New bonds take focus; MetroPCS, Alliant still busy; Edison Mission up; funds add $645 million

By Paul A. Harris and Stephanie N. Rotondo

Portland, Ore., Sept. 9 - The secondary high yield market remained in the black during Thursday trading, as investors continued to focus on new issues.

However, traders noted that the Jewish New Year had resulted in less people occupying their desks, which meant volume was on the lighter side.

In the new issue realm, MetroPCS Communications Inc.'s latest release continued to see a fair bit of trading. Alliant Techsystems Inc.'s new issue was also active and both credits ended the day better than the day before.

In trading, Edison Mission Energy, a subsidiary of Edison International, saw its bonds gaining momentum. There was no news out on the power producer.

And, NewPage Corp. and Rite Aid Corp. were still on investors' minds. NewPage once again saw its bonds attempting to regain lost ground, while Rite Aid paper forged ahead.

The technical picture of the high-yield asset class remains strong, according to a mutual fund manager who noted that high-yield mutual funds' cash flows returned to the positive, for the week ending Wednesday.

The funds saw $645 million of inflows, according to Lipper-AMG.

The inflow trails the previous week's $186 million outflow, and brings year-to-date flows to $5.94 billion.

Powerlong prices $200 million

Only one deal priced during the Thursday primary market session.

China's Powerlong Real Estate Holdings sold $200 million issue of five-year notes (B1/B+/) at par to yield 13¾%.

The issue came at the tight end of talk for a yield of 13¾% to 14%.

HSBC and RBS were the bookrunners.

The Fujian, China, property company will use the proceeds to finance existing and new property projects and for general working capital.

Owens-Illinois sets talk

Looking ahead to Friday, OI European Group BV, an indirect wholly owned subsidiary of Owens-Illinois Group Inc., talked its €500 million offering of 10-year senior notes with a 6¾% area yield.

The deal, which is being led by Citigroup and BNP Paribas, is expected to price on Friday following the conclusion of its Europe-only roadshow.

Owens-Illinois is one of three deals expected to price on Friday.

EXCO Resources, Inc. is expected to price its $750 million offering of eight-year senior notes via J.P. Morgan Securities Inc., Bank of America Merrill Lynch, BNP Paribas Securities Corp., RBC Capital Markets Corp. and Wells Fargo Securities.

Although no official price talk surfaced on Thursday, the deal is whispered in the 7¼% to 7½% range, market sources say.

Nor was official price talk heard on Chaparral Energy, Inc.'s $300 million offering of 10-year senior notes (Caa1/B+), also expected to price on Friday. Managers are J.P. Morgan Securities Inc., Credit Suisse Securities, RBC Capital Markets Corp. and UBS Investment Bank.

However, that deal is being whispered in the 10% area, market sources say.

The week ahead

Given the strong technicals holding sway in high yield, new issue volume is expected to ramp up, sources say.

The calendar for the Sept. 13 week continued to grow on Thursday.

Valeant Pharmaceuticals International Inc. will begin a roadshow on Wednesday for a $1 billion offering of senior notes (B1//), according to a high-yield mutual fund manager.

Goldman Sachs, Morgan Stanley and Jefferies & Co. will lead the Rule 144A and Regulation S offer.

Proceeds will be used to help fund Valeant's merger with Biovail Corp.

The financing also includes a $1.875 billion credit facility.

Also, Celanese US Holdings LLC (Celanese Corp.) is expected to launch a $400 million offering of eight-year senior unsecured notes during the week ahead.

Deutsche Bank and Bank of America Merrill Lynch are leading the debt refinancing deal.

Holiday reduces volume

Away from the new deal arena, market indicators were unchanged to better, according to market sources.

The KDP High Yield Index moved up to 72.20, yielding 8.11%, during the session. That compared to a reading of 72.12, with an 8.16% yield, on Wednesday.

The CDX High Yield Index meantime held steady at 97½ bid, 97¾ offered.

Thursday marked the beginning of Rosh Hashanah, the Jewish New Year, which meant that some market players were away from their desks. As a result, one trader said trading activity was "pretty quiet, but firm."

"There was a focus on new issues," another trader said. However, "with the holiday, it was a bit slower."

MetroPCS, Alliant still flying

Recent new issues continued to move into higher echelons, including the well-received MetroPCS Communications new issue.

One trader called the 7 7/8% notes due 2018 up over ½ point at par 5/8. That compared to its original issue price of 99.277.

The new paper had quickly risen to levels just short of par on Wednesday.

Another market source quoted the notes at par ¼ bid, par ½ offered.

Alliant Techsystems' 6 7/8% notes due 2020 also headed up, closing around 101, according to a trader.

That deal came at par and was upsized to $350 million on Wednesday. The company intends to use the proceeds to redeem some convertible debt and for general corporate purposes.

Edison Mission gets a boost

A trader said Edison Mission Energy's 7% notes due 2017 were "very active," but was not clear why.

The trader said the bonds had gained a point to end around 72.

NewPage takes a turn

NewPage remained a market mainstay and the papermaker's debt once again changed course, regaining some of its recent losses.

A trader said the 11 3/8% notes due 2014 finished almost a point higher around 891/2. The 10% notes due 2012, however, were "pretty much unchanged" around 44.

Another source pegged the 11 3/8% notes at 89¼ and the 10% notes at 45.

On Sept. 1, the Miamisburg, Ohio-based company released better than expected guidance for the upcoming third and fourth quarters. The news resulted in a multi-point rally that spanned several days.

But this week, the notes started out on the decline, and a few players opined that it was simply a matter of the debt gaining too much too fast.

Elsewhere in the pulp and paper sector, Verso Paper Inc.'s 11 3/8% notes due 2016 were unchanged to nominally better around 87.

Rite Aid modestly firmer

Camp Hill, Pa.-based Rite Aid saw its corporate debt gaining ground, traders reported.

One trader deemed the notes up ½ to ¾ point, seeing the 9 3/8% notes due 2015 at 83¼ - a level echoed at another desk as well - and the 10 3/8% notes due 2016 at 1041/2.

On Friday, Rite Aid posted its monthly sales report for the five weeks ending Aug. 28. The report showed a 1% decline in same store sales from year-ago levels.

Total drugstore sales dropped 2.2% to $3.34 billion, which compared to $2.39 billion the year before.

For the quarter, which also ended Aug. 28, same store sales dipped 1.5%, with total sales falling 2.5% to $6.14 billion from $6.3 billion.

Clear Channel, GM strengthen

In the rest of the marketplace, Clear Channel Communications Inc.'s 11% notes due 2016 were "a bit better," a trader said.

He said the bonds were trading around 75.

Another trader agreed with that level, calling it up a point.

There was no news out on the San Antonio-based multimedia company.

The first trader also saw General Motors Corp.'s 8 3/8% notes due 2033 "initially trade down, but they recovered to finish unchanged."

The bonds were quoted at 31¼ bid, 32¼ offered by another market source, who said the debt had inched up ½ point.

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