March off to a quiet start to cap $4.8 billion week; new Equinix issue excels; Penney off lows

By Paul Deckelman and Paul A. Harris

New York, March 1 - They traditionally say that March is supposed to "come in like a lion" - but the new month got underway in Junkbondland on Friday more like a lamb, gently and quietly.

Just one new dollar-denominated, junk-rated deals came to market during the session - a not-surprising development, with investors trying to digest the $4 billion glut of bonds that had priced on Thursday, the busiest primary pricing party in many weeks.

As those new bonds began to trade around, market participants seemed universally impressed by the strength shown by Equinix Inc.'s new seven-year notes. Several quoted the data-center operator's paper trading well above the 101 level. The other half of that massive two-part deal, a tranche of 10-year notes, in contrast, was only modestly higher.

Thursday's other two-part megadeal, from Charter Communications Inc., was seen late in the session with both halves of that offering trading near their par issue price.

As for Thursday's other, smaller deals, they mostly stayed near their respective issue prices.

With Friday's lone pricing, the week closed with $4.98 billion of such junk paper having come to market in 11 tranches according to data compiled by Prospect News. That was down from the $6.8 billion in 12 tranches that had appeared the previous week, ended Feb. 22.

Global junk issuance for the year so far totaled $68.7 billion in 148 tranches as of Friday, running about 6% ahead of the year-ago pace at that same point on the calendar, according to the data.

Away from the new issues, traders saw a little improvement in the battered bonds of J.C. Penney & Co. Inc., which had taken their lumps over the previous several sessions - especially Thursday - as the underperforming department store operator reported bad fourth-quarter numbers, including a big year-over-year sales slide.

Statistical indicators of secondary market performance were mixed on the session, though more to the upside, and they were meanwhile higher across the board from where they had been at the end of the previous week.

Noranda Aluminum downsizes

Following Thursday's $4 billion burst of issuance, the relatively quiet Friday session saw just two deals cross the finish line: one dollar-denominated issue, and one that came in the form of sterling-denominated notes.

In the dollar-denominated market Noranda Aluminum Acquisition Corp. priced a downsized $175 million issue of senior notes due June 1, 2019 (Caa1/CCC+) at par to yield 11%

The yield and reoffer price came on top of talk.

BofA Merrill Lynch, Citigroup Global Markets and UBS Securities LLC were the joint bookrunners for the deal which was downsized from $225 million

The Franklin, Tenn.-based aluminum products manufacturer plans to use the proceeds, together with incremental term loan borrowings under its existing senior secured credit facilities, to redeem its floating-rate notes due 2015 and for general corporate purposes.

DFS Furniture in pounds

In the sterling-denominated market, DFS Furniture Holdings priced £310 million of five-year senior secured notes (B2/B) in two tranches.

A £200 million tranche of fixed-rate notes priced at par to yield 7 5/8%. The yield printed at the tight end of yield talk that was set in the 7¾% area.

In addition, a £110 million tranche of floating-rate notes priced at par to yield three-month Libor plus 600 basis points. The Libor spread came on top of spread talk. The reoffer price came at the rich end of the 99.5 to par price talk.

Joint physical bookrunner Goldman Sachs will bill and deliver. JP Morgan was also a joint physical bookrunner. Lloyds TSB was a joint bookrunner.

Proceeds will be used to repay debt and fund a dividend.

MasTec to roadshow

MasTec, Inc. plans to start a roadshow on Monday in New York City for a $350 million offering of 10-year senior notes (existing Ba3/BB-), according to a syndicate source.

The roadshow moves to Boston on Tuesday and to Los Angeles on Wednesday, and the deal is set to price after that.

Characterizing the offer as a "clubby deal," a trader said that MasTec is feeling for a yield in the mid-5% context.

Barclays is the left lead bookrunner. Morgan Stanley & Co. and SunTrust Robinson Humphrey are joint bookrunners.

The Coral Gables, Fla.-based infrastructure construction company plans to use the proceeds to fund the repurchase of $150 million of its 7 5/8% senior notes due 2017, to repay the outstanding balance under its existing credit facility and for general corporate purposes.

Titan to tap 7 7/8% notes

Titan International Inc. plans to price a $275 million add-on to its 7 7/8% notes due 2017 in the early-to-middle part of the week ahead.

Goldman Sachs & Co. is the lead left bookrunner. Jefferies & Co. is the joint bookrunner.

