VeriSign, Taylor Morrison lead $2 billion day; Rite Aid up on numbers; funds down $79 million

By Paul Deckelman and Paul A. Harris

New York, April 11 - High-yield new issuance fell off on Thursday by nearly 50% from Wednesday's hefty levels - but the junk market kept up the brisk pace seen during that previous session, when nearly half of the paper priced had come from just one giant-sized deal.

On Thursday, in contrast, issuance was spread out over a string of dollar-denominated deals totaling just under $2 billion. There were also several non-dollar pricings, and talk was out on several offerings that are expected to come to market during Friday's session.

The big deal of the day was internet infrastructure services provider VeriSign, Inc.'s upsized $750 million of 10-year notes, followed by homebuilder Taylor Morrison Home Corp.'s upsized $550 million of eight-year paper.

Australian metals product maker BlueScope Steel Ltd. priced $300 million of five-year notes, while Affinia Group Inc., a supplier of aftermarket automotive and industrial filters, did $250 million of seven-year paper.

All four of those new deals were heard by traders to have firmed when they hit the aftermarket.

Rounding out the day, RAAM Global Energy Co. did a smallish add-on to its 2015 secured notes, although those bonds were not seen trading around afterward.

There was a pair of euro-denominated pricings, one from German cable operator Unitymedia and the other from Austrian building products company Wienerberger AG.

Centric Health Corp. came to market with a Canadian dollar-denominated transaction.

Among Wednesday's deals, a trader characterized Sabine Pass Liquefaction LLC's $1.5 billion two-part deal - which had accounted for almost half of Wednesday's $3.6 billion of new junk paper - as "a blowout," with both tranches up around 2 points in heavy dealings.

Away from the deals that actually priced, talk was heard out on the offerings from energy operators Memorial Production Partners LP and Athlon Holdings LP; both are expected to get done during Friday's session, along with gaming concern New Cotai LLC's deal, which was upsized.

Away from the new deals, Rite Aid Corp.'s bonds were solidly firmer after the drugstore chain operator released considerably better fiscal fourth-quarter and full-year results.

Statistical market performance indicators remained up across the board for a second straight session.

But the measurement of fresh investor cash coming into or leaving the junk market via high-yield mutual funds and exchange-traded funds - a key signal of overall Junkbondland liquidity - fell for the first time in four weeks, according to one of the major fund-tracking services.

AMG sees $78.6 million outflow

On Thursday evening, well after the day's dealings had come to a close, junk market participants familiar with the fund-flow statistics generated by AMG Data Services, Inc. reported that in the week ended Wednesday, $78.6 million more had left those funds than had come into them.

It was the first outflow seen in four weeks by Arcata, Calif.-based AMG, a unit of the Lipper analytics division of Thomson Reuters Corp. That broke a string of three consecutive weekly inflows totaling about $267 million seen previously, including the $32.1 million cash addition reported the prior week, ended April 3.

It was also the third straight week in which fund flows in either direction had been relatively minimal, coming in under $100 million. Besides this week's modest outflow and last week's small inflow, there was also a $34.1 million inflow the week before that, ended March 27.

Fifteen weeks into the year, 2013 net inflows as reported by Lipper so far have amounted to about $804 million, according to a Prospect News analysis of the figures.

There have now been nine inflows and six outflows reported by Lipper so far this year.

In 2012, when cumulative net inflows for the year totaled an estimated $32 billion, according to the analysis, inflows to the funds had been recorded in 39 weeks of the year and outflows in the remaining 13 weeks.

As of press time, fund-flow figures for the latest week from the other major fund-tracking service, Cambridge, Mass.-based EPFR Global, had not been seen.

In the prior week, ended April 3, EPFR, which uses a different methodology from Lipper that includes some foreign-domiciled funds as well as domestic funds in its tally, saw an overall inflow to the funds of $997 million, its 12th reported inflow in the first 14 weeks of the year. It saw a $437 million cash injection to the strictly U.S.-only funds it tracks, the eighth such inflow this year against six outflows. Year-to-date overall junk net inflows totaled around $9.2 billion, with an estimated $2.7 billion cumulative inflow to the U.S. funds, according to a Prospect News analysis of EPFR's figures.

Cumulative fund-flow estimates, whether from EPFR or from AMG/Lipper, may be revised upward or downward or be rounded off and could include unannounced revisions and adjustments to figures from prior weeks.

