Hanesbrands prices, bonds move up; Expro, Viskase, DuPont Fabros slate offerings; funds gain $184 million

By Paul Deckelman

New York, Dec. 3 - Hanesbrands Inc. successfully priced a $500 million offering of seven-year notes on Thursday, the lone new-deal pricing of the day. When the apparel firm's bonds were freed for secondary trading, they were seen to have firmed smartly.

Meanwhile, three more deals with a collective face value of some $2 billion were heard by high yield syndicate sources to have moved onto Junkbondland's forward calendar. The biggest is the $1.35 billion behemoth that British oilfield services company Expro International Group Ltd. is shopping around. No definitive pricing schedule has been established, with the deal expected to be roadshowing into next week.

Another fairly large offering is coming from Washington, D.C.-based data center operator DuPont Fabros Technology, LP, which hopes to sell $550 million of eight-year bonds, also being marketed to investors via a roadshow running through next week.

Sausage-casing manufacturer Viskase Cos. Inc. will hit the road starting Monday with a $160 million offering of secured notes.

While the new Hanesbrands bonds fared handsomely in the aftermarket, the same could not be said for Wednesday's offering of Dynegy Holdings Inc. notes, which were seen having fallen from their issue price.

Away from the new-deal arena, traders said that nothing seemed to stand out; one mentioned that many market participants were off attending a big Bank of America conference.

Junk funds up by $184 million

As trading was winding down for the day, market participants familiar with the high yield mutual fund-flow statistics generated by AMG Data Services of Arcata, Calif. - a key barometer of overall market liquidity trends - said that in the week ended Wednesday, some $184 million more came into the weekly-reporting funds than left them.

The latest inflow was the 15th consecutive advance, and followed the $189 million cash inflow seen in the previous week, ended Wednesday, Nov. 25. During that stretch, dating back to mid-August, inflows have totaled $5.073 billion, according to a Prospect News analysis of the AMG figures.

It was also the 22nd week in the last 23 in which inflows were seen, dating back to mid-June. Some $7.502 billion of net inflows have been seen during that stretch, according to the Prospect News analysis - a run interrupted only by a lonely $89.9 million outflow recorded in the week ended Aug. 19.

Counting the latest week's number, the year-to-date net inflow for the weekly-reporting funds rose to $19.086 billion, according to the analysis - a new peak level for the year so far, eclipsing the old mark of $18.902 billion recorded the previous week.

With 2009 now into its final month, inflows, including the latest weekly gain, have been seen in 43 weeks out of the 48 since the start of the year, according to the analysis, against just five outflows - the Aug. 19 retreat, a $110 million outflow in the week ended June 24, and three weeks of outflows in late February and early March, totaling $969 million. The inflows, on the other hand, include a 14-week run of consecutive gains, dating from mid-March through mid-June, during which time the funds grew by a record $9.1 billion.

Including another category of funds - those which report on a monthly basis, rather than weekly - aggregate inflows for the year so far have mounted up to about $29 billion.

Such sustained inflows have helped the junk market come roaring back from last year's staggering 25%-plus loss and sharply reduced primary activity totals. Total returns so far this year totaled an eye-popping 53.066% as of Wednesday's close, according to the authoritative Merrill Lynch High Yield Master II index, a new peak level for 2009, handily beating virtually every other major investment asset class. Meanwhile, the $142.967 billion of new high yield debt issued so far this year globally, as of Wednesday's close -- $116.462 billion of it domestic - is running some 99.01% ahead of the feeble pace of last year's global primary tally, according to statistics compiled by Prospect News. Domestic new issuance is 96.55% ahead of its year-ago levels.

EPFR sees inflows interrupted

However, another fund-tracking service, Cambridge, Mass.-based EPFR Global, which uses a different methodology, calculated a $232 million outflow on the week, reversing the trend seen the previous week, ended Nov. 25, when it had reported a $204 million gain.

That outflow, which broke a three-week string of inflows, was brought on, the company's analysts said, by redemptions running at a 38-week high, amid a general retreat by investors from riskier asset classes like junk bonds "as investors digested the implications of the moratorium being sought by Dubai World on its $60 billion debt pile." They noted that the outflow was only the second seen since late June.

