Lansing Trade five-year deal caps $6.6 billion primary week; most recent deals firm smartly

By Paul Deckelman and Paul A. Harris

New York, Feb. 7 - A moderately busy first week in February came to a relatively quiet close in Junkbondland on Friday, market participants said, as just one smallish deal priced - a $175 million offering of five-year notes from Lansing Trade Group LLC, an Overland Park, Kans.-based independent commodity merchandising and handling company.

That closed out a week which saw $6.65 billion of new U.S.-dollar-denominated, fully junk-rated paper from domestic or industrialized-country borrowers price in 12 tranches, according to data compiled by Prospect News.

That was up from the $5.99 billion of new paper that came to market in 14 tranches during the previous week, ended Jan. 24, the data said.

The latest week's primaryside activity brought year-to-date new issuance up to $29.1 billion in 54 tranches - but that was running about 25.7% behind the red-hot pace seen a year ago, when $39.19 billion had priced in 90 tranches by this point on the calendar, according to the data, helped by a slew of megadeal-sized offerings that came to market during the opening weeks of 2013.

The new Lansing Trade notes arrived too late in the session for any immediate aftermarket activity, traders said.

But the traders saw most of the new deals that had come to market earlier in the week trading well above their respective issue prices. These included Thursday's offerings from specialty vehicle manufacturer Oshkosh Corp. and healthcare products provider BioScrip, Inc., the week's biggest new deal, from carmaker Chrysler Group LLC, and the most actively traded new issue, from Regency Energy Partners LP

Statistical market performance indicators were higher across the board for a second consecutive session on Friday, and were mixed versus where they had been at this time last week, for a second straight week.

Lansing shortens, prices wide

Lansing Trade Group priced Friday's sole deal, a $175 million issue of five-year senior notes (B3/B+) that came at par to yield 9¼%.

In a structural change, the maturity of the notes was decreased to five years from seven years, and call protection was decreased to two years from three years.

The yield printed 25 basis points beyond the wide end of the 8¾% to 9% yield talk.

The debt refinancing deal endured some investor pushback, according to a market source.

Macquarie Capital ran the books.

Chuck E Cheese to roadshow

CEC Entertainment, Inc., the Irving, Texas-based operator of the Chuck E. Cheese family dining and entertainment stores, plans to begin a roadshow on Monday for a $305 million offering of eight-year senior notes.

The deal is set to price late in the week ahead.

Credit Suisse, Deutsche Bank, Morgan Stanley, UBS and Apollo are the joint bookrunners for the LBO financing.

Diamond Foods plans deal

Diamond Foods, Inc. also plans to start a roadshow on Monday for its $230 million offering of five-year senior notes (Caa2/CCC+).

That deal is also set to price late in the week ahead.

Credit Suisse, Wells Fargo, Barclays, BMO and SunTrust are the joint bookrunners for the debt refinancing.

Stena to sell secured bullet

Stena International SA plans to come to market with a $350 million offering of non-callable 10-year senior secured notes (Ba2//) during the Feb. 10 week, via left lead bookrunner Citigroup.

The Gothenburg, Sweden-based company kicked off a $750 million seven-year covenant-light senior secured term loan at a Friday bank meeting.

Bank and bond proceeds will be used to refinance debt.

B Communications sets talk

Israel-based B Communications Ltd. talked a $775 million offering of seven-year senior secured notes (/BB-/BB-) with a yield in the 7½% area.

In a restructuring, the telecommunications company withdrew a proposed euro-denominated carve-out tranche.

The bonds are set to price on Monday.

JPMorgan, Citigroup, HSBC and Discount Underwriting and Issuing Ltd. are the joint bookrunners.

Few deals ahead

The deal pipeline is relatively thin, market sources say.

Apart from market volatility possibly exerting an inhibiting force, a number of potential issuers are entering a blackout period during which fresh financial numbers must be provided before they can bring a bond deal, a sell-side source said on Friday.

In addition to the above-mentioned business for the week ahead, Hunt Cos. is in the market with a non-rated $525 million offering of seven-year notes that will sold in a Regulation D private placement. However the Regulation D notes will be exchangeable for Rule 144A and Regulation S notes upon the closing of the deal.

Jefferies has the books for the offering, which is set to price on Monday.

Thursday deals do well

In the secondary market, traders said that Friday's lone issue - the 9¼% notes due 2019 from Lansing Trade Group - came too late in the day, and at any rate was probably too small, at $175 million, for any kind of aftermarket dealings.

But they did see activity in deals which came to market on Thursday or earlier during the week.

One trader saw Oshkosh Corp.'s 5 3/8% notes due 2022 at 101¾ bid, 102 offered, while a second pegged the new bonds at 101 7/8 bid, 102 1/8 offered.

That was around the same levels to which the $250 million of new notes from the Oshkosh, Wis.-based manufacturer of military vehicles, fire trucks and ambulances and cherry-picker trucks and other access equipment had moved after the quick-to-market deal priced at par on Thursday.

