Busy $12 billion week ends quietly; Genel slates; recent deals ease in dull trading

By Paul Deckelman

New York, April 25 - One of the biggest new-issuance weeks of the year ended on Friday pretty much as it had begun this past Monday - with no new deals having priced, according to high-yield syndicate sources.

Those quiet sessions acted like a pair of matched bookends to the otherwise busy week, which included pricing of the biggest junk bond financing of all time - Wednesday's €12.05 billion equivalent (about $16.6 billion), seven-tranche, dual-currency deal from affiliated European cable and telecommunications operators Altice SA and its 40% owned Numericable AG subsidiary

That huge deal, and the several smaller deals that followed in its wake on Wednesday and Thursday, brought new issuance for the week to $12.07 billion of new U.S. dollar-denominated, fully junk-rated paper from domestic or industrialized country corporate borrowers pricing in nine tranches, according to data compiled by Prospect News - almost double the $6.15 billion that had priced in 11 tranches during the previous week, which ended on Thursday, April 17, due to the financial market closure the day after that for Good Friday.

The week's volume approached - but could not quite top - the $12.89 billion that got done in 20 tranches the week before that, ended April 11 - the heaviest new-issuance week so far this year.

As of the close Friday, year-to-date issuance for 2014 so far stood at $104.67 billion in 199 tranches, down by 3.5% from the busy pace seen a year ago, when $108.15 billion had priced in 239 tranches by this point on the calendar, according to the data. However, junk's recently accelerated new-issuance pace - helped enormously by the two $12 billion-plus weeks in the last three weeks - has been closing the year-over-year percentage gap significantly of late, from the previous week's 8.3% difference and the 13.7% and the 21% figures in the two weeks before that.

With no deals having priced on Friday, the only real news coming out of the primary came from British oil and natural gas operator Genel Energy plc, which plans to sell $400 million of five-year notes. However, no immediate information on the timing of that deal has emerged yet.

Investors were meantime looking forward to deals that are expected to price during the upcoming week after wrapping up their respective roadshows - all coming from borrowers based in Europe. These include British metals mining concern Consolidated Minerals, Dutch aluminum industrial products manufacturer Constellium NV and Greek electricity supplier Public Power Corp..

Back in the secondary market, traders saw a generally softer tone, reflected in the trading levels for the four tranches of dollar bonds priced by Altice and Numericable; as well as Thursday's deal from Hearthside Food Solutions. They all came off the robust highs they had established in the aftermarket after those deals had priced.

Statistical measures of junk market performance turned lower on Friday after four consecutive sessions of having been mixed.

And for a third consecutive week, those market indicators were also mixed versus where they had been at the end of the previous week.

U.K.'s Genel plans deal

With primaryside players presumably still exhausted from Wednesday's extraordinary session - even two days later - news flow from that segment of the junk bond world was reduced to a trickle.

There were no pricings and only one prospective new deal even joined the forward calendar - Genel Energy plc, which plans to sell a $400 million issue of five-year senior notes.

High yield syndicate sources indicated that DNB Markets and Pareto Securities have been appointed joint lead managers and bookrunners for the offering.

Information on the expected timing of the deal and other details about its structure were not immediately disclosed.

The London-based oil and natural gas exploration and production company - which operates in the Middle East and Africa, claiming to be the largest independent oil producer in the Kurdistan Region of Iraq - plans to use the net proceeds of the offering towards a combination of field development costs as well as general corporate purposes.

Market eyes potential deals

With no other hard news seen emerging from the primary market on Friday, some participants were speculating about possible deals that could come onto the radar screens in the coming weeks.

One trader, for instance, pointed out the news that SunCoke Energy Partners, LP, a Lisle, Ill.-based manufacturer of coke used in the blast furnace production of steel, began a cash tender offer for up to $160 million of its $400 million of outstanding 7 5/8% senior notes due 2019.

