Primary silent, awaiting TMS deal talk; GM lags, Charter busy, no Burlington pop from IPO

By Paul Deckelman and Paul A. Harris

New York, Oct. 2 - The high-yield primary sector - so very busy last week and last month - experienced on Wednesday its second complete shutout in three sessions, as no new dollar-denominated and fully junk-rated deals from domestic or industrialized-country issuers were heard to have priced.

Primaryside sources were chalking up the lack of activity to the market's need to first fully digest all of the bond deals that recently got done - $17 billion last week and $47 billion for all of September, both tops for the year - as well as several investor conferences and a generalized wariness as the governmental shutdown saga plays out in Washington.

Those sources did see some activity on tap for Thursday, with price talk expected out on steel industry services provider TMS International Corp.'s $300 million of senior notes and order books scheduled to then close, making pricing a possibility.

In the secondary market, activity was considered quiet.

Friday's new deal from Caesars Entertainment Resort Properties, LLC, which had been seen having firmed solidly on Tuesday off the bonds' recent lows, retreated a little from those stronger levels.

Last week's General Motors Co. three-part deal continued to mostly spin its wheels.

There was busy trading in several Charter Communications, Inc. issues, though with no news seen out on the company.

And while Burlington Stores Inc.'s newly minted shares zoomed on their first day of trading following the company's initial public offering, all of that investor enthusiasm did little for the company's bonds.

Statistical market performance measures were higher for a second consecutive session.

Lots to distract market

The primary market put up a goose egg on Wednesday, with people chalking up the lag in business to various circumstances, including the Deutsche Bank Leveraged Finance Conference, earnings season and market fatigue. High-yield investors seem to still be digesting the $17.2 billion of junk bonds that priced during the final week of September, some of which are now trading below new issue prices.

Last but not least, there is the vaunted shutdown of the U.S. government, as the executive and legislative branches have thus far failed to agree whether amendments forestalling the onset of certain provisions of the Affordable Care Act should be coupled with legislation to extend funding for the government for another three months.

No deals priced on Wednesday, and none were announced.

TMS price talk Thursday

Price talk of 8% to 8¼% is expected to surface Thursday on the TMS International $300 million offering of eight-year senior notes (B3/B-), according to buyside sources.

Books will close on Thursday, according to a portfolio manager who is looking at the deal and was told that the order book is three times oversubscribed.

Goldman Sachs, J.P. Morgan, HSBC and Deutsche Bank are leading the deal backing the buyout of the company by certain members of the Pritzker family.

New Stackpole little changed

In the secondary sphere, a trader said that Stackpole International's new 7¾% senior secured notes due 2021 were unchanged on the day. He quoted that paper at the same 101 5/8 bid, 102 1/8 offered level at which it had gone home on Tuesday.

The Ancaster, Ont.-based manufacturer of oil pumps and powder metal components had priced its $360 million issue at par earlier that session.

Caesars backs off gains

Looking at the deals that came to market last week, a trader said that Friday's new $2.15 billion two-part secured paper offering from Las Vegas-based gaming giant Caesars Entertainment "moved back down" on Wednesday after both tranches had firmed smartly on Tuesday, when they were carried along by an overall solidly stronger market.

He quoted the 8% first-lien senior secured notes due 2020 having retreated to 98¾ bid, 99 1/8 offered, "after yesterday having traded as high as 99¾ a couple of times."

He also saw the company's new 11% second-lien senior secured notes due 2021 as having eased to 97 bid, 98 offered; on Tuesday, those bonds had traded as high as 97 5/8 bid, 98 5/8 offered.

Caesars priced both tranches at par on Friday after having increased the size of the overall deal from an originally planned $1.85 billion. The company upsized the 8% notes to $1 billion from an originally planned $500 million, while downsizing the 11% notes to $1.15 billion from $1.35 billion originally.

However, the new bonds had not done well in initial aftermarket dealings, with the 8% notes having fallen to around 98½ bid when they were freed for trading on Monday, while the 11% notes had done even worse the same day, dropping to 96½ bid, 97 offered from their par issue price.

Both tranches were seen up more than 1 point in Tuesday's dealings, although they then coughed up some of those recovered gains on Wednesday.

