Dynacast prices, moves up; RAAM does add-on; Warner talked around market; secondary slips

By Paul Deckelman and Paul A. Harris

New York, July 12 - The high-yield domestic primary market saw its first new deal in several days price on Tuesday. Die-castings manufacturer Dynacast International LLC and its Dynacast Finance Inc. unit came in with a downsized $350 million offering of eight-year secured bonds. Traders said the Charlotte, N.C.-based company's new issue firmed smartly when it hit the aftermarket.

Also pricing late in the session was a smallish add-on offering from oil and gas operator RAAM Global Energy Co., which added to the 2015 secured notes it sold in the fall. There was no trading seen in the issue.

Price talk emerged on Warner Music Group Corp.'s gigantic three-part bond offering, which is slated to price on Thursday morning. Traders noted the elevated yields at which the $1.045 billion deal is expected to come to market.

Also in the new-deal world, pharmaceutical name Capsugel FinanceCo SCA was heard by syndicate sources to be hitting the road starting Wednesday to market a €325 million bond issue - a relatively unusual offering for a U.S.-based company - being done in support of the leveraged buyout of the company.

Away from the new-deal arena, traders saw the secondary market soft and soggy for a second session in a row. Statistical performance indicators all pointed south.

Leading the way was power generator Dynegy Inc., whose bonds retreated for a second day in apparent negative reaction to the company's debt-restructuring plans.

Downsized Dynacast prices

Dynacast International and Dynacast Finance completed Tuesday's sole new issue: a downsized $350 million issue of eight-year senior secured second-lien notes (B2/B) that priced at par to yield 9¼%.

The yield printed at the tight end of the 9¼% to 9½% price talk.

J.P. Morgan and Macquarie Capital were the joint bookrunners for the acquisition deal, which was downsized from $375 million.

RAAM brings add-on

RAAM Global Energy reopened its 12½% senior secured notes due 2015 to add $50 million. The add-on priced at 102.5% to yield 11.72%.

The original issue priced at 99.1 to yield 12¾% in September 2010.

Proceeds will be used for general corporate purposes.

RAAM is an oil and gas company based in Lexington, Ky.

Capsugel starts Wednesday

Capsugel FinanceCo will begin a global roadshow for its €325 million offering of eight-year senior notes (Caa1/B) on Wednesday in New York.

Barclays Capital Inc., Deutsche Bank Securities Inc., UBS Securities LLC, Mizuho Securities USA Inc. and KKR Capital Markets are the joint bookrunners for the leveraged buyout deal.

In other news from the euro-denominated market, lately rocked by news concerning distressed European sovereign credit, Belgium's Coditel Holding SRA, now in the market with a €260 million offering of seven-year senior secured notes (B3/B/B+), is unlikely to be sidelined by the volatility, a European debt capital markets banker said on Tuesday.

However, France's SPIE, which was expected to launch €300 million to €400 million of high-yield notes in early to mid July, is now more likely to wait out the volatility, the banker said.

"Right now it's actually starting to look like August here," the source remarked, alluding to the Dog Days of summer, which are traditionally a slow time in the high-yield market.

It would not be surprising if the SPIE deal were to remain under wraps until September, the sellsider said.

Morgan Stanley is expected to lead a syndicate of banks that includes HSBC, SG CIB, Credit Agricole CIB and Deutsche Bank.

Warner Music sets talk

Warner Music Group set price talk for its $1.045 billion three-tranche high-yield bond deal.

Two tranches are being issued by the operating company, WMG Acquisition Corp., while a third tranche is being issued by the holding company, WMG Holdings Corp.

WMG Acquisition's $150 million add-on to its 9½% senior secured notes due June 15, 2016 (/BB-/) is talked at 104 to 104.5. Its $695 million tranche of senior notes due Oct. 1, 2018 (/B-/) is talked with an 11½% to 11¾% yield.

At the holding company level, WMG Holdings' $200 million tranche of senior notes due Oct. 1, 2019 (/B-/) is talked to price around 1¾ percentage points above WMG Acquisition's notes due Oct. 1, 2018.

Credit Suisse Securities (USA) LLC and UBS Investment Bank are the joint bookrunners.

Pricing is set for Thursday.

Investors like secured piece

Investors are keen to get into WMG Acquisition's double-B rated $150 million add-on to its 9½% senior secured notes due June 15, 2016, according to a high-yield mutual fund manager who spoke on background.

However, since the tranche size is only $150 million, there is not a lot to go around, the source added.

