RSI secured deal prices to cap $5.3 billion week in quiet pre-holiday dealings

By Paul Deckelman and Paul A. Harris

New York, Feb. 15 - The high-yield primary sphere saw one more deal on Friday before market participants took off on the three-day Presidents Day holiday weekend, as kitchen and bathroom cabinet maker RSI Home Products, Inc. priced $525 million of five-year secured notes during the morning.

With that transaction out of the way, many junk marketeers called it a day by early afternoon, even though Friday officially was a regular full session ahead of Monday's scheduled market close.

The RSI deal topped off a relatively quiet week which saw $5.3 billion of new dollar-denominated, fully junk-rated paper from domestic or developed-country issuers come to market in 12 tranches, according to data compiled by Prospect News. That was well down from the $9 billion which priced in 22 tranches the previous week, ended Feb. 8, according to the data.

On a year-to-date basis, junk issuance through Friday totaled some $56.8 billion in 125 tranches, running about 19% ahead of the pace seen a year ago at this point on the calendar, according to the data.

The new RSI bonds were seen by traders to have firmed about a point after pricing, although market activity was light.

They also saw some dealings in the new Burlington Coat Factory and American Axle & Manufacturing, Inc. bonds which priced during Thursday's session, though again, on relatively light volume.

Statistical indicators of market performance ended mixed on the session, after having been higher across the board on Thursday. But those indicators were up from their week-earlier levels.

RSI prices at tight end

Just one deal priced on a quiet Friday ahead of the three-day Presidents Day holiday weekend in the United States.

RSI Home Products priced a $525 million issue of five-year senior secured second-lien notes (B1/B+) at par to yield 6 7/8%.

The yield printed at the tight end of yield talk that was set in the 7% area.

BofA Merrill Lynch, Wells Fargo and Barclays were joint bookrunners.

Proceeds will be used to repurchase Onex Partners' existing equity stake, to repay all debt under the company's existing credit facilities and for general corporate purposes.

The deal went well, according to a syndicate source, who otherwise held his cards close to his vest.

The week ahead

The four-day post-Presidents Day week is set to get underway with just one deal on the road.

England's Arqiva Broadcast Finance plc was scheduled to wrap up a U.S. roadshow on Friday for a £600 million equivalent offering of seven-year senior notes, which it intends to issue in dollar-denominated and sterling-denominated tranches.

A roadshow in Europe is scheduled to conclude on Tuesday.

Deutsche Bank, J.P. Morgan and Royal Bank of Scotland are the physical bookrunners. J.P. Morgan will bill and deliver for the dollar-denominated notes, while Royal Bank of Scotland will bill and deliver for the sterling-denominated notes.

BofA Merrill Lynch, Barclays, HSBC, Lloyds and UBS are joint bookrunners.

Proceeds will be used to refinance bank debt.

Apart from Arqiva the primary market will be active in the week ahead, said a syndicate official in the United States.

Deal volume stands to be similar to that of the past week, however the size of deals could be bigger, according to the source who has visibility on more than one transaction expected from the industrial sector.

Flows good but not great

As reported, high-yield mutual funds saw $165.5 million of outflows for the week ending Wednesday, according to a report from AMG Data Services.

That outflow trails the previous week's massive $1.38 billion of outflows.

A high-yield mutual fund manager said that so far this year flows have been good but not great.

Thus far in 2013 his fund has seen five negative days, the buysider said.

The good news is that the preponderance of daily flows so far this year have been positive.

However, the entire year of 2012, by contrast, probably did not see five days of negative flows in total, the source added.

RSI rises in aftermarket

After the RSI Home Products 6 7/8% notes had priced, a trader quoted the last two-sided bid he saw on the new deal at 101 bid, 102 offered - up from the par level at which the Lincolnton, N.C.-based maker of kitchen cabinets and bathroom vanities and medicine chests had priced its transaction.

Two other traders meantime saw the bonds going out at 100¾ bid, 101¼ offered.

Junkbondland is quiet

Volume in the day's single new deal was said to be very light, in line with the generally sleepy level of junk market activity heading into the three-day holiday weekend.

One of the traders said that "nothing really was happening today."

When informed that many market participants at other shops had left early - even though Friday, in the eyes of the Securities Industry and Financial Markets Association, was ostensibly just a regular full session - he remarked "lucky them."

Thursday issues quoted higher

With little real trading happening, market sources pegged Thursday's quickly shopped offering from American Axle & Manufacturing a little above that deal's par issue price.

One put the Detroit-based automotive axle and drivetrain components manufacturer's 6¼% notes due 2021 opened at 100 1/8 bid, 100 3/8 offered, later tightening to bid levels between 100¼ and 1001/2.

A second had them at 100 1/8 bid, 100½ offered.

That was actually down a little from initial aftermarket levels seen late Thursday, when the bonds were quoted as high as a 100½ to 101 bid context, before going out at 100½ bid, 100¾ offered.

