Vantage, Nationstar, Corrections pace $2.1 billion day, Heinz up next; funds gain $201 million

By Paul Deckelman and Paul A. Harris

New York, March 21 - Vantage Drilling Co., Corrections Corp. of America and Nationstar Mortgage LLC were heard by high-yield syndicate sources to have come to market on Thursday with a trio of well-received quick-to-market junk bond deals. Nationstar's transaction was an add-on to the mortgage company's existing 2021 notes.

Those borrowers were joined by Milacron LLC, which did a $465 million regularly scheduled eight-year deal off the forward calendar, bringing the day's tally of new dollar-denominated, totally junk-rated paper from domestic or developed-country issuers to more than $2.1 billion.

Corrections Corp.'s two-part deal priced too late in the session for any kind of real aftermarket, but the day's other three deals were seen by traders having moved up from their respective issue prices.

There meanwhile was heavy trading seen in United States Steel Corp.'s new eight-year notes, which priced on Wednesday.

That session's late-appearing behemoth of a three-part deal from Intelsat (Luxembourg) SA was seen having firmed across the board when the$3.5 billion deal's component issues were freed for trading. There were also some brisk dealings in one of the existing issues that the communications satellite company announced a tender offer for, which is to be funded out of the new deal's proceeds.

Away from the deals that have actually come to market, high yield participants heard price talk out on a slew of other transactions that are expected to price during Friday's session: H.J. Heinz Co., Exterran Partners, LP, PetroLogistics LP and St. Barbara Ltd. Ketchup king Heinz's giant-sized secured deal, coming through its Hawk Acquisition, Inc. subsidiary, was heard by market sources to be heavily oversubscribed.

Traders said that activity in the new issues was the dominant theme in Thursday's secondary market. Statistical indicators of market performance turned mixed after having been higher all around on Wednesday.

And another key market indicator - the weekly numbers mapping the flow of fresh cash into or out of junk-rated mutual funds and exchange-traded funds, considered a reliable barometer of overall Junkbondland liquidity trends - was seen on the positive side by both of the major fund-tracking services.

AMG sees $201 million inflow

As Thursday's market activity was drawing to a close, junk market participants familiar with the fund-flow statistics generated by AMG Data Services, Inc. reported that in the week ended Wednesday, $200.9 million more came into those funds than left them.

That was a partial comeback from the $418.1 million outflow seen the previous week, ended March 13, by Arcata, Calif.-based AMG, a unit of the Lipper analytics division of Thomson Reuters Corp.

Twelve weeks into the new year, 2013 net inflows as reported by Lipper so far have amounted to about $817 million, according to a Prospect News analysis of the figures.

There have now been seven inflows and five outflows reported by Lipper so far this year.

In 2012, when cumulative net inflows for the year totaled an estimated $32 billion, according to the analysis, inflows to the funds were recorded in 39 weeks of the year and outflows in the remaining 13 weeks.

EPFR sees $897 million inflow

The other major fund-tracking service, Cambridge, Mass.-based EPFR Global, meanwhile saw its fifth consecutive inflow in the latest reporting week, also ended Wednesday, as $897 million more came into the funds that it tracks than left them.

That was a continuation of the trend seen the week before, when the service recorded a $1.22 billion cash injection, which in turn had followed a $1.9 billion cash gain in the week ended March 6. All of those recent inflows have totaled $4.44 billion, according to a Prospect News analysis of the EPFR figures.

The latest week's inflow was the tenth recorded so far this year by EPFR, against just two outflows, and thus raises the year-to-date net inflow total to nearly $7.2 billion.

EPFR and Lipper calculate their respective fund-flow statistics using different methodologies; EPFR includes some non-U.S. domiciled mutual funds and ETFs in its tabulations, while the Lipper number is purely domestic funds. Despite the differences in the actual numbers, the two services' weekly results usually point in the same direction, although they did not during the week ended March 13.

Reporting only the U.S. funds that it tracks - a category usually more closely aligned with the Lipper totals - EPFR said that those domestic funds accounted for $562 million of the overall number's rise. The week before, inflows to the domestic funds had clocked in at around $348 million.

Those recent gains have represented a comeback from the pronounced weakness in the U.S. funds seen earlier this year. On the strength of that surge lately, EPFR has now seen an even six weekly net inflows to the U.S.-only funds since the start of the year, balanced against six weekly outflows; the 2013 cumulative flows figure, which had been consistently trending in the red until just a few weeks ago, has now risen to about $1.44 billion in the black, according to the analysis.

In 2012, EPFR's overall figure showed a cumulative net inflow of $72.3 billion. According to the Prospect News analysis of the data, EPFR recorded 42 weeks of inflows last year against just 10 weeks of outflows.

Cumulative fund-flow estimates, whether from EPFR or from AMG/Lipper, may be revised upward or downward or be rounded off and could include unannounced revisions and adjustments to figures from prior weeks.