The response to the unsecured bonds has understandably been somewhat more guarded. Investors are trying to "get their heads around what the music business is liable to be like in 2019," the investor remarked.

Nevertheless, the source is contemplating a play in the unsecured operating company bonds on the notion that it could result in a more favorable allocation of the secured add-on deal.

Dynacast does well

When Dynacast International's new eight-year senior secured notes were freed for secondary dealings, several traders saw the bonds push up by several points from the par level at which the downsized $350 million issue came to market.

"They did really well," said one trader, who pegged the bonds at 102 bid, 102½ offered - well up from issue.

Several other traders also saw the new bonds in that 102 area.

One trader had no visibility on whether there was a lot of activity in the credit, although that would stand to reason given the paucity of new paper seen lately around Junkbondland.

"It's almost like 'ho-hum,' it almost didn't come - then all of a sudden, they just started quoting it in the secondary market."

Equinix 'hanging in'

Among other recently priced offerings, a trader said that Equinix, Inc.'s 7% notes due 2021were "hanging in there," still trading fairly actively nearly a week after the Redwood City, Calif.-based data center operator's upsized $750 million issue priced.

He saw the bonds bid around 102 to 102¼ - actually better than Monday's quoted levels around a 1011/2-102 context, particularly given the general softness in the secondary market.

The company priced its offering - upsized solidly from the originally announced $500 million - at par last Wednesday. The new bonds then jumped to 102 in immediate aftermarket dealings and have been up at that level, except for Monday's retreat, since then.

Active auto new-deal names

Traders saw some activity on Tuesday in two deals brought by well-known car manufacturers just a few weeks ago.

Jaguar Land Rover Ltd.'s 7¾% notes due 2018 were seen having traded around on Tuesday, with more than $8 million of the iconic British luxury automaker's paper changing hands. The bonds went home quoted at 100½ bid - unchanged from Monday's levels, though down nearly 1½ points from their last previous round-lot trades, which were recorded last week.

Jaguar sold $410 million of those bonds at par on May 12 along with $410 million of 8 1/8% notes due 2021 and £500 million of 8 1/8% notes due 2018, both of which also priced at par. All three tranches immediately firmed to above the 102 level, although they have since eased back from those peaks. No trading was seen in the other tranches on Tuesday.

A trader saw Chrysler Group LLC's 8% senior secured notes due 2019 and 8¼% senior secured notes due 2021 open lower but then come back to end in line with the previous close.

He said the bonds - which "trade in lock-step" - opened offered at 95½ with no bids. Then, he said, bids came in around 93 to 94, and by the end of the day, the paper closed at 96½ bid, 97½ offered, virtually unchanged from Monday's close.

The Auburn Hills, Mich.-based No. 3 U.S. car manufacturer, along with its CG Co-Issuer, Inc. unit, priced $3.2 billion of the bonds, downsized from $3.5 billion, on May 19. Both the $1.5 billion of 2019 bonds and the $1.7 billion of 2021 bonds priced at par. Although the bonds rose slightly in initial aftermarket dealings the following day, within a few days, both tranches had retreated from those early gains, falling into the lower-to-mid 90s and staying there.

Waiting for Warner

Several traders agreed that with not too much else going on in the primary arena, Warner Music Group's big deal, slated to price on Thursday, might well be the highlight of the week in Junkbondland - although they expressed some caution about the upcoming mega-deal.

"That's going to be a tough one," one trader opined, noting that the big New York-based music publisher and record producer is "a highly leveraged company. You can see what they have to pay" to do the deal. The talk is north of 11% on the seven-year deal and nearly 2 percentage points more on the eight-year piece.

He said that although he didn't "know many people thrilled with this deal," he added that with those kinds of fat coupons, "there may be some rate hogs" who will want to get in on it. "We'll see."

Another trader said that he has not "heard much color on how it's going. But just based on the price talk, it's definitely going to be one of the more higher-risk deals - it's an LBO, and stuff like that."

He said the currently unsettled market "is definitely not a great market for that type of deal - hence, the price talk."

Secondary slippage continues

Away from the new deals, traders saw statistical measures of market performance, which were lower across the board on Monday after having been higher last week, continuing their retreat on Tuesday.

A trader saw the CDX North American Series 16 HY index fall by 3/8 of a point on Tuesday to end at 100 7/16 bid, 100 9/16 offered after having dropped by a full point on Monday.

The KDP High Yield Daily index lost 5 basis points on Tuesday to finish at 75.17 after falling by 13 bps on Monday. Its yield edged up by 1 bp to 6.80% after having risen by 4 bps on Monday.

