Primary slacks off with no new pricings; market awaits Symbion; Sino-Forest gyrates; Compton up

By Paul Deckelman and Paul A. Harris

New York, June 6 - The high-yield primary sphere's strong momentum from Friday's market faded away during Monday's session as not a single new deal was priced, according to syndicate sources. This was in contrast to the more than $2.5 billion, which hit the screens in an exciting late-session flurry on Friday.

Instead, there were only tidbits of news here and there. In the domestic market, price talk emerged on health care facilities operator Symbion, Inc.'s $350 million of five-year senior secured notes, which are expected to come to market after the books close on Tuesday morning.

There was also a new deal announcement from WireCo WorldGroup Inc., which plans a $150 million add-on to the wire rope manufacturer's existing 2017 notes sold last year.

There actually was much more news coming from non-U.S. issuers, such as Norwegian forest products company Norske Skogindustrier ASA, which cut the size of its pending five-year euro-denominated deal in half and put out revised price talk, envisioning a fatter yield for investors. Talk was also out on this week's dollar- and Norwegian kroner-denominated offering from shipping company Stolt-Neilsen Ltd.

On the forward calendar front, Aston-Martin is a name more linked in the public mind with James Bond than it is with junk bonds, but the British automaker, whose sleek luxury sports cars appear frequently in the Bond movies, was heard by the sources to be hitting the road with a sterling-denominated "double-O" seven-year deal.

Other potential borrowers believed to be shopping deals around include French household products maker Spotless Group SAS, German specialty chemical manufacturer Evonik Carbon Black Ltd. and Canadian copper concern Quandra FNX Mining Ltd.

And Canadian companies had two of the more interesting stories in an otherwise bland and blah secondary market. Canadian-Chinese timber company Sino-Forest Corp.'s bonds and shares recovered a little on Monday from the pounding they took last week, as the company fought back against a very negative research report released last week.

And Compton Petroleum Corp.'s bonds rose solidly as the oil and gas operator unveiled plans for a massive recapitalization that will result in those bonds being swapped for stock and equity rights.

Secondary statistical performance indexes all remained on the downside.

Valmont prices crossover deal

The high-yield primary market put up a goose egg on Monday, as most of the new issue market news came from outside the United States.

However, Omaha-based Valmont Industries, Inc. completed a split-rated deal.

The company priced a $150 million add-on to its 6 5/8% senior notes due 2020 (Ba1/BBB-) at 109.888 to yield 5.215%, with a spread of Treasuries plus 220 basis points.

Bank of America Merrill Lynch ran the books for the debt refinancing.

Talking the deals

During the Monday session, news surfaced on deals in the market.

Symbion talked its $350 million offering of five-year senior secured notes (B2/B) to yield 8¼% to 8½%, including an original issue discount of one to two points.

The order books close at 10:30 a.m. ET on Tuesday, and the deal is set to price thereafter.

Morgan Stanley & Co. Inc., Barclays Capital Inc. and Jefferies & Co. Inc. are the joint bookrunners.

Elsewhere, Stolt-Nielsen set price talk for its $200 million to $300 million-equivalent offering of non-callable five-year senior notes.

A dollar-denominated tranche of fixed-rate notes is talked with a 6½% to 6¾% yield.

Meanwhile, a NOK-denominated floating-rate tranche is talked at a 450 to 475 basis points spread to Nibor.

DnB NOR Markets, Nordea Markets and Swedbank First Securities are the joint lead managers.

And Norway's Norske Skogindustrier downsized its offering of five-year senior notes to €150 million from €300 million.

Also price talk was reset at 12% to 13%, an increase from previous talk of 12% area.

Initial guidance was 11% to 12%.

The deal was set to price on Monday. No terms, however, were available at press time.

The joint bookrunners are Citigroup, DnB NOR, SEB and Nordea.

Quadra starts $500 million

The forward calendar grew significantly, with all of the new roadshow news emanating from outside the United States.

Quadra FNX Mining Ltd. began a roadshow on Monday for its $500 million offering of eight-year senior notes (B1/BB-).

J.P. Morgan Securities LLC and Credit Suisse Securities (USA) LLC are the joint bookrunners for the Canadian copper-mining firm's project financing deal.

Evonik begins roadshow

Elsewhere, Germany's Evonik began a roadshow on Monday in the United States for its €600 million-equivalent two-part offering of seven-year senior secured notes (B2/B).

The notes, which will be issued via intermediate holding company Kinove Bondco German GmbH, will be sold in dollar and euro denominations.

An 8% minimum coupon is expected.

Goldman Sachs International, UBS and Barclays are managing the LBO deal.

Spotless brings secured deal

France's Spotless began a roadshow on Monday for its €400 million offering of seven-year senior secured notes (B3/B).

JP Morgan and Morgan Stanley are the physical bookrunners. Barclays and HSBC are the joint bookrunners for the refinancing deal.

Aston Martin starts Tuesday

Finally, England's Aston Martin will begin a roadshow on Tuesday for its £300 million offering of seven-year senior secured notes (B2//).

