99 Cents deal prices; Datatel slates but Expert Global pulls offering; secondary featureless

By Paul Deckelman and Paul A. Harris

New York, Dec. 14 - Number Merger Sub, Inc. came to market on Wednesday with a $250 million issue of eight-year bonds, part of the buyout financing for extreme-value retailer 99 Cents Only Stores Inc. Traders saw the new deal off from its issue price in initial aftermarket dealings.

It was the only domestic pricing of the day. Out of Europe came word late in the day that German building products company HeidelbergCement priced €269 million of five-year fixed- and floating-rate certificates.

Back on the domestic new-deal front, Datatel, Inc., which provides integrated software and professional services to educational institutions, was heard by syndicate sources to be preparing to bring a $530 million junk deal to market sometime early next year.

But Expert Global Solutions, Inc. pulled its planned $300 million eight-year note offering. The business services provider cited the level of current market rates.

The demise of that deal - and the pricing of the 99 Cents offering - clears the forward calendar of deals that are expected to imminently price for the remainder of 2011.

On the secondary side of the fence, traders saw paucity of real activity, unlike Tuesday's fairly busy session.

They said that the issues showing the most price movement, some several points, did so on very thin dealings. These included Del Monte Foods Inc. and Kellwood Co., with only one or two sizable trades.

Conversely, the issues racking up the most volume on the day, including SuperValu Inc., were pretty much unchanged.

Statistical measures of junk market performance were generally trending lower.

99¢ Only eight-year notes

The Wednesday session saw the completion of a single deal: 99 Cents Only priced a $250 million issue of eight-year senior notes (Caa1/CCC+) at par to yield 11%.

The yield printed 78.5 basis points beyond the wide end of the 10% area price talk.

RBC was the left bookrunner for the acquisition deal. BMO and Deutsche Bank were the joint bookrunners.

Proceeds will help fund the buyout of the company by Ares Management LLC and Canada Pension Plan Investment Board for $22.00 per share in cash with a total equity value of about $1.6 billion.

The issuing entity is Number Merger Sub, Inc., which will be merged with and into 99 Cents Only, a City of Commerce, Calif.-based operator of extreme value retail stores.

The new Number Merger Sub 11% notes due 2019 were par bid, par ½ offered following Wednesday's close, according to a market source, who also remarked that the bridge loan backing the bonds had played to a decent book.

NCO pulls $300 million

Elsewhere on Wednesday, NCO Group, Inc. cited rates as it announced its decision to forgo its proposed $300 million offering of eight-year senior notes (Caa1).

Proceeds, together with a new credit facility, were to have been used to refinance debt and to help fund the merger of NCO Group and APAC Customer Services, which are One Equity Partners portfolio companies, into Expert Global Solutions.

In a Wednesday press release, the company referenced "rates currently available in the market," as it made the announcement that it would not proceed with the notes offer.

"The company, APAC Customer Services and One Equity Partners continue to believe it is in [their] best interests to seek to combine their businesses and, to that end, they are continuing to look at alternatives that would enable the combination to be completed on terms that are advantageous to their respective stakeholders," the release stated.

Deutsche Bank Securities Inc. was the left bookrunner. Barclays Capital Inc., J.P. Morgan Securities LLC and RBS Securities Inc. were the joint bookrunners.

NCO also terminated its two concurrent cash tender offers for its $200 million of 11 7/8% senior subordinated notes due 2014 and its $165 million of floating-rate senior notes due 2013.

2011 calendar cleared

The events of Wednesday's primary market session likely cleared the high-yield forward calendar of deals expected to price during the rapidly diminishing run-up to 2012, sources said.

Heading into the Thursday session, no roadshow starts are anticipated before the new year.

However, in spite of turbulence in the global capital markets, much but not all of it related to the ongoing crisis in the sovereign debt of euro zone countries, the primary market could possibly see drive-by action, sources say.

The window for pricing a drive-by deal, which would have to come from a well-known, quality issuer, will likely close after Tuesday.

"The accounts continue to see inflows," a syndicate official remarked after the Wednesday close and added that when weekly fund flow reports circulate on Thursday from Lipper-AMG and EPFR Global, high-yield flows are expected to be shown to have been positive over the one-week reporting period, which ended at Wednesday's close.

"High yield ended the day lower," the syndicate source added.

"But high-yield outperformed equities today, and higher-quality bonds were only down slightly."

New Number Merger eases

When the new Number Merger Sub 2019 notes were freed for secondary dealings, a trader saw the bonds offered at 100¼ but did not see a bid level.

But a little later on, the bonds were seen having come off their par issue price.

"They are not exactly stellar performers thus far," said one trader, who quoted the deal at 99½ bid, 99¾ offered.

At yet another desk, the bonds were seen at 99¼ bid, par offered.

A trader elsewhere said that his shop was "not involved" with the relatively small forward-calendar deal.

Ford Credit volume dwindles

Traders saw little or no activity on Wednesday in any other of the most recently priced bonds.

Even last week's big new deal from Ford Motor Credit Co. LLC, which saw several hundred millions of dollars of those bonds traded the first couple of days after pricing and which also saw $19 million trading as recently as Tuesday of this week, was pretty sedate on Wednesday.

That's when a market source saw just $5 million of the bonds having changed hands, at 101 11/16 bid, down one-sixteenth of a point from where they had finished on Tuesday.

Ford Credit, the loan-financing arm of Dearborn, Mich.-based automotive giant Ford Motor Co., had priced its $1 billion add-on to its existing $1 billion of 5 7/8% notes due 2021last Monday. That drive-by deal - massively upsized from the $500 million that was originally shopped around - priced at 101.8 to yield 5 5/8%, versus the 5 7/8% yield at which the original tranche of bonds had priced.

