Infor, Tullow Oil, Beazer bring deals as market awaits jobs numbers; funds gain $493 million

By Paul Deckelman and Paul A. Harris

New York, April 3 - New-deal activity picked up in Junkbondland on Thursday as four issuers brought $1.88 billion of new high-yield, dollar-denominated paper to market, each marketing a single tranche of bonds, syndicate sources said.

That was up from the previous session's $450 million that priced in one tranche.

The big deal of the day was New York-based software provider Infor, Inc.'s quickly shopped $750 million issue of seven-year senior contingent cash-pay notes due 2021.

That was one of two PIK deals that got done, with the other being an upsized $150 million of five-year senior PIK toggle notes from Michael Baker Holdings, LLC, a Moon Township, Pa.-based provider of high-end engineering, development, intelligence and technology solutions, whose deal priced as a regularly scheduled forward calendar offering.

There were also two more conventionally structured deals.

Atlanta-based builder Beazer Homes USA, Inc. drove by with an upsized $325 million of five-year notes, while British energy exploration and production company Tullow Oil plc did an upsized $650 million offering of eight-year notes, which priced after a roadshow.

The Infor bonds came too late in the session for any kind of aftermarket activity. Michael Baker's new deal was quoted at firmer levels, while Beazer and Tullow mostly hung around their respective issue prices.

There was also new-deal activity in the euro-denominated segment of the junk market. Britain's Stonegate Pub Co. Financing plc did an upsized £400 million of five-year senior secured fixed- and floating-rate notes in two tranches, France's Quick Restaurants served up €595 million of floating-rate secured and unsecured notes in two tranches of five years and 5.5 years, respectively, and Swedish steel producer SSAB AB priced an upsized, quickly shopped €350 million of five-year notes.

Away from the new-deal arena, Momentive Performance Materials Inc.'s bonds remained among the busiest credits as investors prepared for a potential bankruptcy filing by the underperforming maker of specialty materials for the high-tech industry.

Statistical market-performance measures turned mixed after having been higher for the two previous sessions.

Meanwhile, another indicator - the flow of fresh money into or out of high-yield mutual funds and exchange-traded funds, considered a good gauge of overall junk market liquidity trends - was heard to have turned solidly positive in the latest week.

Junk funds gain $493 million

Near the close of Thursday's activity, market sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said that $493 million more came into those funds than left them during the week ended Wednesday.

The inflow more than made up for the $196 million outflow seen by Arcata, Calif.-based AMG, a unit of the Lipper analytics division of Thomson Reuters Corp., during the previous week, ended March 26. That downturn was the first outflow that the funds had seen in seven weeks, snapping a six-week winning streak dating back to the week ended Feb. 12, during which time an estimated $4.04 billion of cumulative inflows to the funds was recorded, according to an analysis of the figures by Prospect News.

Inflows have now been seen in seven weeks out of the last eight, resulting in a cumulative net inflow over that time estimated at about $4.70 billion, according to the analysis.

The latest week's inflow was the 10th such gain seen since the beginning of the year, versus just three outflows - one seen during the March 26th week and back-to-back cash losses in the weeks ended Jan. 29 and Feb. 5, totaling an estimated $1.88 billion. The inflow brought the year-to-date net inflow up to an estimated $3.31 billion, according to the analysis, its peak level for the year.

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.

Another fund-tracking service, the Cambridge, Mass.-based EPFR Global, meantime saw an inflow of more than $2 billion on the week.

While EPFR's methodology differs from AMG/Lipper's as its fund universe includes many non-U.S.-domiciled mutual funds and ETFs, including strictly European junk funds and broader global funds, versus AMG/Lipper's strictly domestic orientation, the two services' weekly results usually point in the same direction, with a rare divergence here and there. EPFR has now seen 11 inflows and two outflows in the 13 weeks since the start of the year.

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 the relatively strong performance seen by both the junk primary and secondary markets over the past two years and which has mostly continued on into this year as well.

A high-yield trader said before the number that "it definitely felt like cash was coming in" during the week.

A second trader called the $493 million inflow "a nice size."

Infor at the tight end

Four issuers priced single-tranche dollar-denominated deals to raise a combined total of $1.88 billion during the busy Thursday session.

Three of the four deals were upsized.

Two came at the tight end of talk, one came toward the tight end of talk, and the other came on top of talk.