That outflow brought the year-to-date cumulative total down to some $21.7 billion from the previous week's $21.94 billion - its peak level for 2009 so far - EPFR said.

While the EPFR junk figures most weeks point essentially in the same direction as AMG's - the latest week and the week ended Nov. 4 being the notable rare exceptions - the precise weekly and year-to-date numbers almost always differ somewhat due to EPFR's inclusion of some non-U.S. funds in its universe. Cumulative fund-flow totals, whether for AMG or EPFR, can include unannounced revisions and adjustments to figures from prior weeks.

The flow of money into and out of the junk bond funds is seen as a generally reliable market barometer of overall high yield market liquidity trends - although they comprise less of the total monies floating around the high yield universe.

A bond trader, apprised of the latest AMG number, marveled that "the money just keeps on coming in," noting that the last recorded AMG outflow had been all the way back in mid-August.

Hanes deal a good fit for market

The major development of the day in the primary market was the pricing of the new deal from Hanesbrands. High yield syndicate sources said it priced a $500 million issue of seven-year senior unsecured notes (B1/B+) to yield 8¼%, at the tight end of talk for a yield between 8¼% and 8½%.

The 8% bonds due Dec. 15, 2016 priced at 98.686, in line with speculation that it would come to market at a discount of between 1 and 2 points.

The registered offering was brought to market via joint book-running managers J.P. Morgan Securities Inc., Banc of America Securities LLC, HSBC Securities (USA) Inc., and Goldman Sachs & Co.

The Winston-Salem, N.C.-based apparel manufacturer, well-known for its branded underwear and hosiery products for men, women and children, plans to use its $482.18 million of net proceeds from the bond offering, along with borrowings from its proposed $1.15 billion of new senior secured credit facilities, to refinance some or all of its outstanding debt under its existing senior secured credit facility, and to repay all outstanding debt under its senior secured second-lien credit facility.

The new deal was just as well received in the aftermarket as it had been in the primary, according to traders. One saw the new bonds having hit a par bid, "right out of the box," and then having pushed as high as 100 5/8 bid, 101 offered. He saw the bonds last quoted during the session as having tightened a little to 100 5/8 bid, 100 7/8 offered.

A second trader pegged the new bonds as trading in a par-101 range, while at another shop, a third trader said the issue was "very active" and had gotten "a nice little move up" up from its pricing level to par bid, 100¾ offered.

Expro expected with huge deal

With Hanesbrands the only actual pricing of the day, high yield primaryside activity otherwise consisted of seeing a trio of new issues join the forward calendar - a calendar already bulging with over $2 billion face amount of new paper, setting the stage for a veritable flood of new deals before the market finally winds down for the year sometime after mid-month.

The biggest of those deals is Expro Finance Luxembourg SCA's $1.35 billion offering of seven-year senior secured notes, which will be presented to potential investors via a roadshow this week and next; more detail on the deal's timing was not immediately available.

The Rule 144A for life /Regulation S mega-deal is being brought to market via bookrunners Goldman Sachs and Deutsche Bank Securities, Inc.

The company -- a unit of Reading, U.K.-based oilfield services provider Expro International Group Ltd. - anticipates using the deal proceeds to refinance its existing senior secured term loans.

DuPont Fabros hitting the road

High yield syndicate sources also heard that DuPont Fabros Technology was beginning a roadshow Thursday for its $550 million offering of eight-year senior notes, with the marketing campaign to continue through Dec. 11.

They said that the Rule 144A/Registration S deal, which is being sold with registration rights, will come to market via joint book-running managers Jefferies & Co. Inc., Barclays and Marquarie Capital Advisors.

DuPont Fabros, a Washington, D.C.-based owner, developer and operator of large-scale data center facilities, which are leased to such familiar high-tech names as Microsoft Corp., Google Inc., Yahoo! Inc. and Facebook, plans to use the proceeds from the bond offering to repay secured bank debt, and for working capital, including certain project completion costs.

