Goodman Networks prices, firms; Downstream, Evonik Carbon on tap; funds plunge $1.6 billion

By Paul Deckelman and Paul A. Harris

New York, June 16- The seemingly hypnotized high-yield primary market seemed to snap out of its daze on Thursday with a $225 million pricing off the forward calendar of seven-year secured notes from Goodman Networks Inc. This marked the first domestic debt issue this week that was not a smallish, quickly shopped add-on from a health care-oriented company, as was the case with both Tuesday's Universal Hospital Services offering and Wednesday's Merge Healthcare Inc. deal.

When telecom services provider Goodman's new bonds were freed for secondary dealings, traders saw them having firmed about a half-point from their issue price well below par.

While Goodman was pricing, two other dollar deals were actually being added to the recently stagnant forward calendar: a seven-year secured deal from payday and title loan firm Main St. Personal Finance, Inc. and an eight-year secured offering from CKX Entertainment, Inc., a New York-based owner and developer of entertainment content.

And price talk emerged on Oklahoma casino developer Downstream Development Authority's $295 million eight-year senior secured deal, which is expected to come to market around midday on Friday.

There was also talk out on another expected Friday pricing, from German specialty chemicals manufacturer Evonik Carbon Black Ltd., which is doing a tranche of dollar-denominated seven-year senior secured notes alongside a similar euro-denominated piece.

European borrower Wienerberger AG announced plans for a seven-year senior secured issue.

Away from the new deals, Caesars Entertainment Corp.'s bonds were seen continuing a recent slide.

But the recently sliding NewPage Corp., though still actively traded, seemed to have put the brakes on its downside momentum - at least for now.

Secondary market performance measures were all pointing lower on the day. And another key indicator of junk market sentiment, the flow numbers for high-yield mutual funds - a proxy for overall liquidity trends - suffered their biggest weekly loss in more than a year at $1.6 billion.

Funds see huge outflow

As the session was winding down, market participants familiar with the weekly AMG high-yield mutual fund flow statistics generated by Lipper/FMI said that in the week ended Wednesday, $1.6 billion more left those weekly reporting funds than came into them.

It was the biggest weekly blood-letting in over a year, since the $1.69 billion outflow recorded in the week ended May 12, 2010. It was also the third consecutive outflow, coming on the heels of a $236.7 million cash loss for the week ended June 1 and the $671 million drain recorded in the week ended June 8 - the trio of outflows collectively totaling some $2.508 billion, according to a Prospect News analysis of the data.

That dropped the year-to-date cumulative inflow total to an estimated $5.313 billion from the previous week's $6.913 billion and places it well south of the $7.82 billion estimate seen in the week ended May 25, the peak level for 2011 so far, according to the Prospect News analysis. With 24 weeks gone in the year, there have now been 17 inflows recorded against seven outflows.

Fund-flow patterns began the new year on a roll with cash infusions totaling more than $8 billion seen over a 14-week stretch from early December through mid-March, including the more than $6 billion taken in during the first 10 weeks of this year.

Since then, however, fund-flow patterns have been choppy: two weeks of declines in March totaling $1.146 billion followed by three weeks of inflows totaling $1.78 billion and then two more weeks of outflows in late April adding up to $190 million. That was then followed by the inflows seen over the next four weeks totaling $1.14 billion and then the latest string of cash losses.

EPFR's $2.08 billion plunge

Another fund-tracking service, Cambridge, Mass.-based EPFR Global, whose methodology differs from AMG, reported a $2.08 billion outflow in the latest week, the second straight cash loss by that agency's calculations, including the $647 million outflow seen the previous week. That, in turn, had followed a 10-week stretch of inflows.

The latest week's cash hemorrhage - the second-biggest since EPFR began tracking those flows, with the $2.1 billion downturn in the May 12, 2010 week holding the top spot - dropped the year-to-date net inflow number to $19.92 billion, EPFR said.

AMG/Lipper's numbers and EPFR's figures generally point in the same direction, although their actual figures can differ markedly since the two services calculate their respective fund-flow totals differently. EPFR, for instance, includes results from some non-U.S. domiciled funds as well as the domestic funds.

EPFR's calculations show 20 weeks of inflows so far this year, against four outflows.

Cumulative fund-flow estimates, whether from Lipper/FMI or EPFR, may be revised upward or downward or be rounded off and could include unannounced revisions and adjustments to figures from prior weeks.

Analysts say the continued flow of fresh cash into junk - and the mutual funds represent but a small, though observable and quantifiable percentage of the total amount of money coming in - fueled the record new deal borrowing binges seen in both 2009 and then in 2010 as well as the robust secondary market seen both years. Those trends have been pretty much continuing in 2011 as well, although the market seems to have hit something of a dry patch the last several weeks.

A trader looking at the week's massive outflow number marveled, "That's a lot of money - just crazy."

