Ryland, Standard Steel, Vector, Murray price drive-bys, Mariner up; funds gain $282 million

By Paul Deckelman and Paul A. Harris

New York, April 15 - Thursday was a busy day in Junkbondland among opportunistic borrowers who brought quickly shopped deals to the primary arena.

The biggest came from Ryland Group, Inc. a Calabasas, Calif.-based homebuilder, which priced a $300 million issue of 10-year notes, the proceeds of which will be used to fund the company's previously announced tender offer for several series of outstanding bonds. Ryland also announced changes in the tender offer terms to make that transaction more attractive to noteholders. The new bonds traded around their par issue price in the aftermarket.

Also coming in like a bolt out of the blue was a $140 million issue from Pittsburgh-based Standard Steel LLC/Standard Steel Finance Corp., a maker of wheels and axles for railroad cars. That unexpected five-year secured offering was so far under most investors' radar that the first they heard of it was when terms surfaced - only after it was already a done deal.

Two issuers drove by with quickly marketed add-on offerings to previous bond deals - Murray Energy Corp., a Pepper Pike, Ohio-based coal producer augmenting a $500 million offering of 2015 secured notes that it priced last fall by $40 million more, and Miami-based cigarette maker Vector Group Ltd., which brought a $75 million addition to a secured 2015 deal originally done in 2007 and previously added on to last summer.

Apart from actual pricings, talk emerged on C&S Group Enterprises LLC's $250 million offering of seven-year secured notes, which is expected to come to market on Friday afternoon, while CF Industries, Inc. began shopping around a $1.6 billion offering of eight- and 10-year notes, for likely pricing early next week.

From the overseas primary market came word that British travel and leisure company Thomas Cook Group plc priced an upsized offering of euro-denominated five-year notes and sterling-denominated seven-year paper.

China's Country Garden Holdings Co. Ltd., meantime, priced $550 million of seven-year notes, becoming the latest Chinese real estate company to tap the junk market; on Wednesday Evergrande Real Estate Group, Ltd., did an opportunistically timed drive-by add-on deal.

In the secondary market, Mariner Energy, Inc.'s bonds exploded upward on the news the company will be acquired by Apache Corp. in a deal valued at nearly $4 billion, including assumed debt.

Spheris Inc.'s bonds also rose sharply after the medical transcription company got bankruptcy court approval to sell virtually all of its assets.

Junk funds gain $282 million

And as activity was wrapping up for the day, market participants familiar with the weekly high yield mutual fund-flow numbers compiled by AMG Data Services of Arcata, Calif. - considered a reliable barometer of overall junk market liquidity trends - said that in the week ended Wednesday $282 million more came into those weekly-reporting high yield funds than left them, a sign of continued investor support for the junk market.

It was the eighth consecutive weekly cash infusion. Since that winning streak started in late February, $3.711 billion has come into the funds, according to a Prospect News analysis of the AMG figures, including the latest inflow and the $417 million cash injection seen in the previous week, ended Wednesday, April 7.

In the 15 weeks since the beginning of this year, inflows have now been seen in 12 of those weeks and outflows in just the remaining three, although these included two massive cash hemorrhages seen in mid-February, each north of $900 million, which totaled $1.9 billion, according to the Prospect News analysis.

However, the mutual funds have more than fully bounced back from that big cash exodus to show a year-to-date cumulative net inflow of $3.354 billion, according to the analysis - a new peak level for the year, eclipsing the old mark of $3.072 billion seen the previous week.

The year-to-date fund flow totals have gyrated between that new peak cumulative inflow level and a net outflow of $357 million seen in the week ended Feb. 17, which had been the first such year-to-date net loss for the funds since early April of 2008, according to the analysis.

EPFR sees $651 million cash gain

Another fund-tracking service - Cambridge, Mass.-based EPFR Global, whose methodology differs somewhat from AMG - meantime reported that $651 million more came into the funds than left them in the latest week.

