Ameristar, Visteon lead $3.6 billion session, deals firm slightly; funds gain $510 million

By Paul Deckelman and Paul A. Harris

New York, March 31 - High-yield new-deal action was fast, furious and mostly shoehorned into the latter part of Thursday's session, with syndicate sources seeing a whole slew of deals collectively worth $3.6 billion come to market.

The big deal of the day came from Ameristar Casinos Inc., whose $800 million of 10-year notes priced in line with tightened market price talk.

Other familiar junk names bringing deals to fruition included automotive components maker Visteon Corp., with a $500 million offering of eight-year notes, and industrial manufacturer and supply-chain logistics provider Park-Ohio Industries, Inc., which came to market with $250 million of 10-year subordinated paper.

Real estate operators CNL Lifestyle Properties, Inc. and Kennedy-Wilson Inc. brought in, respectively, a $400 million offering of seven-year notes and a $200 million issue of eight-year paper.

Also pricing were dollar-denominated deals from non-U.S.-issuers Millar Western Forest Products Ltd., a Canadian company that did an upsized $210 million of 10-year notes, and from Ferrexpo Finance plc, a Switzerland-based resources company selling $500 million of five-year notes.

There was a euro-denominated pricing from another Continental issuer - the German printing-press company Heidelberger Druckmaschinen AG.

Price talk emerged on Liz Claiborne, Inc.'s $200 million offering of eight-year senior secured notes, which could price on Friday.

When the new issues that priced Thursday began trading, they were seen mostly sticking around their respective issue pieces, at least in the early going. Wednesday's deal from First Data Corp. meantime hung onto most of the solid gains it had notched in initial aftermarket action.

Secondary market performance indicators were mixed, but traders said most of the day's activity was in new-deal paper anyway.

Junk funds gain $510 million

After the session's activity had wound down, participants familiar with the weekly AMG high-yield mutual fund flow statistics generated by Lipper/FMI said that in the week ended Wednesday, $510 million more came into those funds than left them

That was in sharp contrast to the previous week, ended March 23, when the service initially reported a record weekly outflow of $2.8 billion, with the explanation that the bulk of the huge initial outflow figure was attributable to monies in two Fidelity funds, the Fidelity Capital & Income F share class and the Fidelity High Income F share class, which had closed down.

That figure was subsequently revised well downward to $676 million, which still struck some market participants as odd, given that they had not seen any kind of sustained large selling that would lend itself to that level of redemptions from the funds.

Either way, the previous week's outflow from those weekly-reporting funds represented the second consecutive loss of capital by the funds, which had also seen an outflow of $470.6 million in the week ended March 16. That March 16 outflow was the first such cash bleed of the year after 10 straight 2011 inflows totaling more than $6 billion, and the first after 14 straight weeks of inflows, dating all the way back to early last December and totaling more than $8 billion in that time, according to a Prospect News analysis of the figures.

The inflow reported in the latest week thus breaks the two-week skid, which had seen total outflows in that time of $1.146 billion - the biggest sustained outflow since a three-week losing streak from last Nov. 17 through Dec. 1, during which time $1.95 billion more fled from the funds than came into them, according to the analysis.

The inflow lifted the year-to-date cumulative inflow total back up to approximately $5.59 billion from about $5.08 billion the week before, the analysis said. With 13 weeks gone in the year, there have now been 11 inflows against the two outflows.

EPFR sees $945 million inflow

Another fund-tracking service, Cambridge, Mass.-based EPFR Global, whose methodology differs somewhat from AMG, meantime reported a $945 million inflow in the latest week, which followed the previous week's $419 million outflow and an $802 million downturn the week before that.

As was the case with the AMG numbers, the latest week's inflow represented a reversal of a two-week pattern of cash-loss that had, in turn, broken the string of 14 consecutive inflows dating back to early December. It brought the year-to-date net inflow number up to $15.5 billion, EPFR said.

AMG and EPFR calculate their respective fund-flow totals differently, although the two services' numbers generally point toward the same trends. EPFR includes results from some non-U.S. domiciled funds as well as the domestic funds.

Cumulative fund-flow estimates, whether from Lipper/FMI 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 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. Both of those trends have been pretty much continuing in 2011 as well.

A trader, asked whether people in the market pay close attention to the fund-flow numbers, opined "not as significantly as you would think," noting that "right now, the hedge funds dominate the game, and you're just talking about the mutual funds. The hedge funds have gotten a much more significant portion of the market."