The continued flow of fresh cash into junk - and the mutual funds and ETFs represent but a small, though very observable and quantifiable percentage of the total amount of investor money coming into or leaving the junk market - has been seen by analysts as a key element behind the high-yield secondary sphere's strong performance last year versus other fixed-income asset classes and its record active new-deal pace, which easily topped the $350 billion mark - patterns of primary activity and secondary strength that have mostly continued into the 2013.

Taylor Morrison upsizes

Three strictly junk issuers priced issues on Thursday, raising a total of $1.1 billion.

Taylor Morrison Home subsidiaries Taylor Morrison Communities, Inc. and Monarch Communities Inc. priced an upsized $550 million issue of eight-year senior notes (B2/BB-) at par to yield 5¼%.

The deal was upsized from $500 million and was priced on the investment grade desk.

Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Goldman Sachs & Co., J.P. Morgan Securities LLC, Wells Fargo Securities LLC and HSBC Securities are the joint bookrunners for the general corporate purposes deal.

BlueScope at the tight end

Australia's BlueScope Steel (Finance) Ltd. and BlueScope Steel Finance (USA) LLC priced a $300 million issue of five-year senior notes (Ba3/BB) at par to yield 7 1/8%.

The yield printed at the tight end of price talk set in the 7¼% area.

Credit Suisse was the bookrunner.

The Melbourne-based manufacturer of steel products plans to use the proceeds for general corporate purposes.

BlueScope postponed a $300 million offer of six-year senior notes last November.

Affinia's eight-year deal

Affinia Group priced a $250 million issue of eight-year senior notes (Caa2/B-) at par to yield 7¾%.

The yield printed at the tight end of the 7¾% to 8% yield talk.

JPMorgan, BofA Merrill Lynch, Barclays and Deutsche Bank were the joint bookrunners.

Proceeds will be used to redeem the company's existing notes and preferred shares, to partially redeem its seller note and to make a distribution to its shareholders.

VeriSign split-rated deal

VeriSign priced an upsized $750 million issue of split-rated 10-year senior notes (Baa3/BB) at par to yield 4 5/8%.

The yield printed at the tight end of yield talk set in the 4¾% area.

JPMorgan and BofA Merrill Lynch are the joint bookrunners.

The internet infrastructure services provider plans to use the proceeds for general corporate purposes, to repay its revolving credit facility and to repurchase shares.

Unitymedia secured deal

European high yield was also active on Thursday.

German cable operator Unitymedia priced a €350 million issue of 10-year senior secured notes (/B+/) at par to yield 5 5/8%.

The yield printed at the tight end of yield talk that was set in the 5¾% area.

Citigroup Global Markets Ltd., Credit Agricole CIB, ING Bank NV, London Branch, Royal Bank of Scotland plc, SG CIB and UBS Ltd. were the bookrunners for the general corporate purposes deal.

Wienerberger upsizes

Austrian building supplies firm Wienerberger priced an upsized €300 million issue of 4% seven-year senior notes (Ba2/BB+) at 99.25 to yield 4 1/8%, according to a market source.

The yield printed 12.5 basis points below initial guidance that had been set in the 4 3/8% area.

The deal was upsized from €250 million.

Raiffeisen International Bank AG and Commerzbank managed the sale.

Talking the deals

A busy Friday is on tap for the junk primary market. Dealers provided price talk and other details about deals expected to clear before the end of the week.

Athlon Holdings and Athlon Finance Corp. talked their $400 million offering of eight-year senior notes (Caa1/CCC+) to yield 7½% to 7¾%.

Joint physical bookrunner BofA Merrill Lynch will bill and deliver for the Rule 144A and Regulation S deal. Wells Fargo is also a joint physical bookrunner.

Credit Agricole CIB, Credit Suisse, RBC Capital Markets and UBS Securities LLC are joint bookrunners.

Memorial Production Partners talked its $300 million offering of eight-year senior notes (confirmed Caa1/expected B-) to price at an original issue discount of about 1.5 points and to yield in the 8% area.

Wells Fargo is the left bookrunner. JPMorgan, Barclays, BofA Merrill Lynch, Citigroup and RBC are the joint bookrunners.

And New Cotai and New Cotai Capital Corp. upsized their offering of non-rated six-year senior PIK notes to $380 million from $360 million on Thursday.

The portion of the company that will be represented in the attached equity interests in New Cotai Participation Corp. was increased to 7.4% from 7%.