That cash infusion followed the $669 million inflow seen in the previous week. Following the pattern seen in the AMG figures, the EPFR statistics have now shown eight straight weeks of inflows, lifting the funds from their two-week rut in the Feb. 10 and Feb. 17 weeks, which EPFR calculated to have produced some $1.76 billion of combined outflows.

Reflecting the difference in the way AMG and EPFR calculate their respective fund-flow totals, the latter - which includes results from certain non-U.S. domiciled funds as well as the domestic funds - said that on a year-to-date basis, the mutual funds are now showing around a $6.85 billion net inflow, a new peak level for the year. That eclipsed the old mark of $6.199 billion seen the week before. In an interesting piece of symmetry, with 3½ months of the year, or some 29%, now in the books, EPFR analysts said in a research note that the new year-to-date inflow total stands at 29% of the record full-year total seen in 2009.

Any and all cumulative fund-flow totals, whether for AMG or EPFR, can include unannounced revisions and adjustments to figures from prior weeks.

The flow of money into and out of the junk bond funds is seen as a generally reliable barometer of overall high yield market liquidity trends - although they comprise less of the total monies floating around the high yield universe than they did in the past. Last year's strong pattern of inflows - with AMG reporting over $20 billion having come in to the weekly-reporting funds over the course of the year, along with over $10 billion more into funds which only report on a monthly, rather than weekly basis, and EPFR posting similarly robust numbers - was seen as a proxy for the overall surge of liquidity into the junk market from all sources, which helped to fuel record 2009 new issuance of over $160 billion and unprecedented secondary returns topping 57%.

Country Garden prices at tight end

An even handful of junk issuers combined to price $1.105 billion face amount of dollar-denominated high-yield notes during a busy Thursday session.

Chinese property developer Country Garden Holdings Ltd. completed Thursday's biggest dollar-denominated deal - a $550 million issue of 11¼% seven-year senior notes (Ba3/BB-) which priced at 99.408 to yield 11 3/8%.

The yield printed at the tight end of the 11 3/8% to 11½% price talk.

Goldman Sachs & Co. and JPMorgan were the joint bookrunners.

Proceeds will be used to refinance the Hong Kong-based company's outstanding convertibles.

Ryland brings drive-by

The remainder of Thursday's dollar-denominated business came in the form of quick-to-market deals.

Homebuilder Ryland Group, Inc. priced a $300 million issue of 10-year senior notes (Ba3/BB-) at par to yield 6 5/8%, in a Thursday drive-by.

The yield printed in the middle of the 6½% to 6¾% price talk.

JP Morgan ran the books for the deal to fund a tender.

The homebuilder sector had a great bid, on Thursday, according to a trader who spoke shortly after the Ryland terms rolled out.

KB Home bonds, for example, were ½ to 1 point higher on the day.

"I'm assuming there are accounts panicking that they are not going to get the exposure they need," the trader added.

Standard Steel sells $140 million

Meanwhile, Standard Steel, LLC and Standard Steel Finance Corp. priced a $140 million issue of 12% five-year senior secured notes (Caa1/B) at 96.401 to yield 13%.

There was no official price talk.

Jefferies & Co. ran the books.

Vector adds on

Vector Group Ltd. priced a $75 million add-on to its 11% senior secured notes due Aug. 15, 2015 at 101.0 to yield 10.47%.

The reoffer price came on top of the price talk.

Again, Jefferies ran the books.

Murray prices tap at 102.50

Murray Energy Corp. priced a $40 million add-on to its 10¼% senior secured notes due Oct. 15, 2015 (Caa1/B+) at 102.50, resulting in a 9.646% yield.

The reoffer price came on top of the price talk.

Goldman Sachs & Co. ran the books.

Thomas Cook offers two-parter

Meanwhile there was action in Europe, which came in the form of a Thomas Cook Group plc upsized two-part unrated senior fixed-rate notes transaction.

The Peterborough, England-based travel and tourism company priced an upsized €400 million tranche of 6¾% five-year notes at 99.44 to yield 6 7/8%.

