DISH, Hologic, Party City lead huge primary session; new deals jump; funds gain $821 million

By Paul Deckelman and Paul A. Harris

New York, July 19 - The high-yield primary sphere had one of its busiest days of the year on Thursday. More than $4 billion of new dollar-denominated, junk-rated paper came clattering down the chute in nine tranches, keeping syndicate desk operatives, analysts, portfolio managers and secondary market traders alike hopping.

Two of the offerings were heard by syndicate sources to have been upsized to mega-deal proportions: medical manufacturer Hologic Inc.'s eight-year deal, coming off the forward calendar, and satellite broadcaster DISH DBS Corp.'s quick-to-market add-on to its 10-year notes. Both eventually weighed in at $1 billion.

Party City Holdings, Inc. joined in the festivities with a $700 million issue of eight-year notes, while zinc products maker Horsehead Holding Corp. did a $175 million five-year secured transaction.

Among quickly shopped deals that just hit the junk market radar screen over the past couple of days, Ireland's Ardagh Packaging Finance plc completed a large and complex three-part offering of dollar- and euro-denominated notes mirroring the terms of existing issues. Energy drink maker Innovation Ventures LLC and communications services provider j2 Global Inc., on the other hand, kept it single-tranche simple, Innovation with an upsized $450 million of seven-year secured notes and j2 Global with $250 million of eight-year unsecured paper. Financial firm Nationstar Mortgage Holdings, Inc. did a $100 million same-day add-on to its existing 2019 notes.

Traders said the latter deal was too small for any kind of secondary presence, and the Horsehead and j2 Global transactions appeared too late in the day for much trading around, but all of the other deals hit the aftermarket and were higher across the board.

There was also very heavy trading seen in the new Smithfield Foods Inc. bond deal that priced Wednesday, with the hog producer's notes having firmed smartly on the day. Wednesday's other deal, from telecom and internet provider Level 3 Communications Inc., meantime held on to the strong gains it had initially notched after pricing.

Other recent new deals were also seen more than holding their own for the most part - but a trader said that Harland Clarke Holdings Corp. failed to keep pace.

Traders said that the secondary market among existing issues was firm but uneventful, with most investor attention focused on the barrage of new deals. Statistical market performance indicators rose across the board for a second straight day.

And a key indicator of overall junk market liquidity trends - the weekly flow of cash into or out of high-yield mutual funds and exchange-traded funds - was strongly positive for a sixth consecutive time.

AMG gains $821 million

As Thursday's session was finishing, market participants familiar with the weekly AMG high-yield mutual fund flow statistics said that in the week ended Wednesday, $821 million more came into those funds than left them.

It was the sixth consecutive strong showing by the junk mutual funds and ETFs in as many weeks and came on the heels of the $1.49 billion inflow seen in the previous week, which ended July 11.

Those six inflows, collectively worth $5.8 billion, have represented a solid turnaround from the pattern of weakness seen in the four weeks before that, dating back to the week ended May 16, when a total of $6.43 billion of outflows were recorded from those funds, according to a Prospect News analysis of the figures. That included two huge cash hemorrhages: $2.9 billion in the week ended June 6, which was the third-largest cash loss on record since Arcata, Calif.-based AMG, a unit of Thomson Reuters' Lipper/FMI division, began tracking fund flows some years ago, and $2.46 billion seen in the week ended May 23.

On a year-to-date basis, Lipper said that latest inflow pulled the cumulative net inflow figure up to $24.45 billion, including the ETFs. The year-to-date figure counts monthly reporting funds as well as the weekly reporters, the company said. Excluding those ETFs and just tallying the mutual funds, the year-to-date net inflow stood at $18.15 billion.

Inflows have now been seen in 24 out of the 29 weeks since the start of the year against just five outflows.

EPFR: funds up $1.32 billion

A rival fund-tracking service, Cambridge, Mass.-based EPFR Global, reported that in the week ended Wednesday, $1.32 billion more came into the funds it follows than left them, confirming the recent turnaround in the fund-flow trajectories.

That followed the previous week's $2.65 billion inflow, which EPFR said was the biggest it has seen in 22 weeks, since the gigantic $3.55 billion cash injection seen in the week ended Feb. 8 - EPFR's second-highest ever.

