No deals price, but Warner Music, ExamWorks seen on tap; Dynacast holds gains; secondary firm

By Paul Deckelman and Paul A. Harris

New York, July 13 - It was another quiet day in the high-yield new-issue market on Wednesday, as no deals, foreign or domestic, were seen by syndicate sources to have priced during the session.

However, traders were anticipating that things were likely to pick up on Thursday, with music giant Warner Music Group Corp. scheduled to bring its billion-dollar-plus three-part offering to market during the session.

Another deal on tap is healthcare credit ExamWorks Group, Inc., with a $250 million eight-year offering, the price talk on which emerged during the session.

MTR Gaming Group, Inc.'s $500 million eight-year secured deal was tabbed as another possible for Thursday.

Among the deals which have already come to market, Tuesday's Dynacast International LLC eight-year transaction was seen having hung onto, or even extended, the gains which the die-castings manufacturer's eight-year deal notched after it priced.

Last week's Equinix Inc. 10-year offering was another recent issue more than holding its own.

Traders saw the overall secondary market firmer than it had been over the prior two sessions, with most statistical indicators better.

From the distressed-debt precincts came word that OPTI Canada Inc.'s bonds firmed after the troubled Canadian energy company, to no one's surprise, sought protection from its creditors.

But power producer Dynegy, Inc.'s bonds continued their downside ride.

ExamWorks sets talk

No issues were priced on Wednesday, as syndicate bankers took note of a marked improvement in equities during the first half of the session in the United States.

However equity prices faded toward the U.S. close, a debt capital markets banker added.

In spite of ongoing volatility, much of it sparked by concerns over European sovereign credit, the dealers plan to work through the existing $3.4 billion active calendar, the banker added.

Also there are likely to be new deal announcements, the source asserted.

On Wednesday ExamWorks Group talked its $250 million offering of eight-year senior notes (B3/CCC+) with a 9% to 9¼% yield.

The deal, via Bank of America, Barclays, SunTrust, Wells Fargo, Credit Suisse and Goldman Sachs is set to price on Thursday.

Also set to price on Thursday is Warner Music Group's $1.045 billion three-tranche deal. Price talk made the rounds on Tuesday.

GFI brings split-rated deal

In the crossover sector, GFI Group, Inc. announced plans for a $250 million sale of split-rated seven-year senior notes (Ba2/BBB-/BBB) on Wednesday.

The debt refinancing and general corporate purposes deal, in the market via bookrunner Jefferies, is expected to price on Thursday.

Dynacast still dynamic

In the secondary market, a trader said that "there was not a heck of a lot of excitement," other than the continued strong showing made by Dynacast's new bonds. "Other than that, it was pretty quiet."

He saw the Charlotte, N.C.-based die-castings manufacturer's 9¼% senior secured second-lien notes due 2019 "holding up well," at a 102¼ bid, 102¾ offered level, with over $20 million having changed hands.

That deal, done with co-issuer Dynacast Finance Inc., priced on Tuesday at par, after having been downsized to $350 million from the originally planned $375 million. The bonds had been seen on Tuesday firming from their issue price to around the 102 level.

'They did well [Tuesday] another trader declared, "and were kind of unchanged as well [Wednesday]."

Equinix still excels

Among other recently priced offerings, a trader said that Equinix's 7% notes due 2021were "still trading well," pegging the Redwood City, Cal.-based data centers operator's upsized $750 million issue at around the 102 3/8 bid level.

The company had priced its offering - increased 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 pretty much ever since then. They had closed Tuesday at 102 to 1021/4.

Big Thursday seen

If Wednesday's market was seen as restrained, Thursday's may prove to be quite a different story.

A trader said that people would be watching for the $1.045 billion, three-part offering from New York-based music publisher and recording company Warner Music Group.

He also noted that the $250 million offering from Atlanta-based medical examinations provider ExamWorks is expected Thursday.

"And MTR Gaming is out there and is supposed to be today or [Thursday]" with the Chester, W.Va.-based race track and casino operator's $500 million eight-year secured deal.

He also mentioned the outside possibility of a pricing from Fairfax, Va.-based defense contractor SRA International Inc. doing a $400 million issue of eight-year paper.

"There's a number of deals in a really short-term pipeline on the new-issue front, I think."

That would be a big change from the recently lackluster new-deal realm, which saw just $1.81 billion price last week, and somewhat over $2 billion in the week before that, ended July 1.While noting the usual seasonal summer slowdown, he added that "when you have a market environment like this, it doesn't make it any easier as well. So you have a market combination of the two."

