NOVA drives by, bonds firm; new Ally two-parter busy; HCA higher but Smithfield slides

By Paul Deckelman and Paul A. Harris

New York, July 16 - NOVA Chemicals Corp. priced a quickly shopped $500 million of 10-year notes on Tuesday, high-yield syndicate sources said. The Canadian company's new issue firmed smartly when it hit the aftermarket.

Nova was the day's sole fully junk-rated, dollar-denominated issue from a domestic or industrialized-country borrower, although the forward calendar continued to grow.

Syndicate sources said that Carolina Beverage Group, LLC and its financing subsidiary started a roadshow for the drink-maker's $120 million five-year note offer. They also said that cable, phone and internet service provider Midcontinent Communications would launch a $250 million bond deal later this week.

In the non-dollar market, Britain's Marlin Financial Group was hitting the road with a sterling-denominated seven-year deal, while French furniture retailer Maisons du Monde was shopping a seven-year euro-denominated offering to investors.

Back in the dollar-deal segment, traders said that Monday's two-part megadeal from lender Ally Financial Inc. was easily the most active name in Junkbondland, with around $150 million of the new bonds traded, though the bulk of this was due to crossover buyers. However, they did not see much in the way of aftermarket dealings in Monday's other two transactions, from RKI Exploration & Production, LLC and from MagnaChip Semiconductor Corp.

Away from the new deals, HCA, Inc.'s bonds rose in active trading, after the big hospital operator released favorable second-quarter preliminary results and reaffirmed its full-year guidance.

Cricket Communications, Inc.'s bonds traded actively for a second straight session, though they were little changed from the sharply higher levels recorded on Monday on the news that the pre-paid wireless service provider is to be acquired by telecom giant AT&T, Inc.

But Smithfield Foods, Inc.'s existing bonds retreated in the wake of the hog producer and pork processor's plans to sell $800 million of new debt to help fund the company's proposed buyout.

Statistical indicators of market performance were mixed, after having been higher across the board over the previous five sessions.

NOVA prices tight

The Tuesday session saw a lone drive-by deal clear the market.

NOVA Chemicals priced a $500 million issue of 10-year senior notes (Ba2/BB+) at par to yield 5¼%.

The yield printed at the tight end of the 5¼% to 5½% yield talk.

In the secondary, the bonds were 101¼ bid, 102 offered in fairly heavy trading, a trader said.

Barclays, HSBC, RBC, Scotia and TD were the joint bookrunners for the debt refinancing deal.

Carolina Beverage deal

Carolina Beverage Group, LLC and Carolina Beverage Group Finance, Inc. began a roadshow on Tuesday for a $120 million offering of five-year senior secured notes.

Imperial Capital is the bookrunner.

The Mooresville, NC-based manufacturer of specialty and functional beverages, primarily energy drinks, plans to use the proceeds to refinance debt and fund a distribution to equity holders.

Nearer at hand, price talk is expected to surface Wednesday morning on the TitleMax $500 million offering of five-year senior secured notes (/B+/), according to a high-yield portfolio manager, who added that the deal is expected to price later on Wednesday via bookrunners Jefferies and Morgan Stanley.

Based on market chatter, this investor expects talk to take shape in a mid-8% context, or perhaps even a low to mid-8% context.

Three consecutive days of strong inflows have returned about 50% of the cash withdrawn during the volatility that rocked the market during the past month, the investor said.

And the dealers are not in the dark with regard to these strong daily flows, the investor said, adding that dealers are nowhere near as malleable, with respect to rate conversations, as was the case just 10 days ago.

The market is heating up at an impressive pace, the buysider said, but added that rates are unlikely to take a precipitous fall to levels anything like those that cleared in the white hot days of spring.

That's because investors are still smarting from price drops sustained on bonds that came at the top of the market.

Right now, the new issue pipeline looks thin, the investor said, but added that a period of low new issue volume could serve to strengthen prices of bonds lately beaten up in the secondary market.

Maisons du Monde LBO deal

The European primary market continued to generate news on Tuesday.