Two of the four came as drive-by deals.

Infor priced a $750 million issue of holdco senior contingent cash-pay notes due May 1, 2021 (Caa1/CCC+) at par to yield 7 1/8% in a Thursday drive-by.

The notes pay a 7 1/8% cash coupon and a 7 7/8% PIK coupon.

The yield printed at the tight end of yield talk in the 7¼% area.

BofA Merrill Lynch was the left bookrunner. Credit Suisse Securities (USA) LLC, J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC, Barclays, Deutsche Bank Securities Inc. and RBC Capital Markets were the joint bookrunners.

Proceeds will be used to repay all of the company's PIK loans and to fund a distribution to shareholders.

Tullow upsizes

Tullow Oil launched and priced an upsized $650 million issue of eight-year senior notes (B1/BB-) at par to yield 6¼%.

The debt refinancing deal was upsized from $500 million.

The yield printed on top of yield talk.

JPMorgan, Barclays, BNP Paribas, BofA Merrill Lynch and Deutsche Bank were the joint global coordinators.

Credit Agricole CIB and Standard Chartered are the joint bookrunners.

Beazer drives by

Beazer Homes USA priced an upsized $325 million issue of non-callable 5¾% five-year senior notes (Caa2/CCC) at par to yield 5.745%.

The deal was upsized from $300 million.

The yield printed slightly below the midpoint of yield talk set in the 5¾% area.

Citigroup Global Markets Inc., Credit Suisse, Deutsche Bank, RBS Securities Inc. and UBS Investment Bank were the joint bookrunners for the debt-refinancing deal.

Michael Baker PIK toggles

Michael Baker Holdings and Michael Baker Finance Corp. priced an upsized $150 million issue of senior PIK toggle notes (Caa1/B-) at 99 to yield 9.127%.

The notes pay a cash coupon of 8 7/8% and a PIK coupon of 9 5/8%.

The deal was upsized from $125 million.

The cash coupon came tight to the 9% cash coupon talk. The reoffer price came on top of price talk.

Jefferies LLC was the arranger for the dividend-funding deal.

EnQuest talk is 6¾% to 7%

Heading into Friday, only one deal remains on the calendar as business expected to price before the end of the week.

EnQuest plc talked its $500 million offering of eight-year senior notes (B3/B) to yield 6¾% to 7%, market sources said on Thursday.

The price talk comes wider than early guidance that had that deal whispered in the mid-6% context, according to a buyside source.

JPMorgan, Barclays, BNP Paribas, BofA Merrill Lynch, Credit Suisse and Goldman Sachs & CO> are the joint bookrunners.

SSAB upsizes to €350 million

The euro- and sterling-denominated markets also generated a high volume of news on Thursday.

Expect more of the same in the days ahead, a London-based investment banker advised.

Stockholm-based steel producer SSAB priced an upsized €350 million issue of 3 7/8% five-year senior notes (/BB/) at 99.444 to yield 4%.

The deal was upsized from €300 million.

The yield printed at the tight end of initial guidance that was set in the 4 1/8% area.

Active bookrunner Credit Agricole will bill and deliver. Citigroup and Nordea were also active bookrunners. SEB and SHB were passive bookrunners.

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

Quick Restaurants two-part deal

France-based Quick Restaurants, issuing via its Financiere Quick SA unit, priced an upsized €595 million amount of floating-rate notes in two tranches.

An upsized €440 million tranche of five-year senior secured notes due April 15, 2019 (B3/B-) priced at par to yield Euribor plus 475 basis points. The tranche was upsized from €430 million. The spread printed at the tight end of the Euribor plus 475 bps to 500 bps spread talk.

In addition, Quick priced a €155 million tranche of senior unsecured notes due Oct. 15, 2019 (Caa2/CCC) at par to yield Euribor plus 750 bps. The spread came at the tight end of the Euribor plus 750 bps to 775 bps spread talk.

The overall deal size increased from €585 million.

Joint global coordinator Goldman Sachs International will bill and deliver. JPMorgan was also a joint bookrunner.

Proceeds, together with cash on the balance sheet, will be used to repay existing senior debt, second-lien debt, mezzanine debt, a shareholder loan and convertible bonds.

Stonegate upsizes

Stonegate Pub priced an upsized £400 million amount of five-year senior secured notes (B2/B+).