A trader saw BioScrip's 8 7/8% notes due 2021 at 101¼ bid, 101½ offered. A second located the notes at 101 1/8 bid, 101 3/8 offered. Again, it was around the levels to which the Eden Prairie, Minn.-based healthcare products distributor's bonds had moved after that $200 million regularly scheduled forward calendar deal priced at par, also on Thursday.

Recent deals hold gains

Among other issues that came to market this week, Regency Energy Partners' 5 7/8% notes due 2022 remained busy, with over $23 million seen having changed hands. That put the Dallas-based master energy limited partnership's deal high up on the Most Actives list for a third straight session. Over $20 million had traded on Thursday, a market source said - and an astonishing $116 million had traded on Wednesday, when the bonds began aftermarket trading after having priced too late in the day on Tuesday to trade.

A market source said the new bonds had gained another ½ point to end at 101½ bid. A second trader located that paper in a 101 to 101¼ bid context.

On Tuesday, Regency priced $900 million of those notes at 98.423 on Tuesday to yield 6 1/8%, after upsizing the issue from an originally announced $600 million.

Traders also saw strong levels for the new Chrysler Group bonds that had priced on Tuesday, with one quoting its 8% notes due 2019 at 109 3/8 bid, 109½ offered, while its 8¼% notes due 2021 had firmed to 111¼ bid, 111¾ offered.

The Auburn Hills, Mich.-based Number-Three domestic automaker - now a wholly owned subsidiary of Italy's Fiat SpA - came to market on Tuesday with a pair of add-on tranches to its existing senior secured second-lien issues - $1.375 billion of the 8% 2019 notes which priced at 108.25 to yield 4.543%, and $1.38 billion of the 8¼% 2021 notes, which priced at 110.5 to yield 5.126%.

The deal was increased in size from an original $2.7 billion to $2.755 billion.

A trader said "those bonds are doing really well. There's a lot of activity there. The big guys are doing a lot."

Proceeds from the deal will be used to repay all amounts owed to the United Auto Workers union's VEBA healthcare plan administrative trust, which took a big stake in Chrysler as part of the latter's 2009 federal bailout and bankruptcy reorganization which last month sold its position to Fiat.

Little jobs numbers impact

A trader said that the Friday morning's Labor Department report on U.S. job creation in January was "a non story" as far as the junk bond market was concerned, although there were some gyrations in equities and Treasuries after the number came out.

When all was said and done, the U.S. economy - the world's largest - added only 113,000 jobs in January, far below the 170,000 analysts had been expecting. The lower number could be seen as a positive by the fixed-income markets, since it might give the Federal Reserve pause before embarking upon its next round of tapering off its purchases of Treasury and mortgage-backed securities - purchases that have kept interest rates at or near historic lows.

Another trader opined that "it was interesting - after the employment numbers, you'd have thought that there would be some activity, one way or another. It looks like everybody came in to hear the number - and everyone went back to sleep."

However, he said that overall, the market was up slightly.

"It felt a little stronger - but there was nothing huge in any one particular name. "

Market indicators stay firm

Statistical junk-market performance indicators were higher across the board for a second consecutive session on Friday, after having been mixed the previous two sessions.

And they were mixed versus their levels at the end of the previous week, on Friday, Jan. 24.

The Markit Series 21 CDX North American High Yield Index rose by 7/16 point to close at 107 3/16 bid, 107 5/16 offered, after having gained 21/32 point on Thursday, versus the prior session's unchanged reading.

It was up from 106 3/16 bid, 106 7/16 offered the previous Friday.

The KDP High Yield Daily Index was up for a second straight session on Friday, jumping by 12 basis points to end at 74.46, on top of the 8 bps improvement seen on Thursday, which broke a four-session losing streak.

Its yield fell by 5 bps to 5.57%, after having come in by 4 bps on Thursday - its first decline after having risen over the prior four sessions.

But Friday's levels still fell slightly short of the previous Friday, when the index reading was 74.48, although the yield was improved, slightly, from 5.58%.

The widely followed Merrill Lynch High Yield Master II Index meanwhile posted its third consecutive gain on Friday, rising by 0.178% after having gained 0154% on Thursday. The gain raised its year-to-date return to 0.989%, up from Thursday's finish at 0.810%, though it was still down from the 1.185% it had reached on Jan. 22, its high point of the year so far.

The index's yield to worst declined to 5.646% from Thursday's 5.681% and from Tuesday's 5.735%, its peak level for the year so far. Those levels remained well above the low yield for the year, 5.386% on Jan.22.

Its spread to worst stayed at 435 bps over comparable Treasuries, in from 441 bps on Wednesday and from Tuesday's 444 bps, the wide point for the year so far. Those levels remained well above the tight spread for the year, 398 bps, on Jan. 22.

For the week, the index gained 0.248% - its first such weekly gain after two previous weekly losses. The Friday before, the index had posted a 0.032% loss for the week, giving a year-to-date return of 0.74%.

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