Warner Chilcott, MultiPlan lead $2.7 billion primary; Exide put off; funds gain $574.8 million

By Paul Deckelman and Paul A. Harris

New York, Aug. 12 - The high-yield primary market kept up its steady pace of churning out new deals on Thursday, as seven offerings collectively worth more than $2.7 billion came to market - oddly, all of them priced exactly at par. While there were a pair of drive-by issues coming out of left field - a $250 million 5.5-year offering from Parsippany, N.J.-based travel services provider Travelport Ltd. and a $200 million eight-year senior subordinated deal from Cardtronics, Inc., a Houston-based operator of ATM machines and consumer financial services kiosks - the bulk of the day's new issues were from companies that had begun the week on the forward calendar and thus were expected.

The biggest deal of the day was a $750 million eight-year offering from Irish specialty pharmaceuticals maker Warner Chilcott plc, although the precise size and structure of the deal did not take shape until Thursday morning. Out of that same health-care sector, MultiPlan Inc. weighed in with a $675 million tranche of eight-year bonds, while Gentiva Health Services, Inc. priced an upsized $325 million issue of eight-year paper.

Canada's Cott Corp. popped the top on a $375 million offering of eight-year bonds, while PetroQuest Energy Inc., a Lafayette, La.-based oil and gas exploration and production company, had the day's smallest deal, a $150 million offering of seven-year notes.

Price talk meantime emerged on a pair of names that could come to market Friday: Tower Automotive Holdings USA, LLC and Chemtura Corp.

But while all of those deals were pricing, or getting ready to price, another was biting the dust, as Exide Technologies, Inc. announced that it will postpone its planned $675 million bond deal due to adverse market conditions, becoming the second prospective issuer to choose to drop out this week; Scotch energy driller KCA Deutag Drilling Group, Ltd. did so on Monday.

The secondary market remained lower across the board, with major statistical measures all pointing downward. Among specific names, American General Finance Corp.'s bonds sank for a second day on fears that the company's new majority owner will restructure its huge debt at a discount.

Junk funds gain $575 million

And as trading was finishing up for the day, participants familiar with the Lipper FMI weekly high-yield mutual fund-flow numbers compiled by AMG Data Services of Arcata, Calif. - considered a reliable barometer of overall junk market liquidity trends - said that in the week ended Wednesday, $574.8 million more came into those funds than left them.

It was the fifth sizable inflow in as many weeks, following on the heels of the $583.1 million cash injection seen the previous week, which ended Aug. 4. Those inflows, totaling $4.084 billion, according to a Prospect News analysis of the figures provided by market sources - broke and more than completely made up for a two-week losing streak in late June and early July during which a total of $498.443 million more had left the funds than came into them, the analysis said.

The five big inflows - which also include $976.3 million in the week ended July 28, $700.64 million in the week ended July 21 and a massive $1.25 billion in the week ended July 14 - look to have put junk liquidity back on a firmly positive track; after strong gains over the first four months of the year, including one 10-week stretch that saw $4.44 billion of inflows, according to the analysis, the weeks that followed saw a more inconsistent pattern, with several weeks of inflows followed by several weeks of outflows, until the latest surge started in mid-July.

With the 2010 third quarter now well under way, inflows have now been seen in 21 weeks out of the 32 since the beginning of the year, while there have been 11 outflows, the Prospect News analysis of the data indicated.

The inflow in the latest week raised the year-to-date cumulative total for the weekly-reporting funds up to around $4.797 billion, according to the analysis - a new peak level for 2010, versus the previous peak level of $4.222 billion recorded the week before. The funds hit their biggest year-to-date negative number so far in the week ended June 9, with a cumulative deficit of $475 million.

EPFR sees $871 million inflow

Another fund-tracking service - Cambridge, Mass.-based EPFR Global, whose methodology differs somewhat from AMG - meantime reported an $871 million inflow in the latest week, continuing a string of recent big inflows. EPFR's analysts said in a research note Thursday night that it was the fifth straight week of inflows in excess of $800 million, a stretch that included cash additions of $1.18 billion in the week ended last Wednesday and before that, consecutive infusions of $1.07 billion, $948 million and a $1.2 billion cash addition to start the winning streak off in mid-July. It was also the eighth inflow seen by EPFR in the past nine weeks.