As was the case with the AMG Lipper numbers, EPFR - which uses a different methodology but whose numbers usually point in the same direction as AMG - reported that this was the sixth consecutive large inflow number. Inflows have totaled an estimated $9.44 billion during that stretch.

As was the case with AMG, those inflows followed four straight weeks of sizable outflows, including one of the biggest ever, the $3.6 billion that had left the funds in the week ended June 6.

The latest week's inflow lifted EPFR's year-to-date total return to $39.41 billion, the company said.

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

Analysts say the continued flow of fresh cash into junk - and the mutual funds represent but a small, though observable and quantifiable percentage of the total amount of money coming in - fueled the record new-deal borrowing binges seen in both 2009 and then in 2010, as well as the robust secondary market seen both years, and continued to be the driver behind 2011's near-record issuance.

Those fund flows are also seen as the key element behind the high-yield secondary market's strong performance during the first half of this year versus other fixed-income asset classes and its relatively active new-deal pace, with issuance volume not running too far behind last year's totals.

DISH doubles down

The torrid Thursday primary market session saw eight issuers price a combined nine dollar-denominated tranches, raising a grand total of $4.27 billion.

DISH DBS priced a massively upsized $1 billion add-on to its 5 7/8% senior notes due July 15, 2022 (Ba2/BB-) at 100.75 to yield 5.771%.

The deal doubled in size from the initially announced $500 million amount.

The reoffer price came in line with the 100.5 to 101 price talk.

Deutsche Bank Securities Inc. ran the books for the general corporate purposes deal.

The original $1 billion issue priced at par on May 8 as part of a $1.9 billion two-part deal that also included $900 million of 4 5/8% senior notes due July 15, 2017.

Hologic upsizes

Hologic priced a massively upsized $1 billion issue of eight-year senior notes (B2/BB) at par to yield 6¼%.

The yield printed at the tight end of yield talk that had been set in the 6 3/8% area.

Goldman Sachs & Co. ran the books for the acquisition deal, which was upsized from $750 million.

Ardagh at the tight end

Ireland's Ardagh Group completed a three-part, multi-currency mirror notes transaction.

The issuing entities for all three tranches were Ardagh Packaging Financing plc and Ardagh MP Holdings USA Inc.

The deal included two tranches of non-fungible notes mirroring the company's 7 3/8% senior secured notes due Oct. 15, 2017 (Ba3/BB-).

A $350 million tranche priced at 105.052 to yield 6%, at the tight end of the 6% to 6¼% yield talk.

A €260 million tranche priced at 104.107 to yield 6¼%, at the tight end of the 6¼% to 6½% yield talk.

In addition, the transaction included a $210 million tranche of fungible notes mirroring the 9 1/8% senior notes due Oct. 15, 2020 (B3/B-) that priced at 104.171 to yield 8¼%, also at the tight end of the 8¼% to 8½% yield talk.

Citigroup Global Markets Inc. was the bookrunner for the acquisition deal.

Party City inside of talk

Party City Holdings priced a $700 million issue of eight-year senior notes (Caa1/CCC+) at par to yield 8 7/8%.

The yield priced 12.5 basis points inside the low end of price talk that had been set in the 9 1/8% area.

Bank of America Merrill Lynch, Deutsche Bank, Barclays Capital Inc., Goldman Sachs and Morgan Stanley & Co. LLC are the joint bookrunners.

Proceeds, along with equity investments, will be used to help finance the acquisition of Party City by Thomas H. Lee Partners LP in a recapitalization transaction valued at $2.69 billion and to repay existing debt.

5-Hour Energy upsizes

Innovation Ventures makers of 5-Hour Energy, in conjunction with Innovation Ventures Finance Corp., priced an upsized $450 million issue of seven-year senior secured notes (B2/B-) at par to yield 9½%.

The yield printed on top of the yield talk.

Bank of America Merrill Lynch and Jefferies & Co. were the joint bookrunners for the issue, which was upsized from $400 million.

Proceeds will be used to pay bank debt and for general corporate purposes, including capital investments in a new manufacturing plant and distribution facility, new product development, international expansion and selective strategic acquisitions.

j2 Global at the tight end

j2 Global priced a $250 million issue of eight-year senior notes (B1/BB-) at par to yield 8%, at the tight end of the 8% to 8¼% yield talk.