The deal included an upsized £260 million tranche of fixed-rate notes that priced at par to yield 5¾%. The tranche was upsized from £230 million. The yield printed at the tight end of the 5¾% to 6% yield talk.

In addition, Stonegate priced a downsized £140 million tranche of floating-rate notes at par to yield Libor plus 475 bps. The tranche was downsized from £150 million. The spread came at the tight end of the 475 bps to 500 bps spread talk.

The size of the overall transaction was increased from £380 million.

Joint bookrunner Barclays will bill and deliver. Morgan Stanley was also a joint bookrunner.

Proceeds will be used to repay all outstanding debt, to fund a distribution to shareholders and for general corporate purposes.

Monier starts Friday

BMBG Bond Finance SCA, a subsidiary of Braas Monier Building Group SA, plans to start a European roadshow on Friday for its €415 million offering of senior secured notes due 2020 in tranches of fixed-rate notes and floating-rate notes.

The deal is coming in a €200 million minimum tranche of fixed-rate notes and a to-be-determined amount of floating-rate notes.

Joint global coordinator Goldman Sachs will bill and deliver for the debt refinancing. BNP Paribas and JPMorgan are joint bookrunners.

The Oberursel, Germany-based building materials company plans to use the proceeds, along with a new €150 million term loan and €100 million revolver, to refinance debt.

ghd sterling deal

Hair styling appliance-maker ghd Bondco plc plans to start a European roadshow on Friday for its £165 million offering of six-year senior secured notes.

Joint bookrunner JPMorgan will bill and deliver. Barclays is also a joint bookrunner.

The notes come with two years of call protection.

Credit ratings remain to be determined.

The Keighley, England-based company plans to use the proceeds to repay bank debt and a portion of shareholder loans.

Michael Baker bonds better

When the new Michael Baker Holdings 8 7/8%/9 7/8% senior PIK toggle notes due 2019 hit the aftermarket, a trader quoted the paper as having firmed smartly to around 101 bid, 102 offered.

That was up from the 99 level at which the engineering and technology solutions company's deal had come to market.

Beazer bonds in narrow range

A trader said that Beazer Homes USA's new 5¾% notes due 2019 were trading at bid levels between par and 1001/2, seeing the inside level in the homebuilder's quick-to-market issue later on around 100 1/8 to 100 3/8.

"Allocations on Beazer were pretty full," he said, "and there were a lot of people that thought it was priced too high, but nobody's going to short it because it got put away."

A second trader pegged the bonds at 100 1/8 bid, 100½ offered.

Tullow holds around issue

A trader said that Tullow Oil's 6¼% notes due 2022 initially struggled a little. "At first, it started trading at 993/4, below [its par] issue price."

While he saw the British energy operator's bonds eventually push up a little to levels between par and 100 1/8, "still a lot of bonds traded below issue price."

The traders meantime said that software provider Infor's new 7 1/8%/7 7/8% senior contingent cash-pay notes due 2021 appeared too late in the session for any kind of initial dealings.

Realogy hits the market

A trader said that Realogy Holdings Corp.'s new 4½% notes due 2019 "hung in there. It got better as the day progressed."

He first saw the Madison, N.J.-based residential real estate services provider's paper trading at around the same par level at which the $450 million drive-by deal had priced very late in the day on Wednesday.

After that, he said, "that one got a little better and the market was as high as 100½ to 1003/4."

He ultimately saw the bonds finishing around 100 3/8 bid, 100 5/8 offered, "so that one definitely did a lot better. It's off its highs by a little bit, but it's still stronger."

A second trader saw the Realogy bonds in a locked market at 1001/2, or trading in a 100 3/8 to 100 5/8 context.

The first trader was a little surprised at the demand for the Realogy notes. He said, "You have a tug of war going on. The stuff that's now trading in high-yield land at 4½ doesn't have as much appeal as it did six or nine months ago because a lot of people feel that maybe it's good for now, but Treasury yields may go much higher."

He added "look at the rating - Caa1/B at 4½%. As a trader, you almost feel like shorting it on principle."

But he acknowledged that the bonds seemed to be holding their own late Thursday.

Recent deals unseen

The traders meantime saw little or no activity in a lot of the new deals that have come to market even as recently as just a couple of days ago.

"Nobody's quoting these things," one opined, adding that "lately, more and more of the underwriters seem to be just keeping them to themselves.