A trader meantime said that Burlington Coat Factory's 9¼% senior PIK toggle notes due 2018 were at par bid, 100½ offered, although a second trader said he could not recall seeing any activity in those bonds.

Through its Burlington Holdings, LLC and Burlington Holdings Financial Inc. subsidiaries, the apparel and home décor retailer - based in the eponymous New Jersey town - had priced $350 million of the PIK notes in a quick-to-market deal Thursday at 98 to yield 9.514%. That pricing came too late in the day Thursday for any aftermarket activity.

Traders did not see any dealings Friday in Neovia Logistics Intermediate Holdings, LLC's new 10% senior PIK toggle notes due 2018.

Along with its Neovia Logistics Intermediate Finance Corp. subsidiary, the Downers Grove, Ill.-based provider of various logistics services to a number of industries had priced that $125 million same-day issue of those notes at par on Thursday. Although it did not price particularly late that session, traders did not see the smallish deal in the aftermarket at that time.

Existing Axle, Burlington bonds busy

While volume in the new issues was seen as fairly light, some of the existing bonds of those borrowers had a relatively busy session, given the overall dearth of meaningful activity.

A market source saw Burlington Coat Factory's established 10% notes due 2019 trading in a 109 5/8 to 110 bid context, after those bonds had gyrated sharply late in the day on Thursday.

The bonds went home quoted at 110, on round-lot volume of about $11 million, making it one of the most active junk issues of the day.

Those bonds had recently been trading in that same 109½ to 110 range, including for most of the day on Thursday - but late in that session, several round-lot trades showed up on the Trace bond-tracking system between 99 and 99½ bid. Traders did not have an explanation Friday - whether this was a legitimate, if short-lived move or some kind of a glitch or anomaly.

At the opening Friday, the bonds had jumped back up to around 109 5/8.

American Axle's outstanding 6 5/8% notes due 2022 were trading around 102½ bid today, unchanged, with more than $7 million of the bonds changing hands.

Axle's 7 7/8% notes due 2017 - which will be taken out via a tender offer financed by the company's new bond issue - traded just above 103, the level where the company is tendering for that $300 million issue. Prices had been in that area for some time, on investor anticipation, proven correct, that the bonds would be tendered for eventually. Volume was a sedate $2 million.

Poly, Flex hold their own

Back among the new deals, traders saw slightly better levels Friday in PolyOne Corp.'s 5¼% notes due 2023, $600 million of which had priced in a quick-to-market deal on Wednesday.

A trader saw bid levels between 100½ and 101. A second had them at 100 7/8 bid, 101 3/8 offered, while a third located them at 100 7/8 bid, 101 1/8 offered.

After pricing, the bonds had initially traded up to 100 5/8 bid, before going home at 100 1/8 bid, 100½ offered. On Thursday, the bonds had traded around 100½ bid, 100 7/8 offered.

Flextronics International Ltd.'s 4 5/8% notes due 2020 were quoted by one trader at 101 bid, 101¼ offered, while a second saw them at 101 bid, 101½ offered.

The Singapore-based contract electronics manufacturer had priced $500 million of those bonds at par on Tuesday as part of a $1 billion, two-part drive-by deal. The bonds had initially been seen in a par to 100 3/8 bid range, continuing to firm slightly during the rest of the week.

The other half of that deal - $500 million of 5% notes due 2023 - was quoted by two traders on Friday at 100 3/8 bid, 100 5/8 offered.

Those bonds too had priced at par, and had been in that same par to 100 3/8 bid context initially, before firming.

Market indicators turn mixed

In the secondary realm, statistical junk market performance indicators were mixed on the day Friday, after having been mostly higher on Thursday. However, they were up on a week-over-week basis from the previous Friday, Feb. 8.

The Markit Series 19 CDX North American High Yield Index finished down 3/32 point on Friday at 102½ bid, 102 5/8 offered, after having been unchanged on Thursday. Before that, it had notched four consecutive gains.

The index was up on the week from the 102 3/32 bid, 102 7/32 level at which it had finished the previous Friday.

The KDP High Yield Daily Index rose by 6 basis points on Friday to 75.25, its third consecutive gain. One Thursday, it had edged up by 1 basis point for a second straight session.

Its yield was off by 2 bps for a second straight session on Friday, ending at 5.72%.

Those levels showed a slight improvement from the week-earlier 72.17 index reading and 5.74% yield.

The widely followed Merrill Lynch High Yield Master II index meanwhile notched its fifth straight gain on Friday, as it rose by 0.052% for a second straight session. That raised its year-to-date return to 1.369% on Friday from Thursday's 1.315%, although it still remained well down from its peak level for 2013 so far of 1.991%, set on Jan. 28.

The index showed a one-week gain of 0.331% - its first gain after two straight weekly losses.

On Feb. 8, it showed a one-week loss of 0.379%, and a year-to-date return of 1.035%.

© 2015 Prospect News.
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