Bank of America Merrill Lynch was the bookrunner.

Proceeds will be used for general corporate purposes, which may include acquisitions.

Horsehead five-year paper

Horsehead Holding priced a $175 million issue of 10½% five-year senior secured notes (B2/B-) at 98.188 to yield 11%.

Guidance in the 10½% area had been circulated while the deal was in the market, according to an informed source who added that the deal went well and the order book was oversubscribed.

Cowen & Co. was the lead left bookrunner. CRT Capital Group LLC was the joint bookrunner and allocating book manager.

Proceeds will be used to fund the construction of the company's Rutherford, N.C., plant.

Nationstar taps 9 5/8% notes

Nationstar Mortgage LLC and Nationstar Capital Corp. priced a $100 million add-on to their 9 5/8% senior notes due May 1, 2019 (B2/B+) at 105.5.

The reoffer price, which renders an 8.396% yield to worst, came at the rich end of the 105 to 105.5 price talk.

Credit Suisse Securities (USA) LLC, RBS Securities Inc. and Wells Fargo Securities, LLC were the joint bookrunners for the quick-to-market deal.

The Lewisville, Texas-based mortgage services provider plans to use the proceeds for general corporate purposes, which may include future acquisitions and transfers of servicing portfolios, including, but not limited to, the acquisition of residential mortgage servicing assets from Residential Capital, LLC, and/or related businesses from third parties.

The original $275 million issue priced at par on April 20.

Calendar thins

By the end of the busy Thursday session, the active forward calendar had thinned dramatically.

One deal, Laureate Education, Inc.'s $300 million offering of seven-year senior notes via Citigroup and JPMorgan, is possible Friday business, sources said.

There is no official talk on Laureate, but conversations have taken place in the low 9% context, a buyside source said.

Party like it's 1999

In the secondary market, a trader, looking over the whirlwind of new-deal activity for the day, said that he had been speaking to several major accounts, "and they have to rely on the calendar because they've got cash pouring in like crazy" that has to be put to work - meaning they're willing to buy just about anything.

With so much cash sloshing around, he opined, "you could finance anything but the kitchen sink right now."

One of the big names at Thursday's new-deal fiesta was Party City Holdings, whose $700 million of new 8 7/8% notes due 2020 priced at par and then took off from there.

The trader saw the Rockaway Township, N.J.-based party supplies retailer's new deal having jumped to 102¾ bid, 103½ offered - and even as he was speaking about it, he amended that to show the bonds having pushed above 103.

A second trader later saw those bonds going home at 103¼ bid, 103¾ offered.

Another deal that came to market at par but was going out having jumped to the 103 neighborhood was Hologic's 6¼% notes due 2020, which were upsized to $1 billion from the originally planned $750 million.

A trader saw the Bedford, Mass.-based diagnostic medical systems developer and manufacturer's new bonds having done even better than that, seeing the issue having shot all the way up to 103¾ bid, 104¼ offered.

A second trader saw the new bonds at 103 7/8 bid, 104 offered.

DISH deal drives by

The day's other $1 billion offering - from Englewood, Colo.-based satellite television broadcaster DISH DBS - also gained some altitude when it began trading around.

Those bonds were increased from the originally announced $500 million size and were actually a quick-to-market add-on to the $1 billion of 5 7/8% notes due 2022 that the company sold back in May. They came at par, and a trader saw them having moved up to 101½ bid, 101¾ offered, calling it proof that "the market is strong."

Ardagh moves up

The day's most complex deal, for Irish glass and metal packaging products maker Ardagh, also moved up when it hit the secondary realm, traders said.

A trader said that its 7 3/8% senior secured notes due 2017, whose terms mirror those of an existing tranche of paper, were trading up at 106½ bid, 107 offered, up from the 105.052 level where the $350 million of bonds priced earlier to yield 6%.

Later on, though, a second trader quoted the bonds offered at 106½ and said they likely were going home at 105¾ bid, 106½ offered.

The first trader estimated that the other dollar-denominated tranche - the $210 million of notes mirroring the existing 9 1/8% senior notes due 2020 - were trading around 104¼ bid, 104¾ offered, versus the 104.171 level at which the deal had priced to yield 8¼%.