The tranche was upsized from €300 million. The yield printed at the tight end of the 7% area price talk.

Barclays Capital, Commerzbank, HSBC and SG Corporate & Investment Banking were joint bookrunners.

In addition, Thomas Cook Group priced an upsized £300 million tranche of 7¾% seven-year notes at 99.168 to yield 7¾%.

The sterling tranche was upsized from £200 million. The yield printed at the tight end of the 7 7/8% area price talk.

Barclays Capital, HSBC and Lloyds were joint bookrunners for the sterling tranche.

Although the notes were unrated at the time of pricing, there will be a 125 bps coupon step-up in the event that two ratings are not assigned within 12 months.

C&S for Friday

C&S Group Enterprises LLC set price talk for its $250 million offering of seven-year senior secured notes (B2/BB-) at 8¼% to 8½%, on Thursday.

Pricing is set for Friday afternoon.

J.P. Morgan Securities Inc. is the left bookrunner for the debt refinancing. Barclays Capital Inc. and Bank of America Merrill Lynch are joint bookrunners.

Obrascon Huarte Lain tightens talk

Meanwhile, Obrascon Huarte Lain SA tightened price talk on its benchmark-sized euro-denominated offering of five-year senior unsecured notes (Ba1/BB-) to the 7 3/8% area from the previous 7½% area price talk.

The final size of the Regulation S deal will be announced on Friday.

The deal will launch and price shortly after.

Santander, Citigroup, Credit Agricole, RBS and SG Corporate & Investment Banking are the joint bookrunners for the debt refinancing and general corporate purposes deal.

CF Industries to sell $1.6 billion

CF Industries Holdings, Inc. will host an investor call at 11 a.m. ET on Friday for its $1.6 billion offering of non-callable senior unsecured notes (B1/BB+).

Pricing is set for the early part of the week ahead.

The notes will be sold in tranches maturing in eight and in 10 years.

Morgan Stanley has the books for the offering.

Proceeds will be used to repay a bridge facility related to the acquisition of Terra Industries Inc., with any excess proceeds going to repay bank debt.

Ryland holds around issue, other newbies unseen

When Ryland Group's new 6 5/8% notes due 2010 were freed for secondary dealings, a trader saw the new bonds break at 99¾ bid, 100¾ offered. He later saw the $300 million issue tighten a little to 99¾ bid, 100½ offered.

A second trader also saw the new bonds at that latter level.

Traders did not see either of the add-on deals - Murray Energy's 10¼% secured notes due 2015 or Vector Group's 11% 2015 secureds trading around.

Nor were the Country Gardens 11¼% notes due 2017 or Standard Steel's 12% 2015 secureds observed in the aftermarket. A trader - noting that the latter deal, a modestly sized $140 million, had come to market via sole bookrunner Jefferies & Co. - said that "you don't really see those small Jefferies deals trading all over the place like the larger-sized ones."

Week's big deals holding their own

A trader said that the new $1.6 billion two-part issue from Charter Communications Inc. stayed pretty much around the levels to which they had risen late Wednesday, after the St. Louis-based cable and broadband operator's deal had priced.

He saw the company's CCO Holdings, LLC and CCO Holdings Capital Corp. 7 7/8% notes due 2018 at 102 bid, 102¼ offered, "where they seemed to be for most of the day." That $900 million tranche of bonds had priced at par on Wednesday, before gaining 2 points in the aftermarket.

He also saw its $700 million of 8 1/8% notes due 2020 at 102 7/8 bid, 103 ¼ offered. That tranche had also priced at par and then moved up a little more strongly than the 7 7/8s. So "one's up two [points from the par pricing level] and the other one is up three points."

He said that "there definitely was activity going on it," although precise turnover totals were not available as the issue was sold under Rule 144A.

