Atwood, Amerigroup, Block deals price; Atwood firms; Chesapeake chokes; funds post big gains

By Paul Deckelman and Paul A. Harris

New York, Jan. 12 - The high-yield primary market continued to churn out new deals on Thursday, although the total volume was less than half of that seen on Wednesday, the first $2 billion session of the new year.

Oil drilling operator Atwood Oceanics, Inc. came to market with an upsized $450 million offering of eight-year notes. Those bonds were seen to have risen smartly when they were freed for secondary market dealings.

Also emerging with an upsized deal was health-care insurance specialist Amerigroup Corp., which did a quickly shopped $75 million add-on to the 2019 notes it priced back in November. The new bonds were quoted higher, though on little activity.

Diversified media company Block Communications, Inc. priced a quick-to-market $250 million tranche of eight-year paper, though too late for any kind of an aftermarket.

Syndicate sources also heard price talk on Physio-Control International, Inc.'s $315 million offering of seven-year senior secured notes. The medical-technology company's deal is expected to price on Friday.

Away from the primaryside, Sears Holdings Corp. continued on as Junkbondland's busiest issue for about the umpteenth day, although its price levels seemed little affected by the news that CIT Group, Inc. - a major lender to middle-market businesses - won't finance loans to Sears vendors.

Chesapeake Energy Corp.'s bonds were getting whacked around. A trader attributed that weakness to sagging natural gas prices.

Overall, indicators of market performance were seen mixed on the day.

And high-yield mutual funds - considered a key indicator of overall junk market liquidity trends - rose for a sixth straight week, adding nearly $2 billion.

AMG posts $1.79 billion inflow

As Thursday's session was winding down, market participants familiar with the weekly AMG high-yield mutual fund flow statistics said that in the week ended Wednesday, $1.79 billion more came into those weekly reporting funds than left them.

It was the second consecutive gain so far in the new year, coming on the heels of the $774.22 million cash infusion seen by Arcata, Calif.-based AMG - a unit of Thomson Reuters' Lipper/FMI division - in the week ended Jan. 4. So far this year, net inflows have totaled about $2.53 billion, according to a Prospect News analysis of the numbers.

It was also the sixth consecutive inflow, a streak that dates back to early December and includes a massive $1.94 billion gain seen in the week ended Dec. 7. Over that six-week stretch, net inflows have totaled $5.67 billion, according to the Prospect News analysis.

EPFR sees $1.94 billion gain

Another fund-tracking service, Cambridge, Mass.-based EPFR Global, whose methodology differs from AMG, also reported a sixth straight week of inflows to start the new year off on the same kind of positive note that the old year ended upon.

And it saw a $1.94 billion inflow, on top of the previous week's $1.14 billion, producing a year-to-date inflow of $3.08 billion, according to an analysis of the figures.

EPFR's figures and those of AMG generally point in the same direction, although their actual numbers usually differ markedly since they calculate their respective fund-flow totals very differently. EPFR, for instance, includes results from non-U.S. domiciled funds as well as the domestic funds and counts exchange-traded funds excluded from the more narrowly focused AMG tally.

Cumulative fund-flow estimates, whether of the AMG numbers from Lipper/FMI or those from 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.

A junk trader commented that the EPFR-reported inflow was "quite a little bit of dough."

Atwood upsizes

Three issuers raised a combined $777.8 million during the Thursday primary market session.

Atwood Oceanics priced an upsized $450 million issue of eight-year senior notes (Ba3/BB) at par to yield 6½%, at the tight end of yield talk that had been set in the 6 5/8% area.

Credit Suisse Securities (USA) LLC, Barclays Capital Inc. and Wells Fargo Securities LLC were the joint bookrunners for the issue, which was upsized from $400 million.

The Houston-based offshore drilling, exploration and development company plans to use the proceeds to partially pay down its existing debt.

The proceeds of the $50 million upsizing will be applied to the company's revolver.

Block Communications drives by

Block Communications priced a $250 million issue of eight-year senior notes (Ba3/B+) at par to yield 7¼%.

The yield printed at the tight end of the 7¼% to 7½% price talk.

Bank of America Merrill Lynch and J.P. Morgan Securities LLC were the joint bookrunners for the quick-to-market deal.

Proceeds will be used to refinance existing notes and to repay outstanding bank debt.

Amerigroup taps 7½% notes

Amerigroup priced an upsized $75 million add-on to its 7½% senior notes due Nov. 15, 2019 at 103.75 to yield 6.87%.

The reoffer price came on top of price talk.

Goldman Sachs & Co. ran the books for the quick-to-market add-on, which was upsized from $50 million.

The original $400 million issue, which was downsized from $450 million, priced at par on Nov. 10.

Physio-Control sets talk

Looking to the Friday session, Physio-Control International talked its $315 million offering of seven-year senior secured notes (B2/B+) with a 9¾% to 10% yield on Thursday.

The books close at 10 a.m. ET on Friday, and the deal is set to price thereafter.

Citigroup Global Markets Inc. is the left bookrunner. RBC Securities is the joint bookrunner.

Cash Store Financial kicks off

The Thursday session also came with one new deal announcement.

