Junk primary drought continues; overall market firmer; Clear Channel, Chesapeake Energy busy

By Paul Deckelman and Paul A. Harris

New York, Feb. 24 - The high-yield primary market remained quiet for a second consecutive session on Monday, syndicate sources said.

Just as had been the case on Friday, there were no pricings of any junk-rated, dollar-denominated bonds from domestic or industrialized-country issuers.

One prospective new deal surfaced, with gaming operator Greektown Casino Hotel heard to be shopping an eight-year offering around for a possible mid-week pricing.

Among recently priced deals, traders saw some activity in Thursday's deal from semiconductor manufacturer Advanced Micro Devices Inc., but did not see trading in such other recent deals as those from waste management company Covanta Holding Corp., homebuilder D.R. Horton Inc. or modular structure and storage container seller Modular Space Corp.

Apart from the new deals, traders said the market was quiet, with many participants away at the J.P. Morgan Global High Yield & Leveraged Finance conference, which is under way in Miami Beach. The conference has slowed down new issue activity, according to a debt capital markets banker who professed visibility on deals expected to surface late this week and early in the week ahead.

Traders said the market seemed stronger with existing issues grinding higher as investors tried to put their cash to work in the absence of many new deals.

Several traders saw some activity in Clear Channel Communications Inc. bonds.

And there was some activity in Chesapeake Energy Corp. paper after the company announced plans to seek a strategic transaction for its oilfield services unit.

Statistical market performance indicators turned higher across the board, after having been mixed on Friday.

Greektown coming Wednesday

Detroit-based Greektown Casino Hotel is expected to bring a $425 million offering of eight-year notes into the market on Wednesday, according to a market source.

The deal, via bookrunner Jefferies LLC, is coming with initial guidance of 8½% to 9%, the source added.

The notes come with three years of call protection.

Elsewhere, price whisper surfaced on Monday on the Kerneos Tech Group SAS €335 million two-part offering of seven-year senior secured notes (B2/B+), according to a market source.

A €200 million minimum tranche of fixed-rate notes, callable after three years at par plus 50% of the coupon, is whispered at 6½%.

A to-be-determined amount of floating-rate notes, which will become callable after one year at 101, are whispered at a 400 basis points spread to Euribor.

The roadshow wraps up on Thursday.

Goldman Sachs International is the bookrunner for the acquisition financing.

AMD, not much else trades

In the secondary market, a trader said he saw "nada" going on in terms of trading in recently priced deals.

A second trader said that "the only new-issue I've seen" in Monday dealings was Advanced Micro Devices' 6¾% notes due 2019, pegging those bonds in a bid context of 100½ to 101. That was a little better than the levels around 100¼ bid seen on Friday, when the bonds began to trade.

AMD, a Sunnyvale, Calif.-based semiconductor manufacturer, priced $600 million of the notes at par in a quick-to-market deal on Thursday, after the issue was upsized from an originally announced $500 million. The deal appeared too late in the day on Thursday for any secondary activity at that time.

The trader said he had not seen any trading in other deals from last week, such as Covanta Holdings' 6 7/8% notes due 2024. The Fairfield, N.J.-based waste management, waste-to-energy and metals recycling operator priced $400 million of the notes at par on Thursday in a drive-by deal and moved up to above the 101½ bid level in very active dealings when the bonds moved into the aftermarket.

He also said he had not seen anything doing in Fort Worth, Texas-based homebuilder D.R. Horton's 3¾% notes due 2019.

That quickly shopped $500 million offering priced at par on Wednesday after having been upsized from an originally announced $400 million.

Although the bonds traded actively right around their issue price when they were freed, most of the action was said to have come from high grade crossover players reaching down the credit curve for yield, rather than from traditional junk accounts put off by the relatively sparse coupon.

There was also no activity seen in last week's $375 million offering from Modular Space Corp., a Berwyn, Pa.-based marketer of modular structures and storage containers. The company's 10¼% senior secured notes due 2019 priced at par on Wednesday in a scheduled forward-calendar deal and promptly firmed smartly to a 103½ to 104½ bid context, propelled by investor interest in the issue's generous coupon.

Older deals quoted better

A trader said that some of the recent deals that priced before last week had moved up on the session, pushed by the generally strong market and the relative lack of much new-deal paper. Those bonds had not been terribly active over the previous few sessions.

He saw CEC Entertainment Inc.'s 8% notes due 2022 at 102½ bid, 103½ offered, calling the bonds up as much as 1 point on the day.