Deutsche Bank AG, which will bill and deliver, is a joint bookrunner along with Credit Suisse and UBS.

The luxury sports vehicle manufacturer plans to use the proceeds to repay bank debt, as well as to redeem preferred shares and fund a dividend to its shareholders.

New Vulcan notes ease off

With no new paper having come down the chute during Monday's sessions, market participants had to be content with trading around in recently priced issues.

A trader saw Vulcan Materials Co.'s new 6½% notes due 2016 at par bid, 100½ offered., while a second had them at 100¼ bid, 100½ offered.

That was well under the initial levels around 100¾ bid, 101¼ offered that the bonds were being quoted at on Friday, after the Birmingham, Ala.-based maker of construction aggregates such as asphalt mix and concrete priced the $500 million tranche at par as part of its two-part deal, upsized to $1.1 billion from the originally announced $1 billion amount.

The other half of that deal - the $600 million of 7½% notes due 2021 - was seen by one of the traders at 100 bid, 100¾ offered, while another trader quoted them as having gotten as good at 101 1/8 bid, 101½ offered. But even the latter level was still down from Friday's aftermarket of 101½ bid, 102 offered, which followed the tranche's par pricing.

While one of the traders said that there had been "a lot of trading" in the 61/2s, he observed that it was "mostly crossover guys" who seemed to be playing in the Ba1/BB-rated issue. That helped push trading volume on each to near the top of the most-actives lists, with over $27 million of the 71/2s changing hands and nearly $14 million of 61/2s, good enough to land both among the top 10 busiest credits.

W&T bonds soften up

Another Friday deal, from Houston-based oil and gas exploration and production company W&T Offshore, Inc., was also seen by traders moving around at levels below those seen on Friday.

One said the 8½% notes due 2019 traded as wide as 100¼ bid, 101¼ offered early in the day, but then came in to around 100¼ bid, 101 offered by around mid-morning, stabilizing around the 101 offered level. He said early activity levels never were able to keep the trading volume going.

A second trader pegged the new W&T at 100 1/8 bid, 100 5/8 offered.

On Friday, the company priced $600 million of the notes at par. The notes were quoted trading around after that at around 100 5/8 bid, 100 7/8 offered.

Endo moves up

However, Friday's other deal, this one from Chadds Ford, Pa.-based drugmaker Endo Pharmaceuticals Holdings Inc., was seen trading at somewhat better levels than par, where both tranches of that $900 million offering - upsized from the originally announced $700 million - had priced.

A trader said that in his view, even though it didn't trade around on Friday after pricing too late in the day, "it didn't trade around much today either."

He saw the $400 million of 7¼% notes due 2022 quoted early in the day at 101 bid, 102 offered "and nothing since then."

He opined that the spread between that tranche and the other part of the deal - the $500 million of 7% notes due 2019 - "should have been more than just 25 basis points."

A second trader said that the 7% notes were trading late in the day on Monday at 100 3/8 bid, 100¾ offered, while the 71/4s were at 100¾ bid, 101 1/8 offered.

Market signs again lower

Away from the new deal arena, statistical measures of market performance, which were lower on Thursday and again on Friday, continued to deteriorate on Monday.

A trader saw the CDX North American Series 16 HY Index down by 3/8 of a point for a second straight session on Monday to end at 100 11/16 bid, 100 13/16 offered.

The KDP High Yield Daily Index lost 10 basis points on Monday, finishing at 75.71, after having dropped 6 bps on Friday. Its yield rose by 5 bps, to 6.58%, after having risen on Friday by 3 bps for a second straight session.

And the Merrill Lynch High Yield Master II Index was lower for a third consecutive session, albeit very slightly, losing 0.01% on top of Friday's 0.152% loss.

That dropped the index's cumulative return to 5.728% from Friday's 5.738% and was well down from its year-to-date peak level of 6.071% reached on May 20.

'Blah Monday'

A trader characterized the day's session as "a little blah Monday."

A second, calling things "very quiet," said that it was his impression, based on the people he was speaking to, that "some of the major dealers haven't been terribly active in the secondary market on Friday or today.

"I think they're just going to keep a low profile through the end of the quarter," he predicted - even though that's nearly a month away.

"The banks are under siege, and you had [prominent analyst] Dick Bove come out today with all sorts of negative things on Wells Fargo, and while it's all housing related, I'm sure these guys don't want to show a big position in any type of leveraged loan or leveraged high-yield transaction as the quarter ends," given the current environment.

Sino-Forest saga continues

A trader declared that once again, "Sino's the one!" in terms of the most interesting secondary market name of the day, as the Canadian-Chinese timber company's bonds and shares continued to gyrate around in the wake of last week's devastating screed against the company from a research firm whose own motives in putting out the damning report have been criticized.

"There was a lot of volatility" in the credit, he said, noting that its bonds were trading around "up, down, sideways." He said that the paper "has been trading all day."

He saw the company's 10¼% notes due 2014, which had been trading around 107 bid before Muddy Waters LLC put out its scathingly critical attack on the company's integrity and finances last week, then plunge down into the 50s afterward, finally finishing the week in the mid-60s. The trader said that these were up about 1 point on the day on Monday, going to 66 from 65 bid.