Cash Store Financial Services Inc. kicked off a C$125 million offering of five-year senior secured notes.

Marketing takes place in Los Angeles for the remainder of the present week and moves to Canada on Monday. The roadshow moves to New York later that week.

Pricing is set for late next week or early in the following week.

Imperial Capital and Canaccord Genuity are the bookrunners.

The Edmonton, Alta.-based alternative financial services company plans to use the proceeds to purchase loans receivable assets from its third-party lenders and for general corporate purposes.

Atwood, Amerigroup move up

When Atwood Oceanics' new eight-year notes priced, a trader observed that the Houston-based offshore oil drilling company's upsized deal "did really well," seeing them up between 1½ and 2 points.

A second trader agreed, seeing the new bonds at 101½ bid, 102 offered, well up from the par level at which the $450 million issue priced.

He also quoted Virginia Beach-based health insurer Amerigroup's upsized, quickly shopped add-on to its 2019 bonds at 104½ bid, 105½ offered, though "on virtually nothing trading."

The Block Communications eight-year bonds, which priced at par, came too late in the session for any kind of meaningful secondary dealings.

Recent deals little changed

Among new issues that came to market on Tuesday or Wednesday, a trader said that the new Sophia LP bonds priced Wednesday by the unit of Datatel Inc. were at 101 3/8 bid, 101¾ offered.

A second trader also saw those 9¾% notes due 2019 holding around the levels they reached in initial aftermarket dealings on Wednesday. The Fairfax, Va.-based higher education technology provider priced that $530 million deal at par.

MGM Resorts International's new 8 5/8% notes due 2019 were seen by a trader having moved up to 101 bid, 101¾ offered, though a second trader said that he saw "buyers below 101."

The Las Vegas-based casino giant priced $850 million of the notes - upsized from the originally announced $500 million - on Wednesday at par in a drive-by deal, and they were seen having firmed up to around the 100¾ bid area when they moved into the aftermarket Wednesday afternoon.

Charter Communications Inc.'s 6 5/8% notes due 2022 were seen by a trader pretty much anchored around 100¼ bid, 100½ offered.

That's the level to which the St. Louis-based cable operator's quick-to-market $750 million offering had moved after pricing earlier in the session at 99.5 to yield 6.694%.

Reaching back to Tuesday, a trader saw "no real activity" in Level 3 Communications Inc.'s 8 5/8% notes due 2020. He saw the bonds trading around 100 3/8 bid, 100 5/8 offered earlier in the session, but activity had dwindled and then they went out at 100 1/8.

The Broomfield, Colo.-based wireless backbone carrier priced a quickly shopped $900 million issue of those bonds - radically upsized from the originally announced $350 million - on Tuesday at par.

A blast from the past

A trader said that with all of the new deals coming from such well-known issuers like Charter, Level 3 and MGM, "it's like the old days are back. You wait for the new deals to price in the afternoon, you trade 'em then and then first thing [the next morning], and then the rest of the day, people are on conference calls.

"So the good old days are back, at least for now."

Another trader called the session "a really churning market."

Indicators turn mixed

Away from the new-deal universe, statistical measures of junk market performance - which had turned positive on Tuesday after three sessions before that of mixed results and stayed positive on Wednesday - went back to being mixed.

A trader saw the CDX North American Series 17 High Yield index up by 3/16 point on Thursday to end at 94 1/8 bid, 94 3/8 offered after having gained 1/8 point Wednesday.

The KDP High Yield Daily edged downward by 2 basis points Thursday to end at 72.86 after having gained 3 bps Wednesday.

Its yield inched upward by 1 bp Thursday to 7.22% after having declined by 1 bp Wednesday.

But the widely followed Merrill Lynch High Yield Master II index notched its 20th consecutive gain on Thursday - an amazing streak that dates back to the middle of December.

It rose by 0.051%, which came on top of Wednesday's 0.038% advance.

The gain lifted the index's year-to-date return to 1.171%, another new high, from its previous peak level for the new year of 1.12% seen on Wednesday.

Chesapeake Energy gets choked

Among specific names in the non-new-deal arena, a trader said Chesapeake Energy "continued to get beat up," seeing the Oklahoma City-based natural gas operator's paper down "2 to 6 points, depending on the issue."

For instance, he said that its 6 1/8% notes due 2021 were down 3 points on the day at around the 99½ bid mark.

Chesapeake Energy's 6 5/8% notes due 2020 eased to around the 104 bid area on heavy volume of $31 million.

He chalked the weakness up to investor unease over continued softening natural gas prices.

Sears seen better

But the busiest junk bond of the day - once again - was Sears Holdings' 6 5/8% notes due 2018.

They were again "really active," pushing up "almost 2 points" to levels around 80, a trader said. He pegged the notes at 793/4.

Volume was more than $60 million.

The gains came despite news out that CIT Group was halting its supplier loans or guaranteed payments to Sears vendors for their shipments to the Hoffman Estates, Ill.-based retailer.

Though it's possible that other lenders might follow suit, Sears is said to have enough liquidity to weather the storm, at least temporarily.

Stephanie N. Rotondo contributed to this report

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