The continued flow of fresh cash into junk - and the mutual funds and ETFs represent but a small, though very observable and quantifiable percentage of the total amount of investor money coming into or leaving the junk market - has been seen by analysts as a key element behind the high-yield secondary sphere's strong performance last year versus other fixed-income asset classes and its record active new-deal pace, which easily topped the $350 billion mark - patterns of primary activity and secondary strength that have mostly continued into 2013.

Vantage Drilling upsizes

Issuers raised $2.1 billion during the busy Thursday session.

Four issuers brought a combined five tranches, all of which saw noteworthy executions.

Four of the five tranches came at the tight end of price talk, while the fifth actually priced through talk.

Of the five tranches, only one was in the market for more than 36 hours.

Two of the five priced in upsized amounts.

Vantage Drilling launched and priced the day's biggest deal, an upsized $775 million issue of 10-year senior secured first-lien notes (B3/B-) that came at par to yield 7 1/8%.

The yield printed at the tight end of yield talk that was set in the 7¼% area. Initial guidance was 7¼% to 7½%.

Citigroup Global Markets Inc. was the left bookrunner for the quick-to-market debt refinancing deal, which was upsized from $600 million.

BofA Merrill Lynch, Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Jefferies & Co. and RBC Capital Markets were the joint bookrunners.

Concurrent with the $175 million upsizing of the bonds, the company downsized its term loan by the same amount, taking it to $350 million from $525 million.

Two tranches from Corrections

Corrections Corp. of America priced $675 million of non-callable senior notes (Ba1/BB+/BB+) in two tranches.

The quick-to-market deal included a $325 million tranche of seven-year notes that priced at par to yield 4 1/8%. The yield printed at the tight end of yield talk set in the 4¼% area.

In addition, the company priced a $350 million tranche of 10-year notes at par to yield 4 5/8%. The yield printed at the tight end of yield talk set in the 4¾% area.

Both tranches were trading in the secondary market at par ½ bid, 101 offered.

BofA Merrill Lynch, J.P. Morgan Securities LLC, SunTrust Robinson Humphrey Inc., Wells Fargo Securities LLC and PNC Capital Markets LLC were the joint bookrunners.

The Nashville-based owner and operator of privatized correctional and detention facilities plans to use the proceeds to tender for all of its outstanding 7¾% senior notes due 2017, to fund the payment in cash of up to 20% of required distributions of earnings and profits attributable to pre-REIT taxable periods, to pay other REIT conversion costs and for general corporate purposes.

Milacron prices through talk

Milacron and MCRON Finance Corp. priced a $465 million issue of eight-year senior notes (Caa1/B-) at par to yield 7¾%, 12.5 basis points inside of yield talk set in the 8% area.

The par-pricing deal shot to 103 bid, 103½ offered, according to an investor.

BofA Merrill Lynch, JP Morgan, Barclays, Credit Suisse and RBC were the joint bookrunners.

Proceeds, cash on hand, borrowings under the company's term loan and certain equity investments will be used to fund the company's acquisition of Mold-Masters, to repay existing third-party debt of Mold-Masters and for general corporate purposes.

Nationstar taps 6½% notes

Nationstar Mortgage and Nationstar Capital Corp. priced an upsized $200 million add-on to their 6½% senior notes due July 1, 2021 (B2/B+) at 1031/4.

The reoffer price, which came at the rich end of the 103 to 103.25 price talk, rendered a 5.828% yield to worst.

BofA Merrill Lynch, Credit Suisse, Barclays and Wells Fargo are the joint bookrunners for the quick-to-market add-on that was upsized from $150 million.

Proceeds will be used for general corporate purposes, which may include future acquisitions and transfers of servicing portfolios.

Heinz playing to $10 billion-plus book

Dealers set the table for a big finish to 2013's winter-spring crossover week, as price talk surfaced on deals that have been roadshowing.

Heinz heads Friday's bill of fare with a $2.1 billion offering of 7.5-year second-lien senior secured notes (B1/BB-/BB) that is playing to between $13 billion and $14 billion of orders, according to a high-yield mutual fund manager.

On Thursday Heinz talked the deal with a yield in the 4½% area.

Wells Fargo is the left bookrunner for the LBO deal.

JPMorgan, Barclays and Citigroup are the joint bookrunners.

The issuing entity is special-purpose vehicle Hawk Acquisition.

Talking the deals

Looking at other deals expected to price on Friday, PetroLogistics and PetroLogistics Finance Corp. talked their $365 million offering of seven-year senior notes (/B/) with a yield in the 6½% area.

Morgan Stanley, Barclays, Citigroup, Goldman Sachs, Stifel Nicolaus, UBS and Wells Fargo are the joint bookrunners.

Exterran Partners and EXLP Finance Corp. talked their $300 million offering of eight-year senior notes (B2/B-) to yield 6¼% to 6½%.

Wells Fargo is the left bookrunner. Credit Agricole, JPMorgan, RBC and RBS are the joint bookrunners.

And Australian gold producer St. Barbara talked its $250 million offering of five-year first-priority senior secured notes (B2/B) to yield 8½% to 8¾%.

Deutsche Bank and Barclays are the joint bookrunners.

