Primedia leads busy new-deal parade; Gap gains on sales rise; funds see another billion-dollar inflow

By Paul Deckelman

New York, May 8 - The new deals were coming fast and furious on Thursday, as a total of seven offerings appeared, with several others making their way onto the forward calendar. The largest deal of the day, and probably the best-known issuer, was Primedia Inc., bringing a $300 million 10-year deal. Three of the other deals were upsized, while one was downsized.

In the secondary market, "trading was light - but the market felt heavy" was how one trader put it, with many issues at best treading water, or retreating a bit. But Gap Stores bonds were up after the clothing store chain reported a big sales gain versus a year ago.

Primary and secondary market participants have noted the role that generous liquidity has played in boosting both of their markets, and have almost come to expect weekly inflows to junk bond mutual funds of over a billion dollars as a matter of course, since they have occurred so often lately. And they were not disappointed on Thursday, as some $1.3 billion more came into the funds during the week ended Wednesday than left them, according to market sources familiar with the weekly junk bond mutual fund flow numbers compiled by AMG Data Services of Arcata, Calif.

The mutual fund flow data are seen by many in the market as a reliable proxy for overall junk market liquidity trends.

The latest week's big inflow follows a $1.09 billion inflow in the week ended April 30; it marks the eleventh straight weekly gain, and the seventh in that time to top the psychologically potent $1 billion mark, according to a Prospect News analysis of the AMG figures. And an eighth week in that stretch was just shy of $1 billion.

All told, net inflows for the year so far total $13.25 billion, excluding distributions and counting only those funds which report on a weekly basis, according to the Prospect News analysis.

The recent liquidity surge, which dates back to late February, is part of a larger liquidity binge that goes all the way back to last fall, with weeks of consecutive inflow, interrupted only occasionally by an outflow here and there. Concurrent with the parade of inflows has been the revival of both the primary and the secondary markets from their previously moribund and depressed states.

With all of that cash flowing into the markets, issuers have been emboldened to bring new deals - and portfolio managers who want to get a better return on their cash than that offered by money-market instruments have been lining up to buy.

"It's certainly been keeping us busy," said one primary-side source Thursday.

And Thursday was one of the busiest days seen in a while, as seven deals priced - the biggest number this year, according to Prospect News data.

Primedia, a New York-based media company, sold $300 million of 10-year senior notes at par to yield 8%.

Thornburg Mortgage Inc., a Santa Fe, N.M.- based residential mortgage lender, upsized its offering of 8% senior notes due 2013 to $200 million from $150 million, while upsized deals were also seen from Norske Skog Canada, Ltd. and Speedway Motorsports Inc.

Norske Skog, a Vancouver-based paper and forest products company, upped its planned $100 million add-on offering to its existing 8 5/8% senior notes due 2011 to $150 million, amid what one syndicate source said was "strong demand - it was a couple of times oversubscribed." He also said that unlike some deals where one or two buyers pick up the whole issue, "there were a lot of accounts interested. Quite a few guys. We had good execution." The bonds priced at 102.953 to yield 8%.

Meantime, Speedway Motorsports, a Concord, N.C.-based owner and operator of motor racing tracks, revved up its planned $210 million of 10-year senior subordinated notes due 2013 to $230 million. The bonds priced at par to yield 6.75%.

One issue was downsized - Evergreen Aviation Inc. throttled back its deal to $215 million from $225 million; the McMinnville, Ore.-based air cargo shipping company's 12% notes priced at par.

El Segundo, Calif.-based real estate services company CB Richard Ellis sold $200 million of 9¾% senior notes due 2010 at par, while Russian-based dairy products and juice maker Wimm-Bill-Dann Foods served up $150 million of new 8½% bonds due 2008 at par.

Two companies were heard to have announced upcoming new seven-year deals - Erie, Pa.-based rental-purchase store operator Rent-Way Inc., selling $215 million of senior secured notes following a roadshow from May 13-21, and Omnova Solutions Inc., a Fairlawn, Ohio-based specialty chemicals maker, whose offering of $165 million senior secured notes is expected to hit the road Friday, with pricing expected around May 14.