Viskase marketing too

Chicago-based sausage and cold cut casing maker Viskase Cos. was also reported getting ready to market its $160 million offering of eight-year senior secured notes via a roadshow that will begin this coming Monday and last for a week, through Dec. 14.

After that, the Rule 144A/Regulation S offering - which is being sold without registration rights - will come to market via sole bookrunner Jefferies.

Viskase plans to use the anticipated proceeds from the deal to repay substantially all of its existing debt, including its $90 million of outstanding 11 ½% senior secured notes due 2011, and for general corporate purposes.

New Dynegy gets dumped

In the new-deal aftermarket, while the new Hanesbrands paper was popping, Wednesday's offering of Dynegy Holdings bonds was flopping.

A trader flatly declared the 7½% notes due 2015, a mirror tranche to the Houston-based power generating company's existing issue, to be "a pig." He noted that the $235 million of bonds had priced on Wednesday at 87.5 to yield 10.56% -- but it was all downhill from there. He saw the bonds open Thursday at 87 bid, and by the end of the day, he said, they had retreated further, to 86½ bid, 87 offered.

The issue, another trader said, with some understatement, "was not one of your stellar performers for the month of December."

He said that when he saw the bonds offered Thursday morning at 873/4, a little bit above their issue price, he realized that "this one is not going to trade up."

Norcraft nowhere to be seen

Wednesday's other new offering - from Eagan, Minn.-based cabinetry maker Norcraft Cos. LP/Norcraft Finance Corp. - was a no-show, as far as traders were concerned.

One said that his desk "was not involved with that one," while another also saw no trace of it around, surmising that "it's probably one of those deals that just gets put away and you'll never hear from it."

Norcraft priced $180 million of 10½% senior secured notes due 2015 on Wednesday - up from the originally announced $150 million offering - at 98.37 to yield 10 7/8%.

Market indicators head higher

Among statistical measures of market performance not related to the new-deal market, a trader saw the CDX Series 13 index up 3/8 point on Thursday at 94 3/8 bid, 94 7/8 offered, after having risen by 3/8 point on Wednesday.

The KDP High Yield Daily Index meantime surged upward by 30 basis points on Thursday to 69.95, after having eased by 4 bps on Wednesday. Its yield tightened by 9 bps to 8.46%, after having held steady the previous session.

In the broader market, advancing issues stayed ahead of decliners for a third straight session, by the same ratio of nearly three to two seen the previous two sessions.

Overall market activity, as measured by dollar-volume, was about equal to Wednesday's pace.

A trader said that there was "not a whole lot" doing on Thursday. While he noted that the market "opened up pretty firm" and characterized the morning session as "a lift-athon, with offers few and far between," he added the caveat that volumes "were fairly light - it felt like one trade could move the market up a half-point or a point, because the depth of the market really wasn't there."

He suggested that "there's still a lot of players" who were attending the Bank of America-Merrill Lynch credit conference.

Overall, he said the market had "a pretty good tone - outside of that one Dynegy deal." But it was "nothing earth-shattering."

A second trader said that "there's no one big event to talk about today - it's just a bunch of 'a little bit here, a little bit there' [things] - nothing jumping out at you."

A busy day for Sallie Mae

The trader noted that there was "a lot of volume" in SLM Corp.'s 5.45% notes due 2011, quoting them at 98 7/8 bid, 99 5/8 offered, up ½ point from earlier in the week, on over $40 million of volume.

However, he acknowledged that with its split-rating (Ba1/BBB-/BBB-), the Reston, Va.-education financing company likely drew just as heavy interest, if not more so, from high-grade investors as from junk marketeers.

GM better but quiet

He also saw General Motors Corp.'s benchmark 8 3/8% bonds due 2033 being locked several times - bid and offer levels in equilibrium - adding that "that just kind of gives you an indication that not a heck of a lot is going on, if you've got that issue locked."

Several other traders meantime saw the Detroit giant's long bonds having "ticked up a little," one said, getting as high as 23 bid, where he said "most of the trading was."

Another trader quoted the bonds at 23 bid, 24 offered, and saw GM domestic arch-rival Ford Motor Co.'s 7.45% bonds due 2031 unchanged at 86 bid, 87 offered.