Traders said that there were, in the words of one, "a lot of reasons to not do much right now," either in terms of new deals or in the corresponding relative quietness of the secondary market, between the churning stock market reacting to economic worries to waiting for the next shoe to drop in the European debt crisis, with Greece, Portugal and, most recently, Ireland, all having been downgraded by the rating agencies.

Add to that the continued uncertainty over the proposed raising of the U.S. debt ceiling, now the center of a contentious political struggle in Washington.

A second trader questioned whether "everybody is on hold till Aug. 2?" - the date when the Treasury is unable to borrow any more money. "Or is it just a good reason not to do anything?

Whimsically, he added "you throw in some [televised] women's soccer, some good weather, the Hamptons, everybody defaulting - there are a lot of reasons not to do stuff."

However, the first trader added that "we go through these cycles - it's always a pendulum. Things will swing in the other direction - volatility will pick back up and volumes will pick back up - it always does."

Secondary strengthens a little

Traders saw statistical measures of market performance, which were lower across the board on both Monday and Tuesday versus last week's stronger levels, firming a little on Wednesday.

One saw the CDX North American Series 16 HY Index gain 1/8 point to end at 100 9/16 bid, 100 11/16 offered, after having fallen by fall by 3/8 point on Tuesday and a full point on Monday.

The KDP High Yield Daily Index continued to struggle, losing 3 basis points on Wednesday to finish at 75.14, on top of Tuesday's 5 bp loss, which had followed a 13 bps plunge on Monday. Its yield rose by 4 bps to 6.84%, versus the 1 bps gain seen on Tuesday.

But the Merrill Lynch High Yield Master II Index broke a two-session slump, gaining 0.164% in Wednesday's dealings, versus Tuesday's 0.146% decline.

Wednesday's rebound lifted its year-date return to 5.592% from Tuesday's 5.418%. However, the cumulative return for the year still remains down from its year-to-date peak level of 6.071%, which was reached back on May 20.

OPTI up on restructuring

Among specific issues, traders in distressed issues noted that OPTI Canada's debt traded up on news the company had reached an agreement with noteholders that would allow it to restructure its balance sheet.

As such, OPTI said it had commenced proceedings in the Court of Queen's Bench of Alberta under the Companies' Creditors Arrangement Act to implement the restructuring.

A trader said the subordinated paper - the 8¼% and 7 7/8% notes due 2014 - traded up nearly a point to around 43. The senior notes - the 9% notes due 2012 and the 9¾% notes due 2013 - were also better at 102 bid, 102¾ offered.

"They had been wrapped around 101," the trader said. "You could tell they were going to file."

Another trader pegged the subs around 43 and the seniors around 102.

Under the terms of the restructuring agreement, the Calgary, Alta.-based oilsands producer will convert the subordinated notes into common stock. Additionally, the company will undertake a C$375 million rights offering, which will be backstopped by members of the subordinated noteholder group.

The senior notes must be refinanced prior to the closing of the offering as a condition of the agreement.

Existing stock will be canceled, though stockholders will receive warrants to purchase about 20% of the new shares in the rights offering.

The restructuring and new equity commitment we have negotiated is indicative of the support of OPTI's noteholders, who recognize the long term value in the company's asset base," said Chris Slubicki, president and chief executive officer, in a statement.

"The recapitalization of our balance sheet will provide us with cash resources to continue to advance operations at Long Lake, as well as to begin development at Kinosis, with our operating partner, Nexen [Inc.]."

OPTI hopes to complete the restructuring by Dec. 1.

On the news, Standard & Poor's dropped its rating to D from SD. S&P had previously placed the rating at SD when OPTI missed a coupon payment last month.

More dismay for Dynegy

A trader said that Dynegy's bonds "went on a little ride," quoting them down 2 to 3 points pretty much across the board, in continuation of the credit's recent downturn.

It was "falling farther," according to another trader.

He called the 7¾% notes due 2019 down another 1½ points to 67½ and the 7½% notes due 2015 about 1¼ points weaker at 733/4.

Another market source deemed the 7¾% notes a point lower at 67¾ bid.

Earlier in the week, the Houston-based energy producer said it was looking to secure $1.7 billion of new loans in order to pay down existing debt. The action was the first part of the company's attempt to restructure itself.

Dynegy had warned earlier in the year that it might be forced to file for Chapter 11 protections if it could not get its balance sheet in check. That warning came after the company rejected two takeover offers, claiming that both bids valued the company too low.

However, some bondholders are now concerned that the company is looking to take value from bondholders, as the new loans will become senior to the bonds.

Stephanie N. Rotondo contributed to this report

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