Players see a big week taking shape in the high-yield primary market

By Paul A. Harris

Portland, Ore., July 6 - Even with Friday's disappointing non-farm payroll numbers casting a pall over the capital markets in the United States, high-yield players see a possible breakout new-issue market primed and loaded heading into the July 9 week.

The reason? Cash.

Coupon payments and cash inflows, accumulating against of backdrop of a recently slow calendar, mean that the buyside accounts have cash to put to work, a fact that has not escaped the attention of issuers and their underwriters, sources say.

Counts differed from source to source. However based on Friday conversations a conservative tally envisions around $5 billion in eight deals, in dollar-denominated business alone, with at least one sellsider asserting that the July 9 week's issuance could push substantially higher than that mark.

With the first, holiday-shortened week of July having put up just a paltry $64 million of issuance, in one deal, the July primary market is still capable of putting up numbers north of $20 billion, sources assert.

Expected deals

Some of the week's business will come from a well-known and building pipeline of issuers.

Community Health Systems, Inc. is expected to come with a quick-to-market deal in the week ahead to fund its cash tender offer for its $934 million of outstanding 8 7/8% senior notes due 2015, sources say.

Credit Suisse Securities (USA) LLC, the dealer manager for the tender, is expected to lead.

Party City Holdings Inc. is expected to show up with a $700 million offering of senior notes to help fund the buyout of the company by Thomas H. Lee Partners LP, according to a trader.

The bridge loan backing the bonds is fully syndicated, market sources say.

Bank of America Merrill Lynch, Deutsche Bank, Goldman Sachs, Morgan Stanley and Barclays are the leads.

Hologic Inc.'s $750 million offering of senior notes, backing the acquisition of Gen-Probe Inc., could also hit the block during the week ahead, the trader added.

Hologic's concurrent $3.05 billion credit facility is being led by Goldman Sachs, JPMorgan and Citigroup.

Already on the calendar

Some business for the July 9 week was already on the calendar.

Its roadshow having been completed in late June, WOW! Internet, Cable & Phone is expected pull the wrappers off a revamped version of its $1.02 billion offering of notes backing the acquisition of Knology Inc.

New conversations regarding investors' views on the deal's pricing and structure are expected.

Credit Suisse, Morgan Stanley, RBC, SunTrust and Mitsubishi are the leads.

Also a couple of smaller deals were carried over the weekend.

Horsehead Holding Corp. plans to begin a full roadshow for a $175 million offering of five-year senior secured notes (expected ratings B2/B) via lead left bookrunner Cowen and allocating book manager CRT Capital.

Also the market continues to await news on Xtreme Drilling and Coil Services Corp.'s $170 million offering of five-year first-lien notes, which are in the market with guidance of 8¾% to 9¼%, via Pareto.

In addition to these, deals north of $500 million are expected to come, including one from the defense/communications/aerospace sector and one from the technology sector, according to a syndicate banker.

Europe a question mark

Market conditions permitting, the European high-yield primary market is poised to resume a meaningful level of activity, sources say.

Netherlands-based Stork Technical Services Holding BV has been marketing €345 million of high-yield debt to accounts in Europe and the United States.

Goldman Sachs has the books.

Germany's Klockner Pentaplast is expected to roll out its recapitalization deal, via Jefferies, which is expected to be comprised of around €255 million of second-lien notes.

Also Fresenius SE & Co. KGaA could be coming soon with €2.1 billion equivalent of bonds, via Deutsche Bank, JPMorgan, Societe Generale, Credit Suisse and UniCredit, in a deal that is expected to come in denominations of €1.5 billion and $750 million.

The perception among European market watchers is that the near-total lack of a European new-issue calendar has created pent-up demand among buyside accounts with cash which they need to put to work.

The Canadian market

In addition to the above-mentioned Xtreme U.S. dollar-denominated deal, a couple of Canada-based companies are in the market with Canadian dollar-denominated offerings.

Great Canadian Gaming Corp. (Ba3) plans to hold a roadshow for its C$400 million offering of 10-year senior notes, although the deal is expected to carry over into the July 16 week.

Scotia and HSBC are the bookrunners.

Also Golf Town Canada Inc. and Golfsmith International Holdings, Inc. plan to hold a roadshow the week of July 9 for a high-yield offering of C$150 million of senior second-lien notes (B/DBRS B low) via Scotia, TD and BMO.

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