Smurfit-Stone surge continues

Smurfit-Stone Container Corp.'s bonds continued to move upward, coasting upon the momentum generated by the news earlier in the week that the bankrupt Chicago-based packaging company had officially filed its reorganization plan with the federal bankruptcy court overseeing its restructuring.

He saw its 8 3/8% notes due 2012 get as high as 85 bid, which he called up 2½ points, while its 8% notes due 2017 were also at 85, up 1½ points on the day, "so they're still lovin' Smurfit."

He said he had seen "good volume in the name."

A market source saw the 8s as one of the more active junk issues traded, with nearly $15 million having changed hands by mid-afternoon, and quoted the bonds as having risen to just under 85 bid from 83 5/8 on Wednesday. The source saw the old Jefferson Smurfit 8¼% notes due 2012 at 84 7/8, up from 83½ on Wednesday. Yet another source saw those 2012 notes at 85, up 1½ points.

The Smurfit bonds are well up from the upper-70s levels they had held before Tuesday's announcement that

Smurfit-Stone had presented its reorganization plan to the U.S. Bankruptcy Court in Wilmington, Del., where the company had filed for Chapter 11 protection from its junk bond holders and other creditors nearly a year ago, in January.

The plan filed Tuesday envisions conversion of the company's unsecured debt into equity, with secured debtholders to get cash, new debt, or some combination. Existing shareholders would get nothing. The company anticipates emerging from Chapter 11 next spring.

Clear Channel holds higher levels

A trader said that Clear Channel Communications Inc.'s bonds were "also feeling better" on Thursday, for a third straight session, despite there being no concrete news out that might explain the rise in the San Antonio, Tex.-based broadcasting and outdoor advertising company's paper this week.

He pegged its 11% notes due 2016 mostly in a 59-60 context, with trades "on both sides" of that range, although he allowed that there had been trades as high as 61, which he said was up between 2 and 2½ points.

Those bonds had been around 50 at the start of the week, while its 6¼% notes due 2011 have moved up to the lower 80s from prior levels in the upper 70s.

Clear Channel's paper had also been firmer the previous week, with some participants citing rumors - at this point still unconfirmed and totally unofficial - that the company might float a bond issue and use the proceeds to take care of its near-term debt maturities.

Dubai Nakheel bonds still active

A trader said that the bonds of Dubai's Nakheel Development were once again moving around on Thursday, noting that "they were active this morning, and then they settled down" later in the session.

That continued a pattern of recent activity in the euro-denominated paper, which has gyrated on investor fears that the formerly high-flying Middle Eastern nation might have trouble paying its debt obligations.

He did not see too much movement in the bonds' actual prices, with the 3.172% euro-denominated notes slated to come due on Dec. 14 trading in a 59-60 context before finally going out around 58-60.

"The bonds did touch 60," he said, although he added that "they were also up there [on Wednesday]. In fact, Wednesday's session had seen those Dec. 14 notes get as good as a 60-61 range towards the end of the day, versus the 58-60 levels seen on Tuesday.

Those bonds had been trading as high as 110 bid last week before the Nov. 25 Dubai government announcement that its Dubai World development arm, of which Nakheel is a subsidiary, would ask creditors to agree to a standstill on billions of dollars of debt owed, including the $3.52 billion of Nakheel bonds maturing on the 14th.

After that, the paper slid to the 80s by the end of last week, and down into the 50s earlier this week. The bonds bottomed at 52 bid on Tuesday, before recovering to trade around current levels on the news that Dubai World will only seek to restructure $26 billion of its approximately $59 billion of debt. The company plans to meet with its main creditors next week to discuss its request that it be allowed to delay payments.

The trader also saw Nakheel's 2¾% euro-denominated notes due 2011 trading around 44-46, "about where they were [Wednesday], holding that those same levels."

That issue had been trading in the 80s last week before the debt payment-delay announcement, then dropped into the mid-50s by the end of last week and continued to slide before bottoming at around a 40-42 context by Monday and climbing back up to the mid-40s after that.

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