The trader saw Harrah's Operating Escrow LLC/Harrah's Escrow Corp.'s new 12¾% second priority senior secured notes due 2018 at 100 3/8 bid, 100 5/8 offered, "pretty much where it's sitting," after having risen to those levels following Tuesday's $750 million pricing.

The Las Vegas-based casino giant's notes - upsized from the originally announced $500 million - priced at 98.788 to yield 13%, and has been well above that price ever since.

The trader also saw Cablevision Systems Corp.'s new deal hanging onto its gains, but not adding to them.

He quoted the Bethpage, NY.-based cable system operator and professional sports team owner's new 7¾% notes due 2018 at 102½ bid, 103½ offered, -- "up a little" from 102 bid, seen Wednesday, so "it's holding in there." However, that was the only market he saw in the bonds, $750 million of which had priced on Monday at par.

He meantime did not see any kind of activity in the company's new 8% notes due 2020. He had last seen them on Wednesday at 102 bid.

"I would have to imagine that is probably up, if the other guys are up." Cablevision priced $500 million of those bonds at par, also on Monday.

Market indicators roll on

Among bonds not connected with the new-deal market, a trader saw the CDX Series 14 index gain ½ point on the day Thursday to end at 101¼ bid, 101¾ offered, after having risen ¾ point on Wednesday.

The KDP High Yield Daily Index meantime was up by 11 basis points on Thursday at 72.68, after having gained 13 bps on Wednesday, while its yield narrowed by 4 bps for a third consecutive session, to 7.62%.

Advancing issues once again led decliners on Thursday, remaining ahead by a better-than four-to-three ratio.

Overall market activity, represented by dollar-volume levels, rose a bit more than 1% on Thursday from levels seen the previous session.

A trader said that at his shop, "we were pretty tied up on Mariner Energy most of the morning, but other than that it seemed kind of quiet."

Mariner moves up mightily

A trader called Mariner Energy "the giant of the day," given the strong performance the Houston-based oil and gas exploration and production company's bonds turned in on the news that Mariner has agreed to be acquired by Apache Corp. for $2.7 billion in cash and stock, with Apache also assuming $1.2 billion of Mariner debt. Included in that figure is Mariner's three tranches of outstanding bonds - its $300 million of 7½% senior notes due 2013, its $300 million of 11¾% guaranteed senior notes due 2016 and its $390 million of 8% guaranteed seniors due 2017.

A trader said that there was "a lot" of trading of the 71/2s taking place at the 104 1/8 level, up about 5/8 from Wednesday's closing levels for those bonds, but up more than 2½ points from the most recent prior round-lot trade, which had taken place last week. Over $18 million of the bonds changed hands on Thursday, mostly in big round-lot deals, with Mariner assuming a place on the day's Most Actives list.

. He noted that the 7½% issue "is currently callable, so it's trading like a 30-day type paper, at a 3½% yield."

He saw the 8% notes get as good as 113 5/8 bid before going out at 113¼ bid, 113½ offered - well up from prior levels just below par. A market source saw volume of over $17 million on the credit.

The trader further saw Mariner's 11¾% notes due 2016 trade up to 130¼ bid, 130½ offered - up some 17 points from Wednesday's closing levels around 113.

"All three issues had trading," he said.

Mariner's New York Stock Exchange-traded shares meantime zoomed by as much as 44.7% at one point during the session, before coming off that peak, though only slightly, to end with a gain of $7.59, or 41.96%, at $25.68. Volume of 66.4 million shares was about 25 times the usual turnover.

Crosstown energy rival Apache's cash and stock offer for Mariner is worth about $26.22 per share, a premium of 45% over the latter's Wednesday's closing price.

Moody's Investors Service said Thursday that it had Moody's placed Mariner's B2 corporate family rating and B3 senior note ratings under review for upgrade on the news that Apache, which carries an A3 senior unsecured rating, will assume Mariner's debt.