After pricing, the new bonds quickly shot above 102 bid in very active dealings and moved all the way up to quoted levels as high as 103 by last Thursday, before starting to gradually come down off of those peaks to around their current levels.

A featureless market

A trader said that "there was some trading" on Wednesday, but at his shop, "we're not doing a lot. It's quiet."

He added: "By and large, the feeling was unchanged, I would say."

A second trader theorized that "everybody has made their money for the year, so they want to sit tight now; they don't blow it.

"Nobody wants to be a hero. Everyone just wants to come back for next year," the trader added.

Indicators remain lower

Statistical measures of junk market performance, which had turned mixed on Tuesday after having fallen on Monday, stayed in negative territory on Wednesday.

A trader saw the CDX North American series 17 High Yield index fall by 1 full point on Wednesday to end at 90 5/8 bid, 91 offered, after having lost 3/8 point on Tuesday.

The KDP High Yield Daily index was off by 10 basis points, closing at 71.59, after having gained 1 bp on Tuesday.

Its yield edged up by 1bp to 7.76%, after having risen 3 bps on Tuesday.

The widely followed Merrill Lynch High Yield Master II Index resumed its recent status on the downside, which had been interrupted briefly by Tuesday's gain.

Its 0.112% retreat on Wednesday stood in contrast to its 0.065% advance on Tuesday.

The latest loss lowered the index's year-to-date return to 3.173% versus 3.288% on Tuesday.

Year-to-date returns remain below the recent peak level of 4.28%, recorded on Oct. 28, and are well below the index's high-water mark for the year of 6.362%, which was set on July 26.

However, they are still well up from its 2011 low-point, a 3.998% deficit recorded Oct. 4.

The junk fallback took place against a backdrop of similarly declining stocks, which hit their lowest level in two weeks as equity investors remained nervous about the lack of a clear plan for dealing with Europe's continuing debt crisis.

The bellwether Dow Jones Industrial Average fell for a third consecutive session, losing 131.46 points, or 1.10%, to close at 11,823.48.

The broader Standard & Poor's 500 index was down by 1.13% on the day, while the Nasdaq composite dropped by 1.55%.

Big movers have little volume

Back in Junkbondland, a trader opined, "Among the largest movers that were up a point or so, there was so real volume to [most of] them," and likewise, among the biggest losers, saw "no real volume there. The ones that were up or down the most, there were only, like, $1 million trading."

For instance, San Francisco-based Del Monte Foods' 7 5/8% notes due 2019 were seen by a market source to have finished up 1¾ points on the day, at 93¼ bid, while at another desk, the bonds were quoted at 93½ bid, up 1½ points on the day.

"That could have been an odd-lot or two trading," the trader said, seeing that "only one trade took place, so that could mean the last time they traded was two weeks ago."

In a similar vein, Kellwood's 7 5/8% notes due 2017 were being quoted as high as 26 bid, well up from levels in the mid-teens at which those bonds have recently traded.

Wednesday's volume came from a pair of round-lot trades, totaling about $2 million.

There was no fresh news out on the St. Louis-based apparel company.

Vulcan not so volatile

The trader said: "So there were no huge, event-driven movers today" as there had been in recent days.

For example, on Monday, when there was brisk volume and sizable gains in Vulcan Materials Co. bonds on the news that an industry rival was making a hostile takeover bid for the Birmingham, Ala.-based construction materials company.

The trader saw Vulcan's 7½% notes due 2021 down 1½ points on Wednesday, at the 108 level, but noted that that was on only three trades.

That was a far cry from Monday's activity in that issue, when the 71/2s jumped by 10 points, to 112 bid, on hefty volume of over $30 million, leading all high-yield issues that day.

The trader said that the company's other two issues - its 6½% notes due 2016 and 7% notes due 2018 - "were unchanged on no volume today."

Again, that was in stark contrast to Monday's activity, at least in the 61/2s, which rose by more than 6 points, to end at 105 bid with over $18 million traded that day.

The Vulcan bonds, after reaching those heights on the news that Martin Marietta Materials Inc. was going over the heads of management and taking its $4.8 billion all-stock bid right to the Vulcan shareholders, were seen to have backed off a few points across the board in Tuesday's dealings.

Big volume=small movements

Another trader said that while the issues that were posting the larger gains were doing so on small volume, the converse was also true - those issues actually generating decent volume were, generally speaking, little moved.

For instance, Rite Aid Corp.'s 8% notes due 2020 knocked down over $9 million of volume on the session ahead of Thursday's third-quarter earnings release by the Camp Hill, Pa.-based drugstore chain operator.

But, the trader noted, they were "pretty much unchanged, or maybe down a quarter," hanging around in a 1083/4-to-109 bid context.

He also saw "a fair amount of trading" in SuperValu's bonds, with the Eden Prairie, Minn.-based supermarket operator's 8% notes due 2016 trading around 101¼ bid, 102 offered,, versus Tuesday's levels at 101½ bid, 101¾ offered, "so they just bracketed Tuesday's prices a little bit."

A market source at another desk saw the bonds down about a half-point, at 101 1/8 bid, though on no news, with over $11 million traded on Wednesday.

And a market source saw some fairly busy trading in ATP Oil & Gas Corp.'s 11 7/8% second-lien senior secured notes due 2015. The bonds were seen going out at 65 bid, up slightly from Tuesday's finish. However, throwing out unrepresentative small-sized trades and just looking at the paper on a round-lot basis, the bonds finished down 1 point, with over $8 million traded, still enough to slot it into the high-yield most-actives list during what overall was a relatively quiet junk session.

There was no fresh news seen out on the Houston-based offshore energy production company.

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