"The business is definitely changing. If it's not Tracing, these underwriters are just keeping these prices to themselves."

He concluded that "it's almost like out of sight, out of mind - especially if they're 144As."

Quiet market head of numbers

One of the traders characterized Thursday's market as "less active than yesterday. I'm just not seeing much."

He declared that the session "was a hunt-and-peck type day," echoing the same exact phrase that a second trader also used in his assessment of the day's dealings.

He said that to a degree, junk players were watching the behavior of stocks - a market that he said "definitely feels like it's running out of steam."

Even short-term equity gains, he said, have no real conviction: "It'll be up 20 or 40 points, but there's no real impetus to the market."

He said that the most recent comments from newly installed Federal Reserve chief Janet Yellen "were a little surprising, and they kind of got people a little jazzed up."

In a Chicago speech, Yellen seemed to be modifying or even partially walking back her earlier remarks of several weeks that had suggested that interest rates could start to rise by next spring, considerably earlier than many observers were looking for. Those earlier comments had spooked both the equity and the fixed-income markets, and in her second go-around, Yellen pointed out how fragile the economy's recovery was and how employment continued to lag, and she promised that the Fed would take all of that into account before doing anything that might push rates up prematurely.

The trader said that all of the speculation over what Yellen said, or was trying to say, "begs the question of whether the economy is really all that strong."

He declared that "I think the employment number on Friday is going to give people a gauge for how we go for the next couple of months. But we'll see."

The Labor Department is scheduled to release the jobs and unemployment numbers for March at 8:30 a.m. ET on Friday. Economists have projected that the government figures will show that employers added 200,000 non-farm jobs in March - up from February's 175,000 - as the economy tries to gain traction after job growth slowed down in December and January, when employers added a combined 213,000 positions.

At another shop, a trader warned that "there's a lot of caution, a good degree. Everybody is waiting for the figures tomorrow."

In the interim, he called the market "almost lethargic. There's some caution out there. People aren't just buying recklessly the way they did a couple of months ago."

Momentive gains steam

Among specific issues, Momentive Performance Materials' debt was inching up as investors ready themselves for a potential bankruptcy filing.

One trader saw the 8 7/8% notes due 2020 closing slightly higher at 1091/2, while the 9% notes due 2021 rose "over a point" to 811/2.

Another trader echoed those levels.

A market source said that over $22 million of the 8 7/8% notes had traded, putting them near the top of the Most Actives list. Nearly $10 million of the 9% notes had changed hands as well.

Late Tuesday, the Waterford, N.Y.-based chemical company said in a regulatory filing that it was delaying filing its 10-K to allow more time to analyze the financial statements. It noted that it expected auditors to issue a "going-concern" warning given the potential of breaching covenants. As such, it had begun talking to stakeholders in the hopes of coming to some agreement. The company indicated that a bankruptcy filing might be the easiest way to complete such an endeavor.

On Wednesday, Standard & Poor's downgraded the company to CC. Moody's Investors Service followed suit on Thursday, cutting the company to Ca from Caa2.

Also on Wednesday, Bloomberg reported that a group of Momentive's secured debtholders had hired law firm Dechert LLP to represent them in a restructuring.

Back in February, Momentive announced it had hired Lazard Ltd. as a restructuring adviser.

Market indicators turn mixed

Statistical junk performance indicators turned mixed on Thursday after having been higher over the two previous sessions.

The Markit Series 22 CDX North American High Yield index was unchanged on Thursday, ending at 107 11/16 bid, 107 13/16 offered, after having gained 1/16 point on Wednesday, its fourth consecutive advance.

The KDP High Yield Daily index was likewise unchanged at 74.94. It was up by 2 bps on Wednesday, its second straight advance.

Its yield, though, widened out by 2 bps, rising to 5.23% on Thursday, reversing the previous session's 2-bps narrowing.

But the widely followed Merrill Lynch High Yield Master II index posted its fifth straight advance. It moved up by 0.035% Thursday on top of the 0.015% gain seen on Wednesday.

The latest improvement lifted its year-to-date return to 3.127%, a fifth straight new peak level for the year so far, up from 3.091% on Wednesday, the former peak level for 2014.

Its spread to worst meanwhile narrowed to 383 bps over comparable Treasuries, its third straight new tight level for the year. That was down from the previous tight level, Wednesday's 384 bps.

Stephanie N. Rotondo contributed to this review

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