That tender offer - with a May 8 early tender deadline and a May 22 expiration deadline, both subject to possible extension - is conditioned on, among other things, the completion of a capital markets debt financing with net proceeds sufficient to fund the offer, although there was no immediate word from either the company or from the dealer-managers for the tender offer, Citigroup Global Markets Inc. and Barclays Capital Inc., as to just what form that debt financing would take - bonds, bank debt, other securities, or some combination.

A primaryside source meanwhile noted that Ortho-Clinical Diagnostics Inc., a Raritan, N.J.-based medical provider of laboratory testing services, has a bank meeting scheduled for Monday with prospective lenders regarding the company's planned $2.175 billion seven-year term loan facility and $350 million five-year revolving credit line - and is expected to shortly after to launch a companion $1.15 billion offering of senior notes. Those bonds are anticipated as May business via joint bookrunners Goldman Sachs & Co., Barclays, Credit Suisse Securities (USA) LLC, UBS Securities LLC and Nomura Securities.

Proceeds of the bond deal and the bank facility will be used to help fund the $4.15 billion acquisition of the company from Johnson & Johnson by The Carlyle Group.

Moody's Investors Service on Friday rated the loan at B1 and the bond deal at Caa1, while Standard & Poor's rated them at B and CCC+, respectively.

Secondary is sedate

Away from the upcoming primary activity, a trader called Friday's session "a pretty quiet, boring day."

He said that he "never saw any of those little deals" that came on Thursday, little being relative to the previous day's giant-sized offerings.

"After a $6, $8, $10 billion deal coming the day before, these $200 and $300 million deals, nobody was showing anything in that."

Recent deals ease

Another trader did see some activity in Thursday's $300 million offering of 6½% notes due 2022 from Hearthside Food Solutions, pegging the bonds at 102 bid, 102¼ offered, down ½ point on the day.

The Downers Grove, Ill.-based bakery and contract food manufacturing company priced its notes at par after that scheduled forward calendar deal was upsized from $270 million originally; in initial aftermarket trading Thursday, the bonds had shot as high as 103 bid, 103½ offered.

The Altice and Numericable deals were also seen having lost some ground, coming down from the robust highs they had hit in initial aftermarket dealings on Wednesday and then had extended on Thursday.

Traders saw the bonds down about ¼ to ½ point pretty much across the board, with Altice's 7¾% notes due 2022 at 103 3/8 bid, 104 offered, Numericable's 4 7/8% first-lien senior secured notes due 2019 at 100 3/8 bid, 100¾ offered, its 6% secured notes due 2022 at 101½ bid, 102 offered, and its 6 ¼% notes due 2022 at 101 5/.8 bid, 101 7/8 offered. Both of the latter two bonds had traded above the 102 mark on Wednesday and Thursday.

Indicators off on day

Statistical junk performance indicators turned lower on Friday, after having been mixed for the previous four sessions.

They were higher versus the levels at which they had ended the previous week for a third straight week.

The Markit Series 22 CDX North American High Yield Index lost 9/32 point on Friday, its third consecutive setback. It had eased by 1/32 on Thursday.

The index was also down from 107 bid, 107 1/16 offered, where it had finished out the previous week.

The KDP High Yield Daily Index dropped by 4 basis points to 74.92, after having been unchanged on Thursday. Friday's loss was its fourth in the last five sessions.

Its yield rose by 2 bps to 5.21%, after having come in by 1 bp on Thursday.

Those levels compared unfavorably with a 74.99 index reading and 5.20% yield a week earlier.

The widely followed Merrill Lynch High Yield Master II Index was also on the downside, suffering its first loss after four consecutive gains. It dipped by 0.008%, versus Thursday's 0.057% rise.

Friday's loss dropped the index's year-to-date return to 3.546%, down from Thursday's 3.554%, its peak level for the year so far.

However, it was up from the 3.349% reading seen at the end of last week, marking a sixth straight week-over-week gain.

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