A victory for Vantage

In the secondary market, a trader said that Vantage Drilling's 7 1/8% senior secured first-lien notes due 2023 "did very well."

He saw the Houston-based offshore energy drilling contractor's deal - upsized to $775 million from the $600 million originally announced on Wednesday - trading first at 101 5/8 bid, up from their par issue price; after that, he saw the bonds get as good as 101¾ bid, 102 offered.

A second trader also saw the new Vantage bonds in that same context.

And another pegged them at 101 5/8 bid, 101 7/8 offered.

Nationstar up from issue level

Another quickly shopped deal, that from Nationstar Mortgage, a Lewisville, Texas-based mortgage origination and servicing company, was quoted at 103 7/8 bid, 1041/4, up from the 103¼ level at which that $200 million add-on to the company's existing 6½% notes due 2021 had priced earlier in the session to yield 5.828%.

A trader saw an afternoon quote at 103 7/8 bid, 104 5/8 offered and said the bonds were likely going home in a 104-to-104¼ bid context.

The day's other quick-to-market transaction, Corrections Corp. of America, came too late in the session for any kind of aftermarket dealings, the traders said.

Milacron moves up

The one Thursday pricing of a deal off the forward calendar that had been shopped around on a roadshow rather than coming as a same-day transaction - Milacron's 7¾% notes due 2021 - produced solidly higher aftermarket levels in a 103-104 bid context, a trader said.

The Cincinnati-based maker of plastics processing machinery had priced its $465 million offering at par.

A second trader heard that "the [order] book was something like 12 times over."

He said that when the deal priced, "they squeezed the hell out of it," causing the deal to come in tighter than the 8% yield that had been talked around the market.

Another market source saw the new bonds at 103 bid, 103½ offered.

U.S. Steel busiest bond

By far the busiest junk issue of the session was the new U.S. Steel 6 7/8% notes due 2021, with a market source seeing a total of $85 million of the Pittsburgh-based steel giant's $275 million issue having traded during the session, mostly in round-lot dealings.

He located the bonds late in the session at 101 1/8 bid, up about a point from where that issue had gone home on Wednesday, when the quick-to-market offering had priced at par after upsizing from an original $250 million.

A second trader quoted the bonds going out at 100¾ bid, 101 1/8 offered.

At another desk, a trader said that he had seen "a bunch of dealer trades" in the active issue at bid levels ranging from 100½ to 1011/4.

Intelsat gains altitude

A trader said that "another name that did really well" was Intelsat (Luxembourg), which priced a restructured and hugely upsized $3.5 billion of notes Wednesday night, well after trading had wrapped up for the day.

He saw all three tranches of the communications satellite company's new issue trading "at 101 1/8-to-101¼ across the board" after the megadeal's component parts were freed for secondary action Thursday.

At another desk, a trader saw Intelsat's $500 million of 6¾% notes due 2018 get as good as 103 bid, well up from their par issue price.

He said that its $2 billion of 7¾% notes due 2021 were trading around 101½ bid, while its $1 billion of 8 1/8% notes due 2023 were trading between 101 and 101¾ bid earlier in the afternoon.

Heading for home, he said, "I think the five-year might have come in a little" from its peak level, "but the other two were pretty firm."

He said that he had heard that the five-year piece "was placed with two lead orders, which took two-thirds of the issue, or $300 million, so there isn't any liquidity it," which he said would not bode well "if somebody got shorted."

Intelsat had originally announced a $1.5 billion issue of the eight-year notes on Tuesday, but it upsized that tranche to $2 billion while adding the five-year and 10-year tranches as well. At $3.5 billion, the mega-deal matched the $3.5 billion two-part deal that Dallas-based pre-paid cell phone operator MetroPCS Wireless Inc. had brought to market back on March 8 as the biggest junk deal of the year so far, and the $2 billion eight-year piece was the biggest single junk tranche of 2013 to date.

Intelsat's existing 11¼% notes due 2017 also saw brisk activity on Thursday, with over $10 million of those bonds having changed hands, finally finishing at 106 5/8% bid, down 1/8 on the day. The company is using proceeds from the new deal to tender for those notes and for its 2017 PIK toggle notes as well.

Market indicators turn mixed

Overall, statistical junk performance indicators turned mixed on Thursday after having been higher across the board on Wednesday - their fourth mixed session in the last five.

The Markit Series 19 CDX North American High Yield index fell by 3./8 point to end at 103 7/8 bid, 104 1/8 offered, after having risen by that same amount on Wednesday to break a three-session losing streak.

The KDP High Yield Daily index, meanwhile, rose by 4 bps Thursday to end at 75.70, its first gain after two straight sessions of having been unchanged.

Its yield came in by 1 bp for a second consecutive session on Thursday to end at 5.47%.

And the widely followed Merrill Lynch High Yield Master II index posted its third consecutive gain on Thursday, rising by 0.013%, on top Wednesday's 0.04% advance.

Thursday's gain lifted its year-to-date return to 2.748%, its third consecutive new peak level for the year so far. The previous 2013 high-point, 2.735%, had been recorded on Wednesday.

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