And the Merrill Lynch High Yield Master II index posed its second consecutive loss on Tuesday - those losses followed an eight-session winning streak that ended on Friday. The index lost 0.146% on Tuesday after dropping 0.2% on Monday. That retreat left its year-date return at 5.418%, down from Monday's 5.573%. It also remains well down from the index's year-to-date peak level of 6.071%, which was reached back on May 20.

A trader characterized Tuesday's session as "lackluster. It was so quiet, everyone was complaining. The flow was very quiet."

One of the factors stilling the activity, he indicated, is probably uncertainty if not downright fear.

He said that after having spoken with a number of money managers, it seemed to him that "there are a lot of meetings going on here - what strategy to pursue. Everybody's really confused."

He said that on Tuesday morning, before he got to the office, "just from listening to the radio, I thought the market was going to implode" on fears that stocks - which had taken it on the chin on Monday, might do so again on Tuesday. "S&P was down 150 [points] and everything was just down."

However, he said, as the day wore on, "all of a sudden, it looked like you had some successful European bond auctions, which nobody thought was possible, and that saved it."

But late in the session, stocks turned south again on word that Ireland had gotten a ratings agency downgrade, joining Greece and Portugal. That erased the equity gains and sent the bellwether Dow Jones Industrial Average to a loss of 58.88 points, or 0.47%, ending at 12,444.88. Other indexes followed suit.

"So there's a lot of nervousness in the market right now," he warned. "A lot."

A second trader, though, took a more even-handed view of things.

"It really felt like stuff wanted to open lower. I think we were all prepared for things to be lower, but there was a reasonable bid."

He said that for the most part, the market was unchanged.

"It was a reasonably good performance for high yield, based on what we were expecting."

Dynegy drops, again

However, there was no silver lining when it came to Dynegy's bonds.

A trader said that Dynegy "had activity," as investors in the Houston-based power-generating company continued to react negatively to the company's Monday announcement that it plans to restructure its current debt by entering into $1.7 billion of new senior secured credit facilities.

He said total trading across the capital structure topped the $100 million mark.

He also saw "a lot of CDS [contracts] trading in Dynegy."

He saw its 7¾% notes due 2019 down about a point on the day at 68½ bid, with "decent volume in those." He saw its 7½% notes due 2015 down 1½ to 2 points to end at 74½ bid, 75 offered. "There was some volume in that, but a little more volume in the 73/4s".

He further saw the 8 3/8% notes due 2016 down a few points, around 74 bid.

A second trader agreed that Dynegy "continued to get whacked around, I guess as people continue to digest what's going on."

Another market source located the 7¾% notes down 1 point at 69, while its 71/2s dipped by nearly 2 points to 75. Dynegy's 8 3/8% notes were quoted down nearly 4 points, at 74 bid, while the 7.67% notes due 2016 issued by the company's Dynegy Danskammer LLC unit, which operates a power plant in upstate New York, were off by 1 point at 75 bid.

Nortel noses higher

On the other hand, Nortel Networks Corp.'s bonds continued to firm, riding the momentum from its recent successful asset auction.

A trader said that the recently strengthened bonds "quieted down today a lot," in terms of price movements, although he still saw the bankrupt Canadian communications technology company's 10¾% notes due 2016 trading at a 109 5/8-109¾ bid context. He said it was unchanged but on "a lot of activity."

But another trader said that the credit "looked like it had some activity today," calling the 103/4s up a point on the day at 109½ bid, 110 offered, with its 6 7/8% notes due 2023 in a 78-80 context, which he called up 1½ points.

"Both had had pretty good activity, with good volume on the 103/4s, for sure, and some volume" on the 6 7/8s. He said there was "not a lot of volume" overall in the latter bonds, "but there were some trades, decent trades, in the 79 range."

At another desk, the Nortel 103/4s were pegged up 1 1/8 points, at 109½ bid, on brisk volume, while the company's 10 1/8% notes due 2013 rose 1½ points to 109 3/8 .

The first trader said that "they caught a break, I'll tell you - the bondholders there," referring to the better-than-expected results for the company's recent court-supervised auction of its valuable portfolio of 6,000 high-tech patents, which produced a winning bid of $4.5 billion - about three times as much as analysts were looking for and five times the initial $900 million "stalking-horse' bid. The unexpected additional proceeds swell the size of the bankruptcy estate, meaning larger recoveries from bondholders and other creditors.

Stephanie N. Rotondo contributed to this report

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