A second trader, while allowing that a large outflow was due given the recent weakness in Junkbondland, still opined, "It doesn't feel like the selling was [consistent] with $1.6 billion [of AMG outflows].

"A lot of guys that I've been speaking to were selling the [CDS] contract because they know that if they sell bonds, they won't be able to get the cash bonds back."

For all of the market's recent anemia, he said, "it's still difficult to buy a lot of names, which means people are hanging onto a lot of stuff - they're trying to get out of some of the stuff that's traded off already."

Goodman Networks prices

With the market tone slightly improved, the primary market generated the highest daily news flow for the week to date on Thursday.

In the dollar-denominated market, a sole issuer raised $221 million in a single tranche, which was priced at the conclusion of a roadshow.

Goodman Networks priced a $225 million face issue of 12 1/8% seven-year senior secured notes (B2/B+) at 98.273 to yield 12½%.

The yield printed 37.5 basis points beyond the wide end of price talk, which had been set in the 12% area.

Jefferies & Co. Inc. ran the books.

The Plano, Texas-based telecommunications services company plans to use the proceeds to fund a management buyout, to repay existing debt and for general corporate purposes.

Videotron upsizes

Meanwhile in the Canadian dollar-denominated market, Videotron Ltd. priced an upsized C$300 million issue of 10-year senior notes (Ba1/BB/) at par to yield 6 7/8%.

The drive-by debt refinancing deal, which was led by RBC Capital Markets Corp. and TD Securities Inc., was upsized from C$250 million and priced on top of the price talk.

Talking the deals

Issuers and the dealers set the stage for a reasonably active Friday session.

Downstream Development Authority talked its $295 million offering of eight-year senior secured notes with a yield in the 10½% area.

In addition to price talk, a planned special call provision was struck from the deal; the provision would have allowed the issuer to redeem 10% of the notes annually at 103 during the non-call period.

The notes now come with a standard four years of call protection.

In addition to the modified call structure, the credit facility carve-out has been reduced to $35 million from $50 million.

Jefferies & Co. Inc. is the left bookrunner. Bank of America Merrill Lynch is the joint bookrunner.

Elsewhere, Germany's Evonik set tranche sizes and price talk for its €600 million-equivalent two-part offering of seven-year senior secured notes (B2/B).

The notes in a $250 million minimum tranche are talked with a yield in the 9½% area, and the notes in a €425 million maximum tranche are talked with a yield in the 9¾% area.

The notes were introduced with pro forma guidance of 8¾% to 9%, according to market sources. However, volatility, which has rocked the global capital markets, also impacted the high yield market, causing bond spreads widen and new issue price talk to gap higher, a trader explained.

Goldman Sachs International, UBS and Barclays are managing the sale of notes, which will be issued via intermediate holding company Kinove Bondco German GmbH.

CKX starts roadshow

The forward calendar saw a moderate build-up on Thursday.

CKX Entertainment began a roadshow in New Jersey and Baltimore for its $360 million offering of eight-year senior secured second-lien notes.

Goldman Sachs & Co. is the left bookrunner. Macquarie Group Ltd. is the joint bookrunner.

The New York City-based owner and developer of entertainment content plans to use the proceeds to fund the purchase of common stock and repay its existing credit facility.

Main St. on Monday

Main St. Personal Finance will begin a roadshow on Monday for its $95 million offering of eight-year senior secured notes.

Bookrunner Cortview Capital Securities makes its debut in the high-yield bond market leading the transaction.

Proceeds will be used to fund the acquisition of Express Cash Advance, repay bank debt, to fund the buyout of a minority equity and debt holder and for general corporate purposes.

The Cleveland, Tenn.-based payday loan and title loan firm does business as Approved Cash Advance, Quik Lend and A Dollar.

Wienerberger's €100 million

Finally on Thursday, Austria's Wienerberger set a June 27 to June 29 subscription period for its €100 million offering of seven-year senior notes (Ba1/BB).

The Vienna-based building supplies firm stated that it expects to get the deal done with a coupon of 5%.

Raiffeisen International and UniCredit Bank Austria are leading the Regulation S-only debt refinancing deal.

New Goodman bonds do well

A trader said that the new Goodman Networks seven-year secured notes were trading at 99 bid, 99½ offered.

That was up from the 98.273 level at which the $225 million issue had priced earlier in the session.

Several other traders, meantime, did not see the Goodman deal.

One, noting that it had been brought to market by Jefferies & Co., which is reputed in some market circles to have its own network of investors who will take up its deals, suggested: "I don't know how much trading there really is" in the new credit.

Another trader noted the very fat 12 1/8% yield at which those bonds finally priced - a necessity in order to get the placement done in the currently chancy market.

"When this market goes down" even further, he suggested, "those will be at around 80."