The only one of the new offerings was seen really trading around in the secondary arena Thursday was the most liquid of the deals, Primedia - but that didn't help its secondary performance.

"The bonds came at par," a trader said, "but the deal doesn't seem very hot." He quoted it trading into a 99 bid and going home at 99 bid/par offered.

The Norske Skog bonds, which priced at 102.953, remained around that near-103 level, while the Thornburg bonds stayed at par.

Another trader said that not just Thursday's deals, but most of the recently priced deals - some of which had been doing respectably well in the secondary since their pricings - were about a point lower Thursday, in line with a generally soggier market.

"The market is heavier," he said. "It looks like the party is over."

A colleague added that "it appears the euphoria over the past two weeks in the new-issue market has come to a screeching halt."

At another desk, a trader said that Amkor Technologies' recently priced 7¾% bonds due 2013 - which had declined to 96 bid earlier in the week after pricing at par on May 1 - had fallen further, to 93.

A buyside source meantime said that his firm was "just not playing a whole lot of the new deals. We've been very cautious" about what they invest in, apparently unwilling to get too far out on a limb and then find it's been sawed out from under them.

Indeed, corporate bonds in general - established issues as well as newbies, high grade as well as high yield - have been seen to be widening out since earlier in the week, when the Federal Reserve's Federal Open Market Committee met; while the FOMC left rates unchanged, the general feeling analysts took away from the meeting was that the central bank is worried about the still lackluster economy, and may have to ease further.

Most established issues were on the downside, such as Allied Waste's 10% notes due 2009m, dipping to 104.75 bid from 106.75 on Wednesday, while American Tower's 9 3/8% notes due 2009 eased to 98 bid from 99.25.

Charter Communications Holdings LLC's bonds, such as its 9 5/8% notes due 2009, were all seen around a point easier, in the mid 60s.

Even CMS Energy's 8½% notes due 2011 likewise fell to 98 bid from levels north of 99 - despite the Dearborn, Mich.-based utility company's having reported a rise in first quarter earnings to $79 million (51 cents per share) from year-earlier levels $42 million (32 cents a share). The latest-quarter numbers also far outpaced analysts' expectations of a 27 cent per share profit. The company reaffirmed its previous guidance of full-year earnings in the 80-90 cent per share range.

Even so, its 9 7/8% notes due 2007 softened to 101 bid/103 offered.

Calpine Corp., whose bonds "have been steadily going down the last few sessions," a market source said, continued its retreat; the San Jose, Calif.-based independent power producer's 8½% notes due 2011 were at 69 bid, while its 8¼% notes due 2005 were at 79.5 bid/80.5 offered, both a point lower on the session.

Also on the power grid, utility operator Mirant Corp.'s 7.2% notes due 2004 were seen down several points, at 83.25 bid/83.5 offered, while its 7.9% notes due 2009 were at 60 bid, also "down considerably," the market source said.

A trader said that there seemed to be little movement in Service Corp. International bonds, despite respectable first-quarter numbers from the Houston-based deathcare giant. "They were pretty quiet," he said.

At another desk, the bonds were seen largely unchanged to up half a point, with its 7 3/8% notes due 2004 at 101 bid and its 6½% notes due 2008 at 98 bid/99 offered.

One company whose bonds did respond more positively to numbers was Gap; the San Francisco-based apparel retailer reported that April sales were up 22% from year-earlier levels, while comparable store sales were 20% better. Even acknowledging that the year-ago figures were pretty soft and wouldn't be that hard to top, high yield marketeers recognize that Gap is continuing the strong turnaround it began last fall, after having recorded a nearly unbelievable two-and-a-half straight years of month-over-month sales declines. Gap's 6.90% notes were seen a point better, at 107 bid/107.75 offered, while its 8.80% notes were two points up, at 120 bid/121 offered.

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