No pricings, but CEVA, Global Ship, Post deals slate; Safeway busy, Chiquita firms

By Paul Deckelman and Paul A. Harris

New York, March 10 - The high-yield primary arena began the new week on a quiet note on Monday with no new deals seen having priced. That was a far cry from last week - the busiest new-issuance week in Junkbondland so far this year, with some $11.746 billion of new dollar-denominated, fully junk-rated paper from domestic or industrialized-country borrowers having priced, according to data compiled by Prospect News.

But while no transactions actually came to market, syndicate sources heard about considerable behind-the scenes activity, a good deal of it from Europe-based companies.

Dutch supply-chain management company CEVA Group plc was heard to be hitting the road to market an $825 million two-part secured note offering to potential investors, with pricing expected this week.

British vessel owner Global Ship Lease Inc. will bring to market a $400 million deal, also secured, later in the week.

On the domestic front, breakfast cereal maker Post Holdings Inc. plans to serve up a $250 million add-on to its existing 2021 notes.

Traders said that recently priced deals from such names as Friday's offering from Niska Gas Storage Partners LLC and Thursday's issue from R.R. Donnelley & Sons Co. were mostly being quoted lower, in line with a generally easier market. But one significant exception was Friday's transaction from Catamaran Corp., which was seen having firmed smartly from its par issue price.

But the day's heaviest activity, for a second consecutive session, came from buyers of Safeway Inc.'s bonds - which for now are nominally investment grade, but which have been placed on review for a possible downgrade to junk bond status by several agencies on the news that the big supermarket operator will be acquired in a mostly debt-financed $9 billion leveraged buyout. Junk investors as well as high-grade accounts are reported to be playing in the name.

Merger and acquisition news also pushed up the bonds and shares of Chiquita Brands International Inc., which plans to become the top banana in the international tropical-fruit industry by combining with European sector peer Fyffes in a $1 billion all-stock deal.

Statistical indicators of junk market performance were headed south for a third consecutive session.

CEVA kicks off $825 million deal

No deals priced during the Monday session, but the active forward calendar for the present week was seen to build.

Netherlands-based CEVA Group plc began a roadshow for an $825 million two-part offering of secured notes.

The deal, set to price this week, includes a $400 million tranche of first-priority notes due March 1, 2021 (B2/B-) and a $425 million tranche of first-and-a-half priority notes due Sept. 1, 2021 (Caa2/CCC).

Guidance on the deal has tightened, according to a market source who said that the whisper on the first-lien paper is lately 6¾% to 7%, down from earlier guidance of 7%. The first-and-a-half lien paper is expected to come 200 to 250 basis points behind the first-lien, or 8¾% to 9¼%, well inside earlier guidance of 9½%, the source added.

Credit Suisse, Deutsche Bank, Goldman Sachs, Morgan Stanley, UBS and Apollo are the bookrunners for the debt refinancing deal.

Global Ship Lease via Citigroup

Global Ship Lease Inc. expects to price a $400 million offering of five-year first-priority secured notes (expected ratings B3/B) on Wednesday, via sole bookrunner Citigroup.

The containership company plans to use the proceeds to refinance debt and terminate existing interest rate swaps.

Post to tap 6¾% notes due 2021

Post Holdings Inc. is expected to price a $250 million add-on to its 6¾% senior notes due Dec. 1, 2021 (existing ratings B1/B) this week, according to market sources.

Goldman Sachs, Barclays, Credit Suisse, Wells Fargo, JP Morgan, Nomura and SunTrust are the joint bookrunners.

The St. Louis-based ready-to-eat cereal manufacturer plans to use the proceeds, along with the proceeds from the sale of 4 billion shares of common stock, for general corporate purposes, which could include, among other things, financing the pending PowerBar and Musashi acquisitions and financing additional acquisition opportunities, as well as for working capital and capital expenditures.

The original $525 million issue priced at par on Nov. 13, 2013.

Isolux Corsan €400 million

In the European market, Madrid-based construction and engineering firm Grupo Isolux Corsan Finance BV began a roadshow on Monday in London for its €400 million offering of seven-year senior notes (expected ratings /B/B+).

Joint global coordinator Morgan Stanley will bill and deliver the bank debt refinancing deal. BofA Merrill Lynch and SG CIB are also joint global coordinators. Santander, Bankia and Deutsche Bank are joint bookrunners.

Friday deals a mixed bag

In the secondary realm, a trader said that "some of the [recent] new issues got weaker," singling out Niska Gas Storage Partners' 6½% notes due 2019. He saw the bonds drop back to 99 bid.

The Houston-based independent operator of natural gas storage facilities priced its $575 million scheduled forward calendar issue at par on Friday via subsidiaries Niska Gas Storage Canada ULC and Niska Gas Storage Finance Corp. The bonds were not seen in immediate aftermarket trading on Friday after pricing.

On the other hand, the trader said, "others held up well," such as Catamaran's 4¾% notes due 2021.

The Schaumburg, Ill.-based pharmacy benefits management company's $500 million scheduled forward calendar transaction priced at par on Friday.

On Monday, a market source was quoting the bonds at 101 bid, on strong volume of over $27 million, putting it right at the top of the Most Actives list.

A second trader saw the bonds at 100 1/8 bid, but said that most of that gain probably got notched in little-noticed aftermarket trading on Friday, with the bonds tacking on another ¼ point on Monday.

However, yet another trader said that he had seen no trading in the Catamaran deal.