Reflecting the difference between the ways AMG and EPFR calculate their respective fund-flow totals - EPFR includes results from certain non-U.S. domiciled funds as well as the domestic funds - the service's year-to-date net inflow total now stands at $9.107 billion. That's up from last week's $8.236 billion and it represents a new peak level for the year, eclipsing the old mark of $8.59 billion seen at the beginning of May after 10 straight weeks of inflows starting in late February.

Any and all cumulative fund-flow totals, whether for AMG or EPFR, can include unannounced revisions and adjustments to figures from prior weeks.

The analysts said that the flows into junk-bond funds "are indicative of a hunger for yield that was also evident in the flows into U.S. bond funds, with municipal and intermediate bond funds attracting the biggest share of the new money, and the shift in preference among emerging markets investors back to funds with a local-currency mandate."

Looking ahead to the fund-flow numbers that will be reported next week, a high-yield mutual fund manager saw positive flows throughout this week, including Wednesday, which was counted in the numbers released on Thursday, and also saw positive flows Thursday, which will be included in next week's tally. However, this manager expects flows to turn negative on Friday - and he added that if this negative turn should materialize, it could serve to dampen issuance in the week ahead.

Warner Chilcott dividend deal

A busy Thursday session in the primary market saw seven issuers, each bringing a single tranche of junk, price $2.74 billion.

It extended the week's issuance total to $16.86 billion. The Aug. 9 week has been the biggest week of 2010 to date, and there is still one session to be played out.

All of Thursday's deals priced at par.

Warner Chilcott Co., LLC and Warner Chilcott Finance LLC priced the day's biggest deal - a $750 million issue of eight-year senior notes (B3/B+) that came at par to yield 7¾%, on top of price talk.

Bank of America Merrill Lynch, J.P. Morgan Securities Inc. and Goldman, Sachs & Co. were the joint bookrunners for the quick-to-market dividend-funding deal.

MultiPlan's $675 million

The rest of Thursday's deals all priced at the wide end of price talk.

MultiPlan priced its $675 million issue of eight-year senior unsecured notes (Caa1/CCC+) at par to yield 9 7/8%, which was at the wide end of the 9¾% area price talk.

Bank of America Merrill Lynch, Credit Suisse Securities and Barclays Capital Inc. were the joint bookrunners for the deal, which will be used to fund the leveraged buyout of the company.

Allocations were lousy, according to a high-yield mutual fund manager who received one-tenth of the amount that the account put in for.

Although this source did not hear how big the order book was, the bridge loan backing the bonds was three-times oversubscribed, the manager said.

The source saw the MultiPlan notes straddling the issue price trailing the Thursday close.

Cott prices eight-years

Elsewhere, Cott Beverages USA Inc. priced a $375 million issue of eight-year senior notes (B3/B/) at par to yield 8 1/8%, at the wide end of the 8% area price talk.

Deutsche Bank Securities Inc., JPMorgan and Morgan Stanley & Co. Inc. were the joint bookrunners for the acquisition financing.

Gentiva upsized

Gentiva Health Services priced an upsized $325 million issue of eight-year senior notes (B2/B-) at par to yield 11½%, also at the wide end of the 11¼% to 11½% price talk.

Barclays, Bank of America Merrill Lynch and SunTrust Robinson Humphrey Inc. were the joint bookrunners for the acquisition financing.

Along with upsizing the bonds to $325 million from $305 million, Gentiva reduced the size of its six-year term loan B to $550 million from $600 million and opted to draw more funds under its proposed revolving credit facility.

The Gentiva order book was three-times oversubscribed, according to an investor who played the deal.

Gentiva traded well in the secondary market, the investor said, spotting the par-pricing notes at 102¼ bid.

This source also played the bank loan, which was 97½ bid in the secondary, versus the 96 issue price.