Recent deals hang back

The various traders saw no notable activity, meantime, in other recently done deals.

On Thursday, they said that even included such big, liquid issues for familiar borrowers like Arch Coal, Inc., whose $2 billion two-part offering of eight- and 10-year notes is trading a little above the par level where both tranches priced on June 8, or for Chrysler Group LLC, whose $3.2 billion of eight- and 10-year senior secured notes were last seen trading at or under 95 bid, well down from their May 19 par pricing levels.

One recent megadeal seeing a little of activity on Thursday, a trader said, was Vulcan Materials Co., whose 7½% notes due 2021 were seen trading around 99 bid. "Earlier this morning, they were wrapped around 99," he said.

A market source at another desk said that over $6 million of the bonds had traded, last around 991/2, enough activity to get the credit on the day's most-actives list.

The Birmingham, Ala.-based manufacturer of construction aggregates, such as cement and asphalt mix, priced its upsized $1.1 billion two-part offering on June 3, with both the $600 million of the 7½% notes and the $500 million of 6½% notes due 2016 priced at par and then moving as high as the 101 level initially in the aftermarket, before eventually settling in at current levels.

Market indicators fall

Away from the new deal names, traders saw what one called "a hunt-and-peck day - a lot of people are using the 'search' feature to see what's going on."

"It was just bits and pieces here and there," another declared. "There was some volumem but once you got past the names like NewPage and Hovnanian [Enterprises Inc.], it quickly drops off."

Hovnanian gets hit

In fact, the Red Bank, N.J.-based builder's 10 5/8% notes due 2016 was one of the busiest bonds of the session.

A trader saw them down nearly a full point, at 97½ bid, even though there was positive data on the homebuilding industry out Thursday, as both housing starts and building permits rose more than expected in May.

Despite good news about the industry, the trader saw the bonds lower in busy dealings of some $31 million, putting the credit at or near the top of the junk most-actives list Thursday.

He said that the company's other issues "only had about one trade each. The '16s were the busy ones."

He theorized the bonds were off despite the good numbers from the Commerce Department because "there's still a huge supply of houses out there and less need for new homes."

NewPage not so bad

As for NewPage, after three straight days of getting whacked around, a trader saw a respite for its battered bonds.

He quoted the company's 11 3/8% first-lien senior secured notes due 2014 up nearly a point on the day to around 91½ bid on heavy volume of over $27 million.

"A lot of people are waiting to see with that," he said, alluding to the whispers among market participants the last few days that in the absence of any other news to explain the slide, some investors were perhaps concerned about the company's ability to make a $91 million interest payment on those bonds due at the end of the month.

He also saw the Miamisburg, Ohio-based coated-paper manufacturer's 10% second-lien senior secured paper due 2012 pretty much unchanged around the 30 bid level on busy volume of $18 million.

At another shop, a market source pegged the 11 3/8s 1 point higher at 911/2, though on no positive news.

Over the previous three sessions, NewPage bonds had been pushed lower by investor nervousness about the name's prospects.

Harrah's is hurting

Also on the downside for the last several sessions, Caesar's Entertainment Corp. - the old Harrah's Entertainment - was continuing to get cracked on Thursday, with a trader quoting the Las Vegas-based casino giant's 10¾% notes due 2016 trading at 93¾ bid in morning dealings. He called that off from levels around 96 bid on Wednesday, "so those things were down another 3 to 4 points on pretty good size."

Last week, he noted, the bonds had been around the101 mark but had eroded since then.

"Not a ton traded, just a couple of million traded, but it was interesting," he said. "Somebody wanted out and hit a low bid."

After losing 2¼ points on Wednesday, the Harrah's 10% notes due 2018 softened further to end in the middle 80s versus levels above 90 last week, while its 5¼% notes due 2015 were down a point or two for a second straight day to end in the middle 70s versus levels above 80 last week.

"Ask the smart guys why," he said in having not seen any specific news that might explain the several-session slide. "They just seem to be coming in."

Market signs stay down

Among statistical indicators of secondary sphere performance, which were in retreat on Wednesday, it was more the same during Thursday's session.

A trader said that the CDX North American Series 16 HY Index lost 3/8 of a point on Thursday to end 99 5/16 bid, 99 7/16 offered, after having closed down¾ point on Wednesday.

The KDP High Yield Daily Index dropped by 13 basis points for a second consecutive session on Thursday to end at 74.96. Its yield, meantime, rose by 4 basis points to 6.88%, on top of the 3 bps rise on Wednesday.

And the Merrill Lynch High Yield Master II Index was lower for an 11th consecutive session on Thursday, its 0.327% loss following a 0.044% retreat on Wednesday.

That dropped the index's cumulative return to 4.571% from Wednesday's 4.914% and also put it even further away from its year-to-date peak level of 6.071% reached on May 20.

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