That having been said, however, he allowed that there is no way to accurately track the amounts of money that come into and out of the hedge funds - leaving the mutual funds as really the only game in town for keeping accurate track of Junkbondland liquidity trends.

"It's really more of a psychological barometer, if you know what I mean," he concluded.

Ameristar atop tightened talk

The Thursday primary market session saw intense deal volume.

Globally, nine issuers stepped forward.

Headlining a dollar-denominated market that saw $3.6 billion price on the day, Ameristar Casinos brought the session's biggest deal, an $800 million issue of 7½% 10-year senior notes (B3/B+) which priced at 99.125 to yield 7 5/8%.

The coupon, reoffer price and yield all came on top of price talk which had been revised downward from earlier yield talk of 7¾% to 7 7/8%.

Wells Fargo Securities LLC was the left lead bookrunner for the quick-to-market deal. Deutsche Bank Securities Inc., Merrill Lynch, J.P. Morgan Securities LLC and Credit Agricole CIB were the joint bookrunners.

Ameristar plans to use the proceeds, in addition to proceeds from a new $1.4 billion credit facility, to fund a tender offer for its 9¼% senior notes due 2014, as well as to refinance existing facilities and repurchase stock from the majority shareholder.

Visteon's $1.6 billion book

Visteon priced a $500 million issue of eight-year senior notes (B2/B+/) at par to yield 6¾%.

The yield printed on top of the price talk.

Merrill Lynch, Morgan Stanley & Co. Inc. and Citigroup Global Markets Inc. were the joint bookrunners for the debt refinancing and general corporate purposes deal.

The Visteon deal played to a book containing $1.6 billion of orders, according to a high-yield mutual fund manager.

CNL at the wide end

CNL Lifestyle Properties priced a $400 million issue of 7¼% eight-year senior notes (Ba3/BB-) at 99.249 to yield 7 3/8%.

The yield printed at the wide end of the 7¼% area yield talk.

Jefferies & Co., Inc. and Merrill Lynch were the joint bookrunners debt refinancing and general corporate purposes deal.

Park-Ohio relaunches

Meanwhile Park-Ohio Industries, Inc. priced a $250 million issue of restructured 10-year senior unsecured notes (B3/CCC+/) at par to yield 8 1/8%.

The deal relaunched on Thursday after having been sidelined in mid-March because of volatility related to the natural disasters in Japan.

Originally the transaction was a senior subordinated notes offer, but it was moved up the capital structure when it relaunched on Thursday as a senior note.

The yield printed at the wide end of the 8% to 8 1/8% price talk. The original talk, which came out at the conclusion of the mid-March roadshow, was for a yield in the 8% area. Hence Thursday's print also came at the wide end of that original talk.

Barclays Capital Inc. and J.P. Morgan Securities LLC were the joint bookrunners.

The Cleveland-based provider of supply chain logistics services plans to use the proceeds to fund the tender offer for its 8 3/8% senior subordinated notes due 2014, to repay borrowings under its term loan A and term loan B and for general corporate purposes.

Millar Western slightly upsized

Millar Western Forest Products priced an upsized $210 million issue of 10-year senior notes (B3/B-) at par to yield 8½%, at the wide end of the 8¼% to 8½% price talk.

Goldman Sachs & Co. ran the books for the debt refinancing deal which was upsized from $200 million.

Kennedy-Wilson's $200 million

Kennedy-Wilson, Inc. priced a $200 million issue of 8¾% eight-year senior notes (B1/BB-/) at 99.297 to yield 8 7/8%.

The deal priced in line with price talk of 8¾% to 9% yield, at a slight discount.

Merrill Lynch and Morgan Stanley & Co. Inc. were the joint bookrunners.

The Beverly Hills, Calif.-based real estate investment and services company plans to use the proceeds to repay all outstanding borrowings under its unsecured revolving credit facility and for general corporate purposes.

The Thursday session also saw a couple of corporate deals that played to emerging markets investors as well as some junk accounts.

China's Longfor Properties Co. Ltd. priced $750 million of five-year notes (Ba3/BB/) at par to yield 9½%, at the tight end of the 9½% to 9 5/8% price talk.

Citigroup, HSBC, Morgan Stanley and Standard Chartered were the bookrunners.

And Switzerland's Ferrexpo Finance plc (with operations in The Ukraine) priced a $500 million issue of five-year senior guaranteed bullet notes (B3/B+/B) at par to yield 7 7/8%.