But a second trader later on pegged them as high as 106.

Energy bonds could use a boost

Innovative Venture's new 9½% senior secured notes due 2019 began trading as though they had gulped down a couple bottles of the Framingham, Mass.-based company's signature product, the caffeine-heavy 5-Hour Energy pick-me-up tonic. They quickly moved up to 102 bid after the $450 million deal - upsized from $400 million - priced at par.

But after that, a trader said, "some selling definitely came into that. They were off their highs" after the bid got hit, he said, and were finishing up around 101 bid, 101¼ offered.

Another trader saw the bonds having come even further off their peak level, quoting them later on at 100¾ bid, 101¼ offered.

The new deals from Horsehead Holding and j2 Global arrived too late for any kind of aftermarket dealings, a trader said.

And likewise, no activity was seen in the $100 million of Nationstar Mortgage's 2019 add-on bonds.

Smithfield soars in secondary

Among Wednesday's offerings, a trader said that Smithfield Foods' new 6 5/8% notes due 2022 "went crazy," trading in a 1021/2-to-103 bid range.

That's well up from the 99½ level at which the Smithfield, Va.-based pork producer's $1 billion drive-by offering - upsized from an originally announced $650 million - priced and up as well from the 101½ bid level at which those bonds had been seen going home on Wednesday.

"They did very well," the trader said, even while seeing the bonds coming down from their peak levels to finish around 102¼ bid, 102½ offered.

However, he was a little doubtful of a second market source's assertion that the bonds had gotten as good at 104½ bid at one point during the session. He had seen the bonds trade in "huge" numbers, with at least $75 million having changed hands by mid-afternoon, easily tops in Junkbondland.

Yet another trader agreed with the first that late in the day, the new bonds "seem down" from their earlier peak levels. He said they were finishing offered at 102 3/8 - he saw no bid side - versus a 1021/4-to-103 context in the morning.

Level 3 stays strong

A trader said that Wednesday's other pricing, which came from Broomfield, Colo.-based telecommunications and internet services provider Level 3 Communications, "was doing great," seeing the bonds locked - bid and offered sides the same - at 1021/2.

A second trader saw the bonds at 102¼ bid, 102½ offered.

Level 3 had priced a quick-to-market $300 million of 8 7/8% notes due 2019 at par, and they had moved up in initial secondary trading to 102¼ bid, 102½ offered.

Harland Clarke gets hit

While most of the new bonds that have come to market this week were seen having traded up from their respective issue prices - and in some case, up by as much as several points - the same could not be said for San Antonio check printer and business services provider Harland Clarke Holdings' 9¾% senior secured notes due 2018.

"They were getting killed," a trader said, "really getting whacked."

He quoted the bonds having gotten as low as an 881/2-to-90½ bid range.

That's well off from the already deeply discounted 96 level at which the $235 million offering - downsized from an originally planned $250 million - priced on Tuesday to yield 10.666%.

Standard & Poor's recently revised its outlook on the company down to negative from stable previously; the ratings agency said the move reflects the company's significant debt maturities in 2014 and 2015 and the risk that cash flow and interest coverage could be reduced meaningfully if the maturities are refinanced.

Market signs show strength

Away from the new-deal arena, which one trader called "the only game in town" on Thursday, statistical measures of market performance were in positive territory across the board for a second straight session.

A trader saw the Markit Group CDX North American Series 18 High Yield index edge up by 1/16 point to end at 96¾ bid, 97 offered after having gained 5/16 point on Wednesday for a second straight session.

The KDP High Yield Daily index shot up by 17 bps on Thursday, its second straight gain, to end at 73.64. It had firmed by 6 bps on Wednesday.

Its yield fell by 6 bps to 6.35%, its second straight contraction; on Wednesday, it had narrowed by 3 bps.

And the widely followed Merrill Lynch U.S. High Yield Master II index posted its fifth straight gain on Thursday, advancing by 0.209% on top of Wednesday's 0.17% rise.

The latest gain lifted its year-to-date return to 8.425% - a new peak level for 2012 - versus Wednesday's 8.198%, the previous high point. The index's recent levels are the strongest they've been since the end of 2010, when the market measure returned 15.19%.

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