No deals price; Dynacast on tap; others on road; secondary slips; Dynegy drops on debt plan

By Paul Deckelman and Paul A. Harris

New York, July 11 - The sense of quietude hanging over the high-yield primary market continued as the new week began with no deals of any sort seen having priced on Monday, the second straight session during which the domestic dollar-denominated segment has put up a big goose egg.

That is expected to change on Tuesday, however, when die-castings manufacturer Dynacast International LLC and its Dynacast Finance Inc. unit are expected to come to market with a $375 million secured bond offering, after price talk on the issue circulated in Monday's market.

Two other dollar deals were heard by syndicate sources to be hitting the road for pricing likely next week - a $285 million two-part offering from tobacco producer North Atlantic Trading Co. and $275 million of secured paper from print and online media publisher Trader Corp.

Also heard beginning roadshows were such international issuers as Belgian cable operator Coditel Holding SRA and Chinese aluminum products maker China Hongqiao Group, Ltd.

Away from the primary, the junk bond secondary market was notably easier, in line with sharply lower stocks, which were hammered by investor fears about the global economy and a spread of the European debt crisis. Statistical indicators - riding high over the past two weeks in Junkbondland - were lower across the board on Monday.

Dynegy Inc.'s bonds were seen down anywhere from 1 to 3 points, after the Houston-based power generating company announced plans to replace its existing credit facility with a new bank lending agreement.

Dynacast International talked its $375 million offering of eight-year senior secured second lien notes (B2/B) with a 9¼% to 9½% yield.

The acquisition deal is expected to price on Tuesday via joint bookrunners J.P. Morgan and Macquarie Capital.

Trader Corp. starts Tuesday

Also on Monday, a trio of prospective issuers braved the chill in the global markets and took places aboard the active forward calendar.

Trader Corp. will begin a roadshow on Tuesday for its $275 million offering of seven-year senior secured notes (expected ratings B3/B).

RBC Capital Markets has the books for the acquisition financing.

North Atlantic Trading deal

North Atlantic Trading will begin a roadshow on Tuesday for its $285 million two-part offering of senior secured notes.

The deal includes a $205 million tranche of five-year second lien notes (B2/B-) and an $80 million tranche of 51/2-year third-lien notes (Caa2/CCC).

Jefferies is the bookrunner for the debt refinancing deal.

The only first lien debt the company intends to put in place is a $15 undrawn revolver.

Coditel starts roadshow

In news from the European primary, Belgian cable operator Coditel Holding began a roadshow for its €260 million offering of seven-year senior secured notes (B3/B/B+).

Morgan Stanley is the global coordinator and a joint bookrunner. ING is also a joint bookrunner.

Proceeds from the deal will be used to finance the acquisition of Belgian and Luxembourg cable assets from France's Numericable.

Equinix eases a little

In the secondary market, traders said that in the continued absence of any fresh new deals, investors were still relatively active in some of the issues priced last week.

For instance, one said that Equinix, Inc.'s 7% notes due 2021 was about the only recent deal really trading around.

He saw the Redwood City, Cal.-based data centers operator's at bid levels in between 101½ and 102, which he called "down slightly" from the levels above 102 bid at which those bonds had traded on Friday. He noted that the whole market was down at least one-half point, so the new deal would likely be lower.

A second trader saw the bonds at 101¼ bid, 102¼ offered.

At another desk, a trader saw those bonds at 100 5/8 bid, 102 1/8 offered.

Equinix had priced $750 million of those bonds - upsized from the originally announced $500 million - last Wednesday at par. Subsequently, they had firmed smartly, getting as good as 102¾ bid, 103 offered on Thursday when over $120 million of the new issue had changed hands.

A trader also saw INC Research, Inc.'s 11½% notes due 2019 at par bid, 100½ offered, down about one-quarter point from the levels seen on Friday. Those levels, in turn, had been up a little from the par issue price at which the Raleigh, N.C.-based contract medical testing and research provider had priced its $300 million deal on Thursday.

Secondary indicators slip

Away from the new deals, traders saw statistical measures of market performance, which had been mostly higher last week or - at worst - slightly mixed, take a definite step backward on Monday.

A trader saw the CDX North American Series 16 HY Index fall by a full point on Monday to end at 100¾ bid, 100 15/16 offered, after having already lost a half-point on Friday.

The KDP High Yield Daily Index dropped by 13 basis points on Monday to finish at 75.22, after having lost 5 bps on Friday. Its yield rose by 4 bps, to 6.79% on top of the 2-bps gain seen on Friday.

And after a solid eight-day winning streak that lasted through Friday, the Merrill Lynch High Yield Master II Index showed its first loss in nine sessions on Monday, dropping 0.2%, more than reversing Friday's 0.09% gain.

That retreat left its year-date return at 5.573%, down from Friday's 5.784%. It also remains well down from its year-to-date peak level of 6.071%, which was reached back on May 20.

A trader characterized Monday's session as "nothing too exciting - it felt like a summer Sunday."

A second said: "It was a little bit boring - except for watching stocks go down."

And go down they did. On heightened fears that the festering Greek debt crisis could spread to other weak economies within the European Union, including Spain and Italy, as well as renewed doubts about the strength of the U.S. economic recovery in the wake of Friday's terrible non-farm job-creation numbers for June, pushed the bellwether Dow Jones Industrial Average down by 151.44 points, or 1.2% to a close of 12,505.76. Other broader market indexes reflected a similar downturn.

Another trader called Monday "a very quiet, down day."