As had been the case on Friday, there were no quotes seen on Monday in Australian mining equipment rental concern Emeco Pty Ltd.'s $335 million of 9 7/8% senior secured notes due 2019, a scheduled forward calendar deal that priced on Friday at 98.563 to yield 10¼% after the transaction was downsized from an original $360 million.

Nor did anyone see anything going on in Friday's other deal: Chicago-based precious metals prospector Coeur Mining Inc.'s quick-to-market $150 million add-on to its existing 7 7/8% notes due 2021 bonds. That deal priced at 102 to yield 7.495%.

Donnelley, other deals lower

Going back a little further, a trader saw R.R. Donnelley's 6% notes due 2024 down ½ point at par bid, 100 ½ offered.

A second trader said that the Chicago-based printing and integrated communications provider's bonds were trading in a 100 1/8 to 100¼ bid context, "and they're not going anywhere."

He said that "they're just trying to keep their head above par."

Yet another market source said the bonds had lost 3/8 point on the day to come down to around 100 3/8 on brisk trading of over $11 million.

Donnelley had priced $450 million of the notes at par on Thursday, after upsizing the quickly shopped deal from $350 million originally.

A trader said that Imperial Metals Corp.'s 7% notes due 2019 were down about ¾ point on Monday to 101½ bid, 101¾ offered. However, a second trader said that most of the downside movement from higher prior trading levels actually took place on Friday, with only a little bit of momentum carrying the notes a little further down on Monday.

The Vancouver, B.C.-based metals mining company priced $325 million of the notes at par in a scheduled forward calendar deal on Thursday. When they were freed for aftermarket dealings later in the session, the bonds were seen by several market sources in a 102¼ to 102¾ range.

A trader said that PHI, Inc.'s bonds eased by 1/8 point on Monday to go home at 100¾ bid, 101¼ offered.

The Lafayette, La.-based provider of helicopter transport services to the offshore energy industry priced its $500 million scheduled forward calendar deal at par on Thursday; the new paper initially got as good as 100 7/8 bid, 101 3/8 offered when it hit the aftermarket.

Nashville-based hospital operator HCA Inc.'s two part drive-by deal from last Monday remained busily traded a week later during Monday's session.

Its 5% notes due 2024 were seen down 1/16 point on Monday, at 98 15/16, on volume of over $13 million.

A trader said "that one has really struggled" from the beginning, when the company priced $2 million of the notes at par.

The other part of that two-part $3.5 billion deal - upsized from $3 billion originally - also traded actively on Monday, just as it did all last week. The company's 3¾% notes due 2019 were seen unchanged at 100 1/8 bid.

Another market source saw those five-year bonds at par bid, 100½ offered, calling that down ½ point. Those bonds, too, had originally priced at par.

Safeway stays busy

Away from the new deals, several traders noted continued active dealings in Safeway's bonds in the wake of Friday's announcement that Cerberus Capital Management - the owner of Safeway rival Albertsons - has agreed to acquire Pleasanton, Calif.-based supermarket operator Safeway in a $9 billion transaction that will be mostly financed by the issuance of some $7.6 billion of new debt.

Those bonds racked up over $500 million, collectively, on Friday, mostly moving smartly higher, although Monday's trading, while still brisk, was considerably reduced from that. Junk accounts as well as high-grade investors were among those buying and selling Safeway.

One of the traders saw the company's 3.95% notes due 2020 up 1/8 point to 101 7/8 bid, on volume of $63 million.

He saw its 4¾% notes due 2021 up 1½ points at 102¾ bid, with over $39 million of the bonds changing hands.

And he said that its 7¼% long bonds rose by 3/8 points to 95 bid, on turnover of more than $32 million.

While Safeway's bonds are currently nominally investment-grade credits carrying a Baa3/BBB-/BBB- rating, Moody's Investors Service and Fitch Ratings are both eying those ratings for a possible downgrade to junk status, noting that the debt deal to fund that LBO is expected to shoot the company's leverage ratio to somewhere in the 6 times EBITDA range from its year-end 2013 level at 3.6 times.

Chiquita moves up

Chiquita Brands International's bonds were firmer on the news that the Cincinnati-based banana importing company will merge with European sector peer Fyffes plc - boosting it ahead of rivals Dole and DelMonte in terms of share of the international banana market.

A trader saw "several million-dollar lots" of the company's 7 7/8% notes due 2021 having traded estimating total volume, including odd-lot trades, in the $5 million to $7 million range.

He saw those bonds form to around the 112¼ bid area, up more than 2 points from their pre-news levels.

Market indicators lose ground

Statistical junk-market performance indicators were lower across the board on Monday, their third consecutive down session.

The Markit Series 21 CDX North American High Yield index eased by 1/32 point on Monday, its third straight setback, closing at 107 13/16 bid, 107 7/8 offered. On Friday, the index had lost 3/16 point.

The KDP High Yield Daily index posted its third consecutive loss, dropping by 10 basis points on Monday to finish at 75.02, on top of Friday's 9 bps retreat.

Its yield, meanwhile, rose by 4 bps for a second consecutive session on Monday to end at 5.23%, after having been unchanged on Thursday.

And the widely-followed Merrill Lynch High Yield Master II index also retreated for a third consecutive session, losing 0.034%, on top of Friday's 0.184% downturn.

Monday's loss dropped its year-to-date return to 2.535%, down from Friday's 2.57% finish and down as well from Wednesday's 2.812% reading, its 2014 peak level.

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