The agency said that the review for a possible upgrade for Mariner's ratings "reflects the improved credit profile of Mariner debt if the merger closes. If Apache fully assumes Mariner's notes and they become pari passu with Apache's debt in all respects, the notes would likely rise to Apache's ratings. However, if the Mariner notes become unguaranteed obligations of a wholly-owned Apache subsidiary, they would likely be rated below Apache's ratings but well within investment grade."

Gimme Credit analyst Philip C. Adams, who listened to Apache's conference call with investors following the announcement of the deal, noted that while Apache said that it would assume the Mariner debt, "we thought we heard the company say it hasn't yet decided whether or not it will formally guarantee the bonds."

Adams theorized that "Apache will likely exercise call provisions to take out the high-coupon debt," noting that the 2013 bonds are currently callable at 103.75, but opined that Apache "is not inclined to tender for [the two issues of] longer-dated bonds."

Spheris soars on sale news

Apart from Mariner, the other big story of the day in the secondary realm was the jump in Spheris Inc.'s 11% senior subordinated notes due 2012, which rose all the way to a 32.5-33 context, a 20 point gain from the 12½ level at which those bonds were trading on Wednesday.

"I don't know what's going on," he said - "but somebody does." He said that the movement resulted from, "just a couple of trades - not a huge amount of trading. But even with that said, they don't go up 20 points for no reason at all."

One likely explanation for the surge in the bonds was the bankrupt Franklin, Tenn.-based provider of medical transcription services getting the green light from the Delaware bankruptcy judge overseeing the company's reorganization for the sale of virtually all of its assets to units of CBaySystems Holdings Ltd. for $116.3 million, following an auction which began on Tuesday. The winning bid consists of $98 million in cash, $17.5 million in notes and the assumption of some debt, with the proceeds to go to bondholders and other Spheris creditors, who have submitted claims totaling $225 million against the company.

That winning bid from CBay Systems units MedQuist Inc. and CBay Inc. was nearly 50% above the original $78.3 million bid by another would-be-suitor, Transcend Service Inc.

Rotech seen rallying

A trader said that Rotech Healthcare Inc.'s 9½% notes due 2012 's trading up at 891/2, up about 4 points on the day and well up from their levels in the 70s at the beginning of the week.

"People have started to talk about a possible refinancing on that one," he said, apparently lifting the Orlando, Fla.-based medicinal oxygen provider's bonds.

He said that Rotech had starting posting gains "from out of nowhere," rising into the 80s on Wednesday.

"It's not a name that trades often," he said, "but most people would have quoted them in the low 60s around the beginning of the month."

He said that not all of the gain has come at once, but "in the last week to two weeks, we've seen people definitely want to bid that paper up, and you still can't find the right side."

He also noted that Rotech's shares, which were trading at 64 cents on April 5, have about tripled since then, closing Thursday at $1.78.

Another trader said that Rotech was "another hurry up and wait" kind of a situation, explaining that the bonds "haven't traded in months," and now all of a sudden, are trading sharply higher, pegging them at 89-90½ on Thursday, up from about 85 on Wednesday and the 70s in the days before that. He said that Thursday's gains came on a couple of large round-lot trades.

Paper and packaging still popping

A trader said that Smurfit-Stone Container Corp.'s bonds "were better in front of the confirmation hearing, which begins [Friday]."

Elsewhere in the paper sector, a trader said that "the space continues to be well-bid. He said that Appleton Papers Inc.'s 10½% senior secured notes due 2015 - which priced at 98.035 on Jan. 29 to yield 11%, only to plummet down to levels around 90 bid in the aftermarket in the days that followed, and then to begin gradually creeping back up from those low, were up 2 points on Thursday. "That bond is [trading at] a premium now," he declared.

He also saw Verso Paper Corp.'s bonds up another point, on top of the gains notched earlier in the week on an equity upgrade for the Memphis-based paper company by Credit Suisse. "The space has been on fire, it really has."

Another trader said that NewPage Corp.'s 10% notes due 2012 remained fairly active in the mid-70s. He saw Smurfit Stone Container's 8¼% notes at 92-93, up a point, on "good volume."

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