Proceeds will be used to repay part of the debt of indirect subsidiaries under the European credit facilities assumed as part of the acquisition of Titan Europe plc in the fourth quarter of 2012, and for general corporate purposes.

The original $200 million issue priced at par in September 2010.

Cornerstone sets talk

In the private placement market, Cornerstone Chemical Co. talked its proposed $220 million private placement of senior secured notes due 2018 (B3/B) to yield 9½%, plus or minus 12.5 bps.

Order books are set to close on Monday.

Imperial Capital and Keybanc Capital Markets are the placement agents.

The deal is a Regulation D private placement, with no registration rights; however, the bonds are expected to trade Rule 144A-style.

Credit ratings in the low single-B range are expected.

Proceeds will be used to repay debt and to pay a cash dividend to shareholders.

Waggaman, La.-based Cornerstone Chemical is a producer of critical intermediate and specialty chemicals.

'Just languishing'

On Friday morning, a trader said that Thursday's deals were "just languishing" in the secondary market.

Most had priced very late in the session on Thursday, and then had not moved into the aftermarket at that time.

For instance, he saw the Equinix 4 7/8% notes due 2020 trading just slightly above their par issue price, at 100¼ bid, 100¾ offered.

Its 5 3/8% notes due 2023 were straddling their par issue price at 99¾ bid, 100¼ offered.

Among some of the other Thursday bonds, the trader quoted both tranches of Charter Communications' $1 billion deal at par bid, 100½ offered.

And he saw Cedar Fair's 5¼% notes due 2021 below their par issue price, at 99 5/8 bid, 99 7/8 offered.

Equinix excels

But after that rather inauspicious start, another trader said, "some of the stuff started kicking up a little bit."

Chief among the deals which started to gain some traction was Equinix, with the trader declaring "that bond is hot. Everybody likes it."

The Redwood City, Calif.-based data center operator had priced an upsized $1.5 billion of new paper as a drive-by issue on Thursday, radically upsizing that deal from an originally announced $1 billion.

The $500 million of 4 7/8% seven-year notes did especially well in the aftermarket when they were freed to trade early Friday, with three different traders seeing the bonds having eventually risen to 101½ bid, 101¾ offered.

At yet another desk, a market source - who pegged the bonds around the 101 1/8 level - said that over $22 million had changed hands by mid-afternoon, making those '20s one of the busiest junk issues on the day.

However, they were eclipsed by the other half of that big deal - the $1 billion of 5 3/8% 10-year notes - at least in terms of trading volume, if not necessarily price appreciation.

That market source said that over $54 million of that paper had traded by mid-afternoon - clearly the winner in the most-active sweepstakes. However, while a lot of that paper was traded, it really wasn't going very far, at least when compared with the other part of that deal. He quoted the bonds at 100¼ bid.

Another trader saw them at 100½ bid, 100¾ offered, while two more traders had them going home at 100 5/8 bid, 100 7/8 offered.

Isle treads water

Among the other offerings that priced Thursday, one of the traders opined that "the deal that didn't go too well, unfortunately" was Isle of Capri Casinos Inc.'s 5 7/8% notes due 2021. "That didn't go far, it went down."

He saw the St. Louis-based gaming operator's quick-to-market issue trading at 99 3/8 bid, 99¾ offered, before narrowing to 99 3/8 bid, 99 5/8 offered. That was down from the par level at which that $350 million deal had priced.

A second trader said he had not seen any aftermarket dealings in that issue.

Cedar Fair, Huntsman below issue

Another new deal which didn't immediately rise right out of the box was Cedar Fair LP's 5¼% notes due 2021. After meandering around a little below its par issue price in morning dealings, the Sandusky, Ohio-based amusement-park operator's quickly shopped $500 million issue remained just below par throughout the afternoon.

One trader did quote the bonds as having gotten to around a 100 to 100 1/8 bid context, but the consensus level was between 99½ and par bid.

Huntsman International LLC's fungible-upon-registration add-on to its existing 4 7/8% notes due 2020 were seen by a trader on Friday at 98 1/8 bid, 98½ offered.

The Salt Lake City-based specialty chemicals manufacturer's $250 million same-day transaction had priced on Thursday at 98.5 to yield 5.112%.

Other deals a little better

Apart from those relative underachievers, however, a trader said that "the others all traded up," even if none was a barn-burner.

He saw Charter Communications' 5¼% eight-year notes in a par to 100¼ bid context, and saw its 5¾% 10-year paper trading between 100¼ and 100¾ bid.