Travelport drive-by

Elsewhere, Travelport LLC and Travelport Inc. priced a $250 million issue of 5.5-year senior notes (B3/CCC+) at par to yield 9%, again at the wide end of the 8¾% to 9% price talk.

Credit Suisse and UBS Investment Bank were the joint bookrunners for the quick-to-market deal.

The Parsippany, N.J.-based travel distribution services company will use the proceeds to repay a portion of its senior secured credit facilities and for general corporate purposes, which may include debt repayment or business development opportunities.

Cardtronics senior subs

Cardtronics priced a $200 million issue of eight-year senior subordinated notes (B2/BB-) at par to yield 8¼%, at the wide end of the 8 1/8% area price talk.

Bank of America Merrill Lynch and JPMorgan were the joint bookrunners for the quick-to-market debt-refinancing deal.

PetroQuest, at the wide end

Finally, PetroQuest Energy priced a $150 million issue of seven-year senior unsecured notes (Caa1/B) at par to yield 10%, on the wide end of the 9 7/8% to 10% price talk.

JPMorgan ran the books for the debt-refinancing deal.

Wide end explanation

Six of Thursday's seven deals priced at the wide end of price talk.

"I don't think that's a coincidence," one high-yield investor said.

The dealers were leaving something on the table in light of the mediocre-to-poor secondary market performance of several deals that came earlier in the week.

Most prominent among these, sources said, is the new Tembec Industries Inc. 11¼% senior secured notes due Dec. 15, 2018 (B3/B-/), which priced Tuesday at 98.717 to yield 11½%.

Amid the ensuing volatility in the stock market, which dragged high yield down, those bonds immediately sank and continued to languish more than 2½ points below issue price on Thursday, sources said.

"It's true that they are leaving something on the table," the investor said.

"But at the same time, the deals we saw on Thursday are well oversubscribed," the source specified, adding that the lackluster performance of some of the recent deals appears not to have soured the buyside's appetite.

Talking the deals

Chemtura talked its $450 million offering of eight-year senior notes with an 8% area yield on Thursday.

The order books close at noon ET on Friday, except for West Coast accounts.

Citigroup Global Markets Inc., Bank of America Merrill Lynch, Barclays, Wells Fargo Securities and Goldman Sachs are the joint bookrunners for the Chapter 11 exit financing.

Elsewhere, Tower Automotive Holdings USA, LLC and TV Holdings Finance, Inc. talked their $450 million offering of seven-year senior secured first-lien notes (/B/) with an 11% to 11¼% yield.

That deal is expected to price on Friday.

JPMorgan, Citigroup and Goldman Sachs are the joint bookrunners for the debt-refinancing deal.

Exide postpones

Finally, Exide Technologies postponed its $675 million two-part offering of senior secured notes due to adverse market conditions, according to a Thursday press release.

Morgan Stanley, Deutsche Bank Securities and Wells Fargo Securities were the joint bookrunners.

The Milton, Ga.-based stored electrical-energy solutions company intended to use the proceeds to repay bank debt, to fund the redemption of its 10½% senior notes due 2013, to provide working capital and for general corporate purposes.

Gentiva trades robustly

A trader said that Gentiva Health Services' new 11½% notes due 2018 were "up a bunch" in aftermarket dealings, quoting them at 102¼ bid, 102½ offered, "a real good break."

Several other traders also saw those new bonds move up above the 102 level, with one quoting them going out at 102 bid, 103 offered.

The Atlanta-based home health-care provider had earlier priced its $325 million of new paper - upsized from the originally announced $305 million - at par.

Cott sparkles in secondary

The trader also saw some fizz in soft-drink bottler Cott's new 8 1/8% notes due 2018, saying the Mississauga, Ont.-based company "had a nice trade" and seeing buying at 102.

The $375 million offering had earlier priced at par.

A second trader was quoting the Cotts going home at 102 bid, 103 offered.

PetroQuest pops modestly

A trader saw PetroQuest Energy's 10% senior notes due 2017 trading at 100½ bid, 100¾ offered, "so you got a little bit of that one."