The trader meantime saw "a lot of activity" in the company's legacy Harrah's Operating Co. Inc. 10% second-lien notes due 2018, which he pegged in a 51½ to 52¼ bid range. "We saw some pretty good-sized trades," he said, noting that the $3.3 billion issue normally is a pretty active credit.

At another desk, a trader saw even more activity in the Harrah's 11¼% notes due 2017 - over $11 million versus about $8 million on the 10% notes - and saw the 11¼% notes off ½ point at 101½ bid.

GM in a rut

A high-yield portfolio manager was quoting General Motors' new 4 7/8% notes due 2023 at 98¼ bid, 98¾ offered, while its 6¼% long bonds due 2043 were parked at 98¾ bid, 99¼ offered.

The Detroit giant had priced $1.5 billion of each of those bonds last Tuesday at par, along with another $1.5 billion of 3½% notes due 2018.

While the shorter paper seemed to have at least held its own - a trader at another shop on Wednesday quoted it at 100 1/8 bid, 100 5/8 offered - the 10-year and 30-year bonds struggled; that same trader saw the 10-years at 97½ bid, 98 offered, while the 30-years were languishing at 98 3/8 bid, 98 7/8 offered, both unchanged on the day.

The portfolio manager suggested that GM's bonds were not being helped any by soft recent sales figures - GM saw an 11% drop-off in September from a year earlier, its first such monthly fall since July of 2012.

He opined that "Labor Day screwed everything up for GM, because Friday and Saturday of Labor Day weekend fell into August. If people bought over Labor Day weekend they got counted into August, whereas the prior-year Labor Day weekend numbers went to September."

While very true, that was not a situation unique to GM, as it affected all of the carmakers, and, in fact, most of them reported softer sales from the same period last year. However, the Labor Day glitch didn't seem to bother GM rivals Ford or Chrysler much, both of whom reported sales gains for the month of 6% and 1%, respectively, with Ford actually coming within 2,049 vehicles of unseating GM as the top U.S. automaker for the first time since May of 2011.

Another trader, meantime, said that despite GM's nominal junk ratings (Ba1/BB+/BB+), "we leave that for the high-grade guys here, because Ford (Baa3/BBB-/BBB-) and GM should trade together, and it's really a high grade at this point, in my estimation, or at least a crossover, even though it doesn't have the rating."

He said that "certainly the high-grade community is involved in GM, but from a high-yield perspective, maybe not so much."

Busy day for Charter

Away from the new deals, a market source noted that Charter Communications' CCO Holdings LLC bonds were among the most actively traded issues in Junkbondland on Wednesday, although there was no fresh news seen out on the Stamford, Conn.-based cable and broadband operator.

Its 5¼% notes due 2022 were seen up 1/8 point at 93 3/8 bid, on volume of over $10 million, while its 5 1/8% notes due 2023 were unchanged on the day at 92½ bid, with over $11 million having traded. CCO's 6 5/8% notes due 2022 gained around 1 point on the day on volume of $9 million, going out at about 102½ bid.

Little Burlington IPO impact

Burlington Coat Factory Warehouse's 10% notes due 2019 derived little benefit from parent company Burlington Stores' successful first day of stock trading following the Burlington, N.J.-based clothing retailer's IPO.

The bonds eased by 1/8 point to end at 111¼ bid, on volume of over $4 million.

The shares, though, soared by $8.01, or 47.12% on their first day of New York Stock Exchange trading, finishing at $25.01, on volume of over 15 million.

Market indicators improve

Statistical junk-market performance indicators were meantime higher across the board on Wednesday, their second consecutive session on the upside after having been down across the board over the previous two sessions.

The Markit Series 21 CDX North American High Yield index rose by 3/32 point to end at 104 15/16 bid, 105 1/16 offered, its second straight gain. It had advanced 13/32 point on Tuesday.

The KDP High Yield Daily index broke a three-session losing streak, rising by 6 basis points Wednesday to go home at 73.46. On Tuesday, it had lost 2 bps.

Its yield narrowed by 2 bps to end at 6.12%, its second straight decline; the yield had come in by 1 bp on Tuesday.

And the widely followed Merrill Lynch High Yield Master II index posted its second straight gain on Wednesday after six consecutive downturns, as it rose by 0.103%, building on Tuesday's 0.077% improvement.

The latest gain lifted its year-to-date return to 3.975% from Tuesday's 3.867% finish.

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