A roadshow starts on Wednesday for a €325 million offering of seven-year senior secured notes (expected ratings B3/B) backing the LBO of France-based furniture retailer Maisons du Monde.

Global coordinator Credit Suisse will bill and deliver. Commerzbank and Natixis are joint bookrunners.

Proceeds will be used to finance the acquisition of Maisons du Monde by Bain Capital and management.

Marlin roadshowing

London-based Marlin Financial is conducting a roadshow in Europe for a £150 million offering of seven-year senior secured notes (expected ratings B2/B), which are expected to price later this week.

Joint bookrunner JPMorgan will bill and deliver. Investec is also a joint bookrunner.

Proceeds will be used to repay debt and for general corporate purposes.

The issuing entity is Marlin Intermediate Holdings plc.

London-based Marlin Financial is a purchaser of defaulted unsecured consumer debt portfolios in the United Kingdom.

New NOVA trades up

In the secondary arena, traders saw NOVA Chemicals' new 5¼% notes due 2023 improve solidly when they began to trade in the aftermarket after having priced at par.

One trader quoted the Calgary, Alta.-based chemical company's new deal at 101 3/8 bid, 102 offered, while a second saw a locked market at 1011/2.

"The deal went surprisingly well," he opined, adding that before the deal got done, he thought the 5¼% yield at the tight end of talk "was going to be a little cuspy."

"Maybe you'd get [another] quarter-point out of it - but obviously they had more latent demand than expected from crossover people, I would think, that propelled this thing higher."

He said, "A lot of high-yield guys said 'no thanks' " to the idea of playing the relatively low-coupon deal, "so demand had to come from outside the high-yield universe."

Two other traders also saw the bonds moving around within a 101 to 101¾ bid context.

Chemicals lag, but NOVA okay

In a Tuesday research note on NOVA, independent advisory service Gimme Credit LLC senior analyst Evan Mann wrote: "With demand rebounding at a modest pace, and the overhang of low cost Middle Eastern supply entering the market over the next few quarters, we don't look for a meaningful improvement in the fundamentals of the commodity chemical sector any time soon."

However, he noted that NOVA has done "a good job cleaning up its balance sheet" over the past six months, a process it is continuing via its current tender offer for its 2016 bonds.

And Mann predicted that NOVA "should have adequate liquidity to tide itself over until a more robust recovery in the commodity chemical sector takes hold."

New Ally deal active

Among the issues priced on Monday, a trader said that Ally Financial's big new two-part offering "was pretty active," which was putting it mildly.

He saw Ally's 3½% notes due 2016 having firmed a little to 100 3/8 bid, 100½ offered versus the $1 billion tranche's par issue price and said that over $100 million of those bonds had traded - making it easily the busiest high yield-rated issue.

He saw the Detroit-based automotive and mortgage lender and online banking company's $375 million of new floating-rate notes due 2016 trading a little below their par issue price, at 99¼ bid, 99¾ offered, with over $50 million having changed hands, a pace exceeded only by the fixed-rate half of the deal.

A second trader said that the former General Motors loan-financing unit's new drive-by deal "did okay," seeing the 31/2s at 100¼ bid, 100 3/8 offered and the floaters trading between 99 and 99½ bid.

As was the case with the NOVA transaction, Ally - with an even smaller and less traditionally junk-like coupon - attracted considerable attention from investment-grade crossover buyers who ignored the official Ba1/B+/BB- ratings to buy a piece of it.

Other deals less traded

The heavy trading in the new Ally deal seemed to suck much of the air from the room when it came to Monday's other deals.

A trader saw MagnaChip Semiconductor's 6 5/8% notes due 2021 trading at bid levels between 99 7/8 and 100 1/8, before the South Korean computer-chip manufacturer's quickly shopped $225 million deal traded "right square in the middle" at par.

The issue had priced at 99.5 to yield 6.707%

While there were at least some dealings in that credit, the same could not be said about RKI Exploration & Production's 8½% notes due 2021. The Oklahoma City-based energy company's issue had priced at par on Monday.

A trader said, "We didn't see too much of that one."

In fact, he went on to say, "even though it's a decent-sized issue [at $350 million], I saw not one level off that one at all."