Another trader pegged those bonds at 100½ bid, 101 offered, while a third had them going home at 100 3/8 bid, 100 7/8 offered.

The oil and gas exploration and production company's $150 million issue had earlier priced at par.

Some new issues little traded

A trader said that "clearly, Travelport, MultiPlan and Cardtronics all went nowhere."

Another trader agreed in the case of MultiPlan, seeing the New York-based health-care cost-management solutions provider's new 9 7/8% notes due 2018 at 100 1/8 bid - "struggling to break issue."

The company had earlier priced that $675 million deal at par.

But at another desk, a trader saw MultiPlan's bonds having pushed their way up to 100½ bid, 100¾ offered.

Some slight upside was detected in Cardtronics' $200 million offering of 8¼% senior subordinated notes due 2018, with at least two traders seeing the issue at 100¼ bid, 100¾ offered, up a little from their par pricing.

And a trader said that the Travelport 9% notes due 2016, which also priced at par earlier on the day, had edged up to 100¼ bid, 100½ offered.

Par price not a big factor

A trader said that from the way things priced Thursday - unusually, all of the day's new deals came at par - "it looks like the new vogue thing is to price right at par."

Another, however, declined to read too much into the fact that the deals all came at that level, in theory leaving not much room for aftermarket upside; in fact, as noted, a few of the deals pretty much stayed at or slightly above their issue price levels.

He said that the failure of the day's bonds to really catch fire, outside of the Gentiva and Cott deals, "is more about [market] sentiment than about where they priced.

"It's still a yield game at the end of the day, right? Dollar prices matter some, but you could have priced [any of the inactive new bonds] at a discount to yield the same thing, and I don't think you would have gotten a much greater response."

He suggested that "right now, the pendulum has swung away from everything rallying 2 or 3 points, back to you having to be more selective in what you play, and you've got to be more comfortable holding on to new issues, from a longer-term holding perspective."

Looking at what the primary and the aftermarket were doing just a week ago versus what's happening now, he asserted that "the momentum is not there," primarily because of the "massive amount of supply" that has come into the junk precincts over the past few sessions, "not that there's not cash to absorb it, but it does make it difficult to rally stuff."

He added that "the market has rallied pretty substantially overall in general, so you're starting from richer levels and you've brought a massive amount of supply, so it makes it that much more difficult to rally that stuff."

New First Data comes back

A trader said that First Data Corp.'s new issue of 8 7/8% notes due 2020 "actually bounced nicely" from the levels at which the Atlanta-based electronic transactions processor's bonds had traded on Wednesday, when the company priced its $510 million of the bonds at 98.387 to yield 9 1/8%.

"It was weak again this morning, but it firmed here this afternoon" to around a 99 bid, 99¼ offered level, "so that one is up a little bit from issue, after struggling out of the gate, so that one's kind of found its footing and it is rallying a little bit."

New OPTI bonds do well

A trader said that OPTI Canada Inc.'s new 9¾% first-lien senior secured notes due 2013 "are actually trading well."

He saw the Calgary, Alta-based oil-sands petroleum producer's $300 million of bonds "trading well," up 2 to 3 points from the 96.5 level at which the bonds priced on Wednesday.

A second trader saw those bonds at 98½ bid, 99 offered, well up from their issue price, and also saw OPTI's new 9% first-lien senior secured "mirror' notes at 100 3/8 bid, 101 offered; the company had priced $100 million of those bonds as a non-fungible add-on to its existing $425 million issue, which had priced at 99.51 to yield 9.228%.

AIG unit bonds firm some

A trader said that "you had a lot of the new AIG [International Lease Finance Corp.] paper trading right above par," quoting all four of International Lease's issues as holding around par bid, 100½ offered.

On Wednesday, the aircraft leasing arm of troubled New York-based insurer American International Group, Inc. priced $4.4 billion of new bonds in four tranches, all coming to market at levels just a whisper away from par, at 99.99

Market indicators continue retreat

Away from the new-deal sector, a trader saw the CDX North American HY Series 14 index ease by 1/8 point on Thursday to 97 bid, 97¼ offered after having slid by 7/8 point on Wednesday.