Coupon talk is unchanged at the 10¾% area.

Recommitments are due by 10 a.m. ET on Friday, and the deal is set to price thereafter.

Credit Suisse is the bookrunner.

VeriSign does very well

In the secondary market, a trader said that he saw "nothing going on really. It was pretty quiet."

While he saw that VeriSign's 4 5/8% notes due 2023 priced at par, after having been upsized to $750 million from an originally announced $600 million, he said that there was "nothing exciting there."

However, a second traded did see the Reston, Va.-based internet infrastructure services provider's deal having gotten as good as 101 bid, 101½ offered, while another pegged the new bonds at 100 7/8 bid, 101 5/8 offered.

Taylor, other deals trade up

Taylor Morrison's $550 million offering of 2021 notes traded at 101 bid, 101¾ offered.

Another said that the 5¼% yield on the deal "is probably reasonable."

The Scottsdale, Ariz.- based homebuilder's issue was upsized from an originally announced $500 million, and the deal priced at par.

A trader saw BlueScope Steel's $300 million of 7 1/8% notes due 2018 having pushed up to 101 7/8 bid, 102¼ offered. A second saw the Melbourne, Australia-based steel products manufacturer's new paper at 101¾ bid, 102¼ offered, well up from their par issue price.

Affinia Group's 7¾% notes due 2020 did even better than that, another market source said. He said that the $250 million offering from the Ann Arbor, Mich.-based supplier of automotive and industrial filters moved as high as 102 5/8 bid, 103 1/8 offered versus its par issue price.

A second trader said he "didn't see much trading in them." He said the bonds "came a little tighter than I expected," given that they priced at the tight end of their price talk range.

"It's got a bit of a fan club, but it's not something that's going to attract a bunch of attention."

Sabine Pass pops up

Among Wednesday's deals, a trader said of Sabine Pass Liquefaction's $1.5 billion two-part drive-by deal, "[It] seemed like that thing was a real blowout. Those traded very well today -it seemed like there was a lot of follow-on demand."

He said that the $500 million add-on to the Houston-based liquid natural gas company's existing 5 5/8% senior secured notes due 2021 "priced at 1021/2. Then it was up [another] 1½ to 2 points, I would call it, on pretty heavy volume." He saw the bonds going home at 104 to 104¼ bid.

Meanwhile, "the new 10-year piece that came was up 2¼ or so at the best" from the $1 billion tranche's par issue price, ending at 102 to 1021/2.

"So it was a nice day for both of those issues, on really heavy volume."

Rite Aid on the rise

Away from the new deals, a trader saw Rite Aid's 7.7% bonds due 2027 up 3 points on the day at 101½ bid, 102½ offered.

Another trader had its 9¼% notes due 2020 at 1141/2, a gain of 1¼ points on the day.

The Camp Hill, Pa.-based drugstore chain operator's paper popped up after the company reported strong results for the 2013 fiscal fourth quarter and full year ended March 2, including its first yearly profit since 2007 and record levels of adjusted EBITDA.

Company executives also said on their conference call following the release of the results that Rite Aid had cut its debt by $250 million during the year, and its leverage ratio of debt versus EBITDA had improved by more than 1 full turn year over year. (See related story elsewhere in this issue.)

Market indicators stay strong

Statistical junk market performance indicators were better across the board for a second consecutive day on Thursday.

The Markit Series 20 CDX North American High Yield index rose by 7/32 point, its sixth straight gain, to end at 104 3/8 bid, 104 5/8 offered, after having gained 7/16 point on Wednesday.

The KDP High Yield Daily index added 6 bps to finish at 75.76, its second straight gain. It had jumped by 10 bps on Wednesday.

Its yield declined by 2 bps to 5.42%, its second straight narrowing, after having fallen by 4 bps on Wednesday.

And the widely followed Merrill Lynch High Yield Master II index rose for a fourth consecutive session on Thursday, gaining 0.218% ,on top of Wednesday's 0.194% advance.

The latest gain lifted its year-to-date return to 3.636%, a new peak level for the year. That was up from the previous high point for the year, Wednesday's 3.41% reading.

Meanwhile, the index's yield fell on Thursday to 5.498%, a new all-time low, versus the previous low mark, Wednesday's 5.59%.

Its spread over comparable Treasury issues tightened by 5 bps to 475 bps, approaching the year's low level of 474 bps, set back in late January.

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