Dynegy drops on debt scheme

Among specific issues, a trader said that "Dynegy seems to be the name of the day. There was a lot of activity in that name" after the Houston-based power generating company announced plans to seek a restructuring of its debt.

The company said that it had opened talks with potential lenders for new senior secured credit facilities "supporting a new organizational structure aligned with its gas and coal generation assets."

Dynegy said that the new credit facilities would replace the existing credit agreement, "marking the initial step in the company's operating and financial restructuring."

The trader said that Dynegy's 7¾% notes due 2019 were bouncing around within a 691/2-to-70½ context during the session before going out around 70 bid, which he called down a point or two on "a lot of trading." He said that the 7¾% issue "seemed to be the really active one."

He also saw the 7½% notes due 2015 at 76 bid, 77 offered and the 8 3/8% notes due 2016 at 75 bid, 76 offered, which he said were down about a point or so.

"They were pretty active all day," he observed. He said that the recapitalization plans obviously had generated angst among the bondholders "for it to fall that much."

He said that the bonds had been "even a little lower than this earlier in the day. I think they started out the day higher, dropped down [after the initial announcement] and then moved back up" to the closing levels, though these were still down a point or so from Friday.

For instance, he saw the 73/4s trading during the morning as low as a 66-68 context before going out at 70, while the 71/2s were around 73-75 and the 8 3/8s were in a range of 711/2-73½ before climbing back up to 75-6, still off a point.

The gyrations he said "are all based on this restructuring. People were trying to figure out what it meant. At first, it was, like, 'When in doubt, sell 'em out,' but then when they get a little clarity, they ended up buying them back."

A market source at another desk pegged the Dynegy 8 3/8s down 2¼ points on the day at 77¾ bid.

A second source saw those bonds finishing the day at 76½ bid, down 6¾ points, but throwing out all of the small trades as unrepresentative, he saw the bonds falling 2½ points, to 77½ on a round-lot basis on volume topping $8 million. The heaviest action was in the 73/4s, off 1½ points from Friday's close, but down a deuce counting only the large trades on volume of over $26 million.

After rejecting two takeover attempts since September, Dynegy warned that it might have to file for bankruptcy in the second half of the year if it could not get its balance sheet in check. To that end, it hired financial advisors to help devise a restructuring plan.

The new loans, totaling $1.7 billion, are the first part of a proposed plan aimed at reducing the company's overall debt. Of the loans, $1.3 billion will be held at the company's GasCo subsidiary and the remaining $400 million at the CoalCo unit.

Proceeds from the GasCo loan will be used to repay Dynegy Holdings Inc.'s existing senior secured credit facility, repay existing debt relating to Sithe Energies Inc., make a $400 million restricted payment to a parent holding company of GasCo and to fund cash collateralized letters of credit and cash collateral for existing collateral requirements.

The CoalCo loan will be used to fund cash collateralized letters of credit and cash collateral for existing collateral requirements, and for general working capital and general corporate purposes.

A bank meeting was held Monday and the loans are expected to launch Tuesday. Closing is expected by the end of the month.

Dynegy's New York Stock Exchange-traded shares dropped 37 cents, or 5.59%, to end Monday at $6.25 apiece, near their low point of the day, on volume of 2 million shares, only slightly more than normal.

Market yawns at Cricket news

Elsewhere, the news that a large shareholder of Leap Wireless International, Inc. is mounting a proxy challenge to the management of the San Diego-based cellphone operator was seen by traders having little or no impact on the bonds of Leap's Cricket Communications Inc. subsidiary.

A trader said that he was "not really seeing anything in them," quoting the company's 7¾% notes due 2020 at 98¼ bid, off by three-quarters of a point on the day. However, he said there had been "very little trading in them - they were down with the whole market."

A second trader called the bonds down 1 point at 98½ bid, but only on "low volume."

Yet another trader also saw the bonds at 98½ bid, calling them down three-quarters of a point, but said that "only 1,300 bonds traded" - $1.3 million - "so it's not huge, not like $50 million traded."

He guessed that "nobody is getting too upset" at the shareholder revolt that Pentwater Capital Management, LP, a Chicago-based investment management company, which owns 3% of Leap, is trying to spark against the company's management, putting up a slate of three candidates to run against the company's official slate of director nominees.

In filings on Monday with the Securities and Exchange Commission, Pentwater charged that management's actions had led Leap's share price to tumble from over $90 per share in 2007, down to present levels - the Nasdaq-traded shares closed Monday at $15.37, down 56 cents on the day, or 3.52%. Volume of 1.34 million was about two-thirds of the norm.

Among the blunders Pentwater charges is Leap's rejection of a takeover offer in 2007 from sector peer MetroPCS as well as what it called a faulty broadband strategy and poor pricing policies.

In the corporate governance area, Pentwater charges that too many of the company's directors have financial ties to company chairman Mark Rachesky and are "enmeshed" personally and financially with the chairman. It alleges that those ties may prevent them from fulfilling their fiduciary obligation to act in the best interest of all company stockholders.

It has also attacked Leap's moves to not allow its slate of director challengers to run, filing suit against the company in Delaware to force it to recognize Pentwater's nominees.

Kodak comes down

A trader said that Eastman Kodak Co.'s bonds "seemed lower," with its 7¼% notes due 2013 quoted around an 88-88½ context, but on "not much volume at all."

He said they were down about a point from around 89-90 on Friday, the level to which the Rochester, N.Y.-based photographic products and imaging technology company's bonds had retreated in the aftermath of a disappointing non-decision from a federal trade court hearing on Kodak's patent-infringement case against smartphone makers Apple, Inc. and Research in Motion.

Stephanie N. Rotondo contributed to this report

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