He said that this was especially surprising because the deal was brought to market by several investment bank heavyweights - Citigroup, J.P. Morgan and UBS - making it more likely that buyers could emerge.

A second trader meantime concurred that he had not seen "anything at all" in the new credit. He added, "It's a deal that if you bought it, you really didn't buy it to trade."

Smithfield gets slammed

Traders saw Smithfield Foods' 6 5/8% notes due 2022 get hammered down by more than 3 points on the session, ending at 105¼ bid.

A market source saw more than $12 million of the Smithfield, Va.-based hog producer and pork processor's bonds having changed hands, making it one of the day's busiest bonds outside of those issued by Ally Financial.

That slide followed Monday's news that Smithfield plans to issue $800 million of five- and eight-year senior notes to help fund the company's purchase by Chinese pork producer Shuanghui International Holdings Ltd.

Leap jump continues

Another even busier name was Cricket Communications' 7¾% notes due 2020. A trader saw between $25 million and $30 million of the San Diego-based pre-paid wireless service company's bonds having traded, pegging them at 114 1/8 bid, 114¼ offered.

That was up from the levels around 113 7/8 at which those bonds had finished on Monday, when they zoomed more than dozen points from prior levels below 102 on ultra-heavy dealings of over $125 million.

Those bonds had jumped on Monday on the news that wireless giant AT&T plans to acquire Cricket's corporate parent, Leap Wireless International, Inc. for $1.2 billion in cash and the assumption of nearly $3 billion of the latter company's net debt.

HCA moves higher

The market also saw HCA's bonds firm after the Nashville-based hospital giant issued positive preliminary results for the just ended 2013 second quarter.

The company's 7½% notes due 2022, which had finished on Monday at 112½ bid, got as good as 114 in early trading, before coming off that peak to settle in around 113 5/8 at mid-morning, and a trader said that after that initial morning flurry, not much more of them was seen during the afternoon.

He estimated volume at above $7 million, with most of that generated during the morning.

HCA said that for the second quarter that ended on June 30, it anticipates reporting revenues of about $8.450 billion, up from $8.112 billion in the second quarter of 2012.

Income before income taxes is expected to rise to about $806 million from $699 million a year ago, and net income per diluted share is expected to come in around 91 cents, up from last year's 85 cents. Adjusted EBITDA for the latest quarter is expected to rise to $1.689 billion from the year-ago $1.569 billion.

Same-facility admissions for the quarter increased 1.3%, while same facility equivalent admissions increased 1.1%. Same-facility revenue per equivalent admission is expected to have increased by some 2.9% for the 2013 second quarter from the year-ago quarter's level.

The company also reaffirmed its previously issued guidance ranges for the full year. It expects to report its second-quarter and first-half results on or around Aug. 1.

Market indicators turn mixed

Statistical junk market performance indicators turned mixed on Tuesday after five straight sessions on the upside.

The Markit Series 20 CDX North American High Yield index lost 5/32 of a point to end Tuesday at 105 3/8 bid, 105 7/16 offered. That snapped a streak of six sessions without a loss, including Monday's quarter-point gain.

But the KDP High Yield Daily index gained 14 basis points on Tuesday, its sixth consecutive rise. It had risen by 17 bps on Monday.

The yield came in by 4 bps, to an even 6%, also its sixth straight narrowing. On Monday, it had closed 7 bps lower.

And the widely followed Merrill Lynch High Yield Master II index also saw its sixth straight gain on Tuesday, as it rose by 0.252%. That followed Monday's nearly identically sized 0.255% advance.

The latest gain raised the index's year-to-date return to 3.262% from Monday's 3.003%, which had represented the year-to-date return's first time above the psychologically significant 3% mark since June 19, when it stood at 3.139%. Tuesday's finish was the highest in over a month, since June 10, when it stood at 3.362%.

Tuesday's yield to worst was 6.079%, down from Monday's 6.154%, and the lowest yield since June 19's 6.062%. Its spread to worst over Treasuries was 480 bps, down from 484 bps on Monday and the tightest level seen since May 31's 469 bps spread.

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