Midday Commentary: Drive-by activity slows amid heavy market conditions; ETF trading active

By Paul A. Harris

Portland, Ore., June 4 - Drive-by activity nearly dried up in the high-yield primary market thus far in June, market sources say.

Week to date, only one dollar-denominated quick-to-market deal has priced: Eagle Midco Inc. (Epicor Software Corp.) priced a $400 million issue of 9%/9¾% senior PIK toggle notes due June 15, 2018 (Caa2/CCC+) at 98 to yield 9.51% on Monday

"The market feels heavy," a trader commented on Wednesday morning and added that cash bonds are down anywhere from 1 point to 2 points over the past two days.

High-yield exchange traded funds are purposefully selling, causing a notable ramp-up in the number of Bid Wanted in Competition (BWIC) lists now in circulation, sources say.

Substantial calendar

Amid these softer conditions, the dollar-denominated active forward calendar presently stands at $4.2 billion of deals, a substantial portion of which are expected to price by the end of the week.

InterGen NV could price $800 million equivalent of bonds in a dual-currency offering of senior secured notes as early as Wednesday, according to a market source.

The deal is coming in tranches dollar-denominated 10-year notes and sterling-denominated eight-year notes.

There's no official price talk, but the dollar notes are guided at 6¼% to 6½%, with the sterling-denominated notes expected to come 25 to 50 basis points behind.

Deutsche Bank is the global coordinator. Barclays, BofA Merrill Lynch, Credit Suisse, Mitsubishi and RBC are the joint bookrunners.

Hot Topic, Inc. is expected to price its $350 million offering of eight-year senior secured notes (B2/B) Wednesday or Thursday, a trader said.

Talk has yet to surface, but conversations are focusing on a yield in the high 7% to low 8% range.

BofA Merrill Lynch and Jefferies are the joint bookrunners.

And Quicksilver Resources Inc. is expected to price its $875 million two-part offering of notes on Friday.

The deal includes a $200 million tranche of six-year second-lien notes which are guided in the low 7% yield context, and a $675 million tranche of eight-year senior notes guided in the low 10% yield context.

Again, formal price talk has not yet surfaced.

Credit Suisse, Citigroup, Deutsche Bank, JPMorgan, TD and UBS are the lead arrangers.

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