The deal launched at 7 7/8% earlier in the session.

J.P. Morgan Securities LLC, Morgan Stanley & Co. Inc. and UBS Investment Bank were the joint bookrunners.

Heidelberger Druckmaschinen

In the euro-denominated primary market Germany's Heidelberger Druckmaschinen AG priced a €304 million issue of 9¼% seven-year senior notes (Caa1/B-) at 98.735 to 7 yield 9½%.

The yield printed at the tight end of the 9½% to 9¾% price talk.

Deutsche Bank, Citigroup, BNP Paribas, Commerzbank and LBBW were the joint bookrunners. Deutsche Bank will bill and deliver.

The Heidelberg, Germany-based manufacturer of offset printing presses plans to use the proceeds to refinance existing debt.

As talk surfaced, a bond investor in Germany put in an advance complaint about allocations, perhaps in an effort to beat the crowd.

Pushing back

Following a rollercoaster week on the high-yield mutual fund flows front - a $2.8 billion outflow reported on March 24 was downgraded to a $677 million outflow the following day - flows turned positive once again during the most recent week, sources said on Thursday.

High-yield mutual funds saw $510 million inflows for the week to Wednesday, they added, citing a weekly report from Lipper-AMG.

A high-yield mutual fund manager owned to seeing two days of negative flows, as the markets turned volatile trailing the natural disasters in Japan. These included a big outflow on March 17, the manager said.

This investor has become somewhat more circumspect lately with regard to the new issue calendar.

Tightened talk on Thursday's Ameristar deal propelled the buy-sider toward the exits.

The sure flip of a meager allocation of bonds in the roaring hot market of late February and early March can no longer be depended upon, the investor lamented.

For example, Thursday's CNL Lifestyle Properties deal, which priced at 99.249, was trading at 98¾ bid, 99 offered, one-by-one, as the market closed, the investor said.

"These things aren't popping the way they were a couple of weeks ago," the buy-sider asserted.

"So we've begun to push back a little."

Liz Claiborne sets talk

Looking ahead to a Friday session that promises to be a great deal quieter than was the case on Thursday, Liz Claiborne talked its $200 million offering of eight-year senior secured notes (B2/B-/) with a yield in the 10½% area.

Merrill Lynch, J.P. Morgan Securities LLC, SunTrust Robinson Humphrey Inc. and Wells Fargo Securities LLC are the joint bookrunners.

Also poised to price a deal on Friday is England's Thames Water Utilities Ltd., which has been marketing £400 million of eight-year senior secured notes (B1//BB).

Although there was no official talk on Thursday, the whisper is 7½%, according to a debt capital markets banker based in London.

Morgan Stanley & Co., which will bill and deliver, is a joint physical bookrunner for the Regulation S-only offering. BNP Paribas and J.P. Morgan Securities LLC are also physical bookrunners.

Sizzling Platter $150 million

One new offering was added to the active forward calendar during the Thursday session.

Sizzling Platter, LLC is in the market with a $150 million offering of first lien senior secured notes (/B-/).

The deal, which is being led by Global Hunter Securities, Maxim Group and Knight Capital Markets, is expected to price on April 7 or 8.

The Murray, Utah-based restaurant company plans to use the proceeds to refinance debt and for general corporate purposes.

Visteon, others near issue

Talking about the rapid-fire flood of new deals hitting aftermarket almost all at one late the day, a trader exclaimed that "they're all coming - it's crazy."

"A lot of deals just came at the end," a second agreed.

But when the day's new deals began moving around in the aftermarket, traders for the most part saw them not far removed from where those issues had priced earlier in the session.

For instance, a trader saw familiar junk name Visteon's $500 million of eight-year notes trading at par bid, 100½ offered, after having priced at par.

But a second trader saw the new bonds "a little weaker," calling them 99 5/8 bid, 99 7/8 offered.

Yet another trader pegged the automotive components maker's deal at 99½ bid, par offered.

A trader saw Millar Western Forest Products' new 10-year notes at 100¼ bid, 100¾ offered, after the Canadian issuer had priced its upsized $210 million issue at par. A second had the bonds at 100½ bid, 100¾ offered, while a third saw them get as good as 100 5/8 bid, 101 1/8 offered.

But when CNL Lifestyle Properties' $400 million of seven-year notes began trading around, a trader situated them at 99 bid, 99¾ offered, pretty much straddling the 99.239 level at which the bonds had priced. Another only saw them offered at 991/4.