A market source at another desk, who quoted the bonds as low as 62½ at mid-afternoon, said that over $20 million had changed hands, making it easily one of the busiest issues of the day in Junkbondland.

The first trader said that the company's 6¼% notes due 2017, which had traded around a 93 bid level before the bonds got hammered down but which finished Friday's dealings down around a 58-60 bid level, were up 4 points from prior levels to around 62 bid, 64 offered.

He saw its 9 1/8% notes slated to mature this coming August were "feeling a little better, trading around 75 bid." On Friday, they had finished in a wide 72-77 range, after having traded at par earlier last week, before the damning research report came out.

And he saw its two issues of convertible notes - the 5% notes due 2013 and the 4.25% notes due 2016 - going home on Monday around 61 bid, 63 offered and 57 bid, 58 offered, respectively. He called the former notes about unchanged on the day and the latter issue perhaps a point higher on the day.

In contrast, the 41/4s had hovered above 111 last Wednesday, before the market had digested the Muddy Water's slam against Sino-Forest.

He said that the bonds had been "active all day," although he did not know how much in each name.

"They were quoted 4 or 5 points higher early in the morning," he said, though by mid-morning, there was "still little volume." While allowing that there had probably been some pickup in activity as the day wore on, especially as the company's shares gyrated around, he said that he personally "can't say that I've seen a lot of volume."

He further said that market participants were hoping for a little more clarity on the situation from a 6 p.m. ET conference call closed to anyone but analysts that Muddy Waters was holding to defend its research. This was in response to a Sino-Forest news release put out on Monday morning in which the company attempted a point-by-point rebuttal of the charges of fraudulent bookkeeping and financing that the research firm had leveled in its original research piece.

The Muddy Waters report at one point had likened the company to a ponzi scheme and even invoked the name of disgraced financier Bernard Madoff by way of comparison. In attempting to blunt that attack, Sino-Forest also noted that Muddy Waters - founded by short-seller Carson C. Block - has a big short position in the company's stock and thus stood to make substantial money from the collapse of its shares, which followed the release of the report.

Sino-Forest's Toronto-stock exchange traded shares - trading at over C$18 per-share before the report came out - fell more than 20% on Thursday on eight times the normal volume and then surrendered nearly two-thirds of their remaining value on Friday on nearly 27 times their usual activity level. The shares seemed to be heartened by the company's attempts to defend itself on Friday and more comprehensively on Monday, jumping by as much C$3.30, about the magnitude of Friday's loss.

By the close, however, the shares had given back most of those gains, going home up by a more modest 87 Canadian cents, or 16.63%, at C$6.10. Volume of 23.4 million shares was more than 10 times the average daily turnover.

Compton climbs on recap plan

Compton Petroleum Corp.'s 10% notes due 2017 gained 1½ points in active trading on Monday, after the Calgary, Alta.-based oil and natural gas exploration and production company announced plans for a recapitalization transaction that would convert the $193.5 million of those notes and $46.8 million of the company's 10% mandatory convertible notes scheduled to come due this September into equity.

The 10% straight bonds, which had been trading around the 75 bid level in late May, but had not traded since then, jumped to 76½ on Monday on the news on round-lot volume of more than $12 million, making it one of the busier issues in the junk market.

The company announcement said that the plan - expected to be completed by around the end of August - also calls for the addition of C$50 million of new equity raised by way of a backstopped rights offering, which will be applied to further reduce debt as well as the consolidation of existing common shares on a 200-to-1 basis.

Noteholders will receive common shares and rights in exchange for their paper, enabling them to participate in the rights offering.

Compton said that the transaction would reduce total pro forma debt to C$145.3 million from the C$419.6 million on the company's books at the end of the 2011 first quarter on March 31, a reduction of C$274.3 million, resulting in a decrease of annual cash interest and financing expenses by C$25.5 million and "significantly improving Compton's capital structure and providing considerable improvement in Compton's financial liquidity."

The company also said that the transaction "normalizes Compton's capital structure to be competitive with industry peers in the continuing low natural gas price environment."

It said that the leverage ratio of debt to trailing four quarter adjusted EBITDA would be reduced from 4.4 times to 1.5 times pro forma at March 31

The transaction also reduces the drawings on Compton's credit facility by the amount of the net proceeds of the rights offering, after deducting costs incurred in completing the recapitalization.

Upon the completion of the recapitalization, the company's debt structure will be comprised of the credit facility and the midstream financing on its Mazeppa gas plant in Alberta

Although the announcement said that shareholders would also benefit from the deal from the overall strengthening in the company's finances and their own participation in the rights offering, Compton's Toronto-Stock Exchange-traded shares plunged by 12 Canadian cents, or 51.11%, to end at 11 Canadian cents per share. Volume of 13.1 million shares was 18 times the norm. Its U.S. Pink Sheets-traded shares meantime likewise nosedived by 12 cents per share, or 52.17%, to end at 11 cents on volume of 16.8 million shares, or 50 times the usual turnover.

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