The KDP High Yield Daily index meantime declined by 14 basis points on Thursday to 71.86 after having plunged by 40 bps on Wednesday. Its yield rose by 4 bps Thursday to 8.27% after having ballooned out by 13 bps on Wednesday.

The Merrill Lynch High Yield Master II index was down for a third straight session Thursday, losing 0.312% on the day to bring its year-to-date return down to 8.302%, down from 8.641% on Wednesday. The index was down further from the 9.085% recorded on Monday, its peak level for 2010 so far.

For a second straight session, advancing issues trailed decliners, with the latter ahead by the same seven-to-five edge they had held on Wednesday - the first time decliners had led after an incredible winning streak of 27 consecutive sessions, dating back to July 2, when advancers held the lead.

Overall activity, represented by dollar-volume levels, fell by 12% for a second consecutive session on Thursday.

American General falls

For a second consecutive session, a trader on Thursday said that American General Finance was "a big, big, big name - CDs, bonds, hundreds of millions trading everywhere" - a not unreasonable estimate, given that the consumer lending unit of AIG has over 150 separate issues outstanding. Taken in total, "there was huge amounts of size, huge, huge trading" in the name.

As was the case on Wednesday, he saw the 6.9% notes due 2017 as the busiest issue in the company's structure and said that the bonds were ending the day around 79, down 2 or 3 points.

"They opened the day in the 70s, then they traded into the 80s, and then back down, so there was a lot of volatility between 78 bid and 82 bid."

He said that "all I am seeing is literally pages and pages of markets across the board on these things. It was active all day long."

At another desk, a market source saw the 6.9s fall as low as the mid-70s before going out around 81 bid, which was up as much as 4 or 5 points from their session lows but still down about 1½ to 2 points from Wednesday's close. The source estimated volume in the credit at some $85 million, making it easily the busiest issue in Junkbondland on Thursday.

On Wednesday, those bonds had slid about 7 or 8 points on the day in heavy dealings, from 90 bid down to around 83 bid, on the news that parent AIG had agreed to sell an 80% stake in the money-losing unit to Fortress Investment Group LLC for an undisclosed amount of money - and the speculation among bondholders and even some analysts that the new owner may try to restructure American General's $17 billion debt load on less-than-favorable terms for the bondholders.

Among others, Fitch Ratings cautioned that "new ownership and existing management may potentially seek to engage in some type of business reorganization, up to and including a restructuring of the firm's capital structure."

Other American General bonds that had also been knocked down on Wednesday, though in less active trading than the 6.9s, were seen continuing that pattern on Thursday as well. A source saw the company's 4 7/8% notes due 2012 drop to 90½ bid from prior levels around 94, with volume of over $20 million changing hands - well less than the 6.9s but still enough to put it high upon the most-actives list.

The source saw American General's 5 5/8% notes due 2011 lose about 1¼ points on the day on volume of over $10 million to finish just below the 97 mark. The company's 5¾% notes due 2016 swooned to the tune of nearly 5 points on the day to end at 76 bid.

GM easier despite big profit

General Motors Corp.'s bonds were off on Thursday in line with the generally softer, soggier market, getting no lift from the not-unexpected news that the automotive giant had posted second-quarter earnings of $1.33 billion - GM's second straight quarterly profit, coming on the heels of the $865 million that it earned in the first quarter.

GM also announced that current chief executive officer Ed Whitacre will step down from that post on Sept. 1, handing the day-to-day reins of the company over to Daniel Akerson, currently a GM director.

A trader saw the company's benchmark 8 3/8% bonds due 2033 down by ½ point at 34½ bid, 35 offered on "good volume."

He also saw GM domestic arch-rival Ford Motor Co.'s 7.45% bonds due 2031 at 96 bid, 97 offered, "pretty much where they were all day."

At another desk, a trader also saw the GM benchmarks down ½ point at 34½ bid, 35 offered, while seeing the Ford long bonds up ¼ point at 96¼ bid, 97¼ offered.

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