The Irving, Texas-based operator and franchisor of the popular Chuck E. Cheese family dining and entertainment restaurants priced $255 million of the notes at par in a scheduled forward-calendar deal on Feb. 14, after downsizing the offering from an originally shopped $305 million. The notes had firmed to around a 101½ to 101¾ bid range in the aftermarket prior to Monday.

He also saw Diamond Foods, Inc.'s 7% notes due 20119 up¾ point at 103¼ bid, 103¾ offered. The San Francisco-based producer of packaged snack foods like popcorn, potato chips and nuts priced $230 million of the notes at par in a forward-calendar deal on Feb. 13.

The bonds had quickly moved to around the 102 to 102½ area when they were freed for aftermarket dealings.

Overall market quiet, firm

Away from those recent deals, a trader said that there was "not a whole heck of a lot" going on.

A second trader said: "The market is just grinding higher - it seems very firm and full, with not a lot of issuance and plenty of cash around, so guys are chasing secondaries."

It was, he said, "very quiet, a couple of things trading but basically, most guys were just looking for bonds."

The first trader opined that "nothing is really jumping out, left or right here. It was just a sleepy Monday, watching the market go up."

Clear Channel climbs

One major exception to the rule, which was seen in the market on Monday, was Clear Channel's 14% notes due 2021.

In contrast to the generally quiet tone of the junk market, a trader said the San Antonio, Texas-based radio broadcasting and outdoor advertising company's issue was "the big volume leader today," seeing over $44 million of those bonds having traded around 99, which he called a gain of 1½ points.

Another trader also volunteered that "there were a lot of blocks of CCMO 14s that were up today," calling the bonds 11/2-point winners.

A market source at another desk also saw the company's 9% notes due 2021 firm to around 104 1/8 bid with nearly $7 million traded by mid-afternoon, while its 5½% notes due 2016were going out around 94½ on volume of over $5 million.

The 9% notes due 2019 were seen ending at 105 7/8 bid, also on volume of more than $5 million.

There was no fresh news out on the company, which last week reported fourth-quarter results, including better revenues from its radio group powering an overall revenue rise despite a decline in outdoor ad sales. It also touted increased liquidity from a pair of asset-sale transactions in recent weeks.

Chesapeake churns

A trader saw about $16 million of Chesapeake Energy's bonds trading on Monday, although he allowed that the total figure was spread over something like six different issues of the Oklahoma City-based natural gas and oil exploration and production company's notes.

That followed the company's announcement that it was pursuing strategic alternatives for its oilfield services division, Chesapeake Oilfield Services, including a potential spinoff to Chesapeake shareholders or an outright sale.

He saw around $6 million of its 6 5/8% notes due 2019 trading, going out at 106½ bid, calling that down 1 point.

The trader saw its 6 7/8% notes due 2020 up¼ point at 115¼ bid, on "a couple of million of those trading. So there were no big moves in either direction."

He also saw the company's 5 3/8% notes due 2021 at 108 bid, up 1 point, on volume of about $3 million, which he called "not large volume."

He added that there was "not a lot of volume" in any one issue, "and nothing huge, one way or another, jumping off."

"It seemed like bonds were up a bit," a trader at another shop said, but he added, "I didn't really see that much action in Chesapeake."

Market indicators improve

Statistical junk-market performance indicators turned higher across the board on Monday, after having been mixed on Friday, although that followed a higher session on Thursday.

The Markit Series 21 CDX North American High Yield index gained ¼ of a point on Monday to finish at 107 13/16 bid, 107 7/8 offered. On Friday, it had lost 3/32 of a point.

The KDP High Yield Daily index recorded its 12th consecutive gain, moving up by 3 basis points to end at 75.10. That followed an 8 bps rose on Friday. Its yield, meanwhile, came in for a 12th consecutive session on Monday, declining by 3 bps for a second straight session to end at 5.28%.

And the widely followed Merrill Lynch High Yield Master II index recorded its 14th straight gain on Monday, rising by 0.165%, on top of Friday's 0.116% improvement.

The latest upturn raised its year-to-date return to 2.239%, its 10th consecutive new peak level for the year, versus 2.07% on Friday, the first time the index was above the 2% mark.

The index's yield to worst declined to 5.291%, its fourth straight new low for the year, eclipsing the previous 2014 low of 5.329% set on Friday. Those levels were well down from the 5.735% seen on Feb. 4, its highest point for the year so far.

The spread to worst tightened to399 bps over comparable Treasuries from 404 bps on Friday. Those spreads remained in from Feb. 4's 444 bps, the wide point for the year so far, although they also were up from the tight spread for the year - 398 bps - recorded on Jan. 22.

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