The St. Louis-based cable TV, broadband and phone service provider - one of the most recognizable junk market names - drove by the primary sphere on Thursday with its $1 billion deal, pricing each $500 million tranche at par.

However, a second trader saw both of those issues come off their high prints to go home straddling par.

Thursday's other deal, for Chicago-based commercial printer R.R. Donnelley & Sons Inc., was seen by several traders having moved up moderately well from the 99.5 level at which those notes had priced to yield 7.961%.

The quick-to-market $450 million issue - which was upsized from $350 million originally - traded at 100¼ bid, 101 offered on Friday, a market source said, while a second saw them even better than that, at 100 5/8 bid, 101 1/8 offered.

Donnelly's existing bonds were also trading around; its 6 5/8% long bonds due 2029 rose by 2 points, a trader said, to go home at about 88 3.4 bid.

Its 6 1/8% notes due 2017 were finishing at almost 104 bid, while its 7¼% notes due 2018 moved up to 1043/4, with both racking up around $7 million or $8 million of volume.

Goodyear still popular

One other recent deal that was notable on Friday was Goodyear Tire & Rubber Co.'s 6½% notes due 2021.

The Akron, Ohio-based tire-making giant had priced $900 million of those bonds at par on Feb. 20, and they had quickly moved up to around the 102 bid level in very heavy aftermarket trading - over $200 million total - in the several sessions that followed.

Volume trailed off this week, but was still respectable enough to put Goodyear's deal among the most actives several days this week.

One Friday, a market source said that over $15 million had traded by mid-afternoon.

A trader saw them still hovering like one of the company's iconic advertising blimps well above the 102 level, quoting them between 102¼ bid and 1021/2.

"They just remain very popular," he exclaimed.

J.C. Penney rebounds

Away from the new-deal arena, J.C. Penney's bonds remained one of the more notable secondary credits.

A trader said that those bonds were "for the most part, maybe a little bit better," following two straight days of losses tied to a poor earnings report.

The trader pegged its 5.65% notes due 2020 at 81 bid, 81½ offered and the 7 1/8% notes due 2023 in an 88-89 context.

Another trader saw the 7 1/8% notes "coming off of yesterday's lows," deeming the debt up 3 points to 891/2. However, he saw the 7.95% notes due 2017 slipping a point to 93.

Late Wednesday, the company reported its quarterly results, which showed no improvement despite a massive turnaround effort.

For the fourth quarter, the Plano, Texas-based retailer reported a net loss of $552 million, or $2.51 per share. That compared to a profit of $294.1 million, or $1.28 per share, the year before.

Excluding one-time charges, net loss was $427 million, or $1.95 per share - far worse than analysts' forecast of 28 cents per share of red ink.

Revenues for the big holiday quarter were down 28.4% to $3.8 billion. Same-store sales declined by 31.7%.

For the year, the company lost $985 million, or $4.49 per share. Revenues declined by 24.8% to $12.99 billion.

Same-store sales were down 25%.

Market indicators stay mixed

Statistical junk market performance indicators were mixed for a second straight session on Friday, and for the fourth time in the last five sessions, a stretch interrupted only by a broad advance on Wednesday.

They were, however, up across the board from the levels they had held at the end of the previous week, ended Feb. 22. It was the third consecutive week that those signposts were pointing higher, after having been on the decline for two weeks before that.

The Markit Series 19 CDX North American High Yield Index was up by 5/16 point on Friday to end at 102¾ bid, 102 13/16 offered, after having lost 3/16 point on Thursday.

The index was up from its 102 17/32 bid, 102 19/32 offered level the previous Friday.

But the KDP High Yield Daily Index was down by 3 basis points on Friday to close at 75.33, its first loss after two previous gains. It jumped by a solid 11 bps on Thursday.

Its yield edged up by 1 bp to close at 5.64% on Friday, after having declined by 3 bps on Thursday, its second straight narrowing.

Those levels compare favorably with the week-earlier 75.26 index reading and 5.68% yield.

The widely followed Merrill Lynch High Yield Master II index posted its third straight gain on Friday, rising by 0.014%, on top of Thursday's 0.147% advance.

The gain raised the index's year-to-date return to 1.859% from 1.845% on Thursday, although it still remained down from its peak level for 2013 so far of 1.991%, set on Jan. 28.

For the week, the index was up by 0.355% - its third straight weekly gain.

In the week ended Feb. 22, it had risen by 0.129%, for a 1.499% year-to-date return on Friday.

Stephanie N. Rotondo contributed to this review

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