnelley's 6% notes due 2024 were seen at 100½ bid, 101 offered, up from the par issue price at which the Chicago-based printing and integrated communications services company's deal priced after having been upsized from an originally announced $350 million.

A market source at another desk said that those new bonds were among the busiest issues in the high-yield space, with over $11 million having traded by the close. That wasn't the most active credit by any means, but volume was robust enough to get onto the Most Actives list. He saw the bonds ending just below 100½ bid.

Recent deals trade around

A trader said that recently priced issues meanwhile "were trading. There was flipping in the new issues, that sort of thing."

Perhaps the busiest of the recently priced offerings was ADT's 4 1/8% notes due 2019.

A market source saw the Boca Raton, Fla.-based security alarm service provider's new issue was up by 5/8 point on the day at 101 bid, with over 432 million having changed hands.

That $500 million quick-to-market deal had priced at par on Wednesday and gained ¼ point in initial aftermarket dealings on volume of over $36 million.

Another popular issue was Access Midstream Partners LP and ACMP Finance Corp.'s 4 7/8% notes due 2024, with over $29 million of those bonds trading. They were seen down by around 5/8 point at just below par bid.

On Wednesday, they had been seen trading in a 100 3/8 to 100½ bid context on volume of over $73 million.

The Oklahoma City-based oil and natural gas transportation, processing and storage company priced its quickly shopped $750 million issue at par on Tuesday after upsizing it from $600 million originally.

The new Grifols Worldwide Operations Ltd. 5¼% notes due 2022 were seen by a trader continuing to hold the healthy gains that the Spanish pharmaceutical company's new issue had notched in initial aftermarket dealings after the $1 billion scheduled forward calendar offering priced its deal at par on Wednesday.

They rose to around and even above the 102 bid level when they were freed to trade, and on Thursday, they were seen still hanging in around 102 bid, 102¾ offered.

Gymboree gets jammed up

Away from the new deals, a trader said that Gymboree's 9 1/8% notes due 2018 were a notable loser on the day in "fairly active" volume.

He quoted those bonds having dropped from prior levels around 90¼ bid to as low as 86¾ before rebounding a little to close around 87.

Another trader also saw the bonds going out at 87, calling that down more than 3 points on the day, on volume of over $22 million.

The first trader said that the San Francisco-based retailer of children's apparel and accessories had no news out that might explain the slide - but he said that investors might have been spooked after sector peer Children's Place released disappointing fourth-quarter numbers and, more importantly, relatively bearish guidance going forward, "and they must have extrapolated that weakness to Gymboree," even though they are two separate, unrelated companies, albeit operating in the same industry.

While Children's Place actually beat analysts' earnings per share estimates by a penny, posting a profit of 96 cents per share, revenue dropped by 8.2% to $467.5 million, well down from the expected $484 million to $485 million.

Looking ahead, the company said that for the current quarter, earnings will come in between 56 cents and 66 cents per share, considerably lower than Wall Street expectations of close to $1 per share.

Analysts were looking for full-year earnings to top the $3.60 per share mark, but the company projected a likely earnings range of $2.85 to $3.05, assuming no great deterioration in sales.

Market indicators turn lower

Statistical junk-market performance indicators were mostly lower on Thursday after having turned steady to higher on Wednesday.

The Markit Series 21 CDX North American High Yield index lost 1/16 point on Thursday to end at 108 1/16 bid, 108 1/8 offered, its first loss after two gains. On Wednesday, the index had risen by 1/16 point.

The KDP High Yield Daily index retreated by 6 basis points to end at 75.21 after having been unchanged on Wednesday. It was the index's third loss in the last four sessions.

Its yield, meanwhile, was unchanged at 5.15% on Thursday after having come in by 2 bps on Wednesday.

The widely followed Merrill Lynch High Yield Master II index lost 0.052% on the day, its first loss after two upturns, including Wednesday's 0.022% advance.

Thursday's loss left its year-to-date return at 2.759% - down from Wednesday's 2.812%, its 2014 peak level.

However, the index's spread-to-worst tightened to 395 bps over comparable Treasuries, a new tight level for the year, surpassing Wednesday's 396 bps spread.

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