Park-Ohio pops a little

Park-Ohio Industries' new 10-year senior subordinated notes were seen by a market participant to have traded into a 100¾ bid, and he saw the $250 million issue left at 100 5/8 bid, 100 ¾ offered, while a second trader estimated them at 100½ bid, 101 offered.

At another desk, a trader had the bonds going home at 100 7/8 bid, 101 offered.

Ameristar up slightly

The big deal of the day, from Las Vegas gaming operator Ameristar, was seen by one trader at 99½ bid, 100½ offered, while several others saw it get as good as par bid, 100¼ offered - up from the 99.125 level at which the $800 million offering had come to market earlier.

Ferrexpo, Kennedy-Wilson are no-shows

Although they did price, traders saw no immediate aftermarket dealings - probably due to the lateness of the hour and investors' relative unfamiliarity with the companies - in either California-based real estate operator Kennedy-Wilson Inc. or Swiss resources company Ferrexpo Finance.

Kennedy-Wilson's $200 million of eight year notes priced at 99.297, while Ferrexpo's $500 million of five-year paper came at par.

First Data hangs in there

A trader said that First Data Corp.'s new 7 3/8% first-lien senior secured notes due 2019 "held up well" a day after the Atlanta-based electronic transaction processor's $750 million of new bonds had priced at par.

Although the bonds were down slightly from the immediate Wednesday aftermarket levels around 102 bid, he saw them on Thursday still holding mort of their gains in a 1011/2-101¾ context.

A second trader saw the bonds going home at 101½ bid, 102 offered.

Small funds are an indicator

A trader said that one of the trends he has noticed lately is the participation in new deals of what - without naming any names - he calls "small, insignificant hedge funds."

For instance, he said that a friend at one such small fund told him to "follow Visteon, Ameristar and Kennedy-Wilson" among the day's new deals - because "when he gets a couple of bonds, he flips them so fast, your head would spin."

His friend is by no means alone - the trader said that "there's a lot of flippers in this market," with many of them being such small shops that "they can't carry [the new issues] long - because they have no capital. So, it's in and out."

Furthermore, he pointed out, the presence of such "small, insignificant" hedge funds among the investors getting allocations on a new deal "is a leading indicator to me that a deal is in trouble.

"Normally, an underwriter would rather sell it to a buy-and-hold account" - but if one of the smaller accounts likely to flip right out of the deal asks for an allocation of $1 or $2 million and gets it, it's a signal that the underwriter is having trouble placing it with a bigger, more reputable buyer, "of course."

Indicators turn mixed

Away from the new-deal world, a trader saw the CDX North American Series 16 HY index down ¼ point on Thursday to end at 102 1/8 bid, 102 3/8 offered, after having gained 3/8 point on Wednesday.

The KDP High Yield Daily Index meantime was up by 6 bps Thursday to end at 75.75, after having been up by 4 bps on Wednesday. Its yield came in by 7 bps to 6.64%, after having tightened by 2 bps on Wednesday.

Advancing issues held their lead over decliners for a second straight session on Thursday, holding the same roughly six-to-five edge they enjoyed on Wednesday.

Overall market activity, as measured by dollar-volume levels, fell by 4% on Thursday, after having risen by 20% on Wednesday from the prior session's levels.

A trader said that apart from dealings in the new issues, it was "a lackluster day" in the secondary realm. "Things were a little weaker."

Providing yet another distraction and giving people not inclined to trade one more excuse, he suggested that "most people were watching the Yankee game," as the Bronx Bombers opened the new season at home with a rare afternoon contest.

Rite Aid goes sideways

Among specific names, Rite Aid Corp. posted a 0.1% decline in same-store sales for the four weeks ending March 26.

A trader said the results were in line with what the market was expecting, resulting in "sideways" movement for the company's bonds.

He saw the 7½% notes due 2017 closing at par bid, par ¼ offered, on $40 million to $50 million traded.

Another trader pegged the 7½% notes at "par and change" and the 9½% notes due 2017 at 893/4, "up a quarter, maybe."

For the month, the Camp hill, Pa.-based drugstore chain saw its total sales fall 0.9% to $1.95 billion from $1.97 billion the year before.

Prescription revenue accounted for nearly 70% of total sales.

Rite Aid is expected to release quarterly numbers next week.

Stephanie N. Rotondo contributed to this report

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.