Domestic primary falls quiet as Interoil, Tomkins slate; new Goodyear, Mueller issues firm up

By Paul Deckelman and Paul A. Harris

New York, Aug. 23 - If it wasn't obvious last week when high-yield domestic primary issuance slid to under $2 billion from the previous week's massive $15 billion tally, it was painfully evident on Monday that the U.S.-based new-deal arena has probably hung out the 'Gone Fishing" sign for the next couple of weeks.

There was absolutely no chatter coming from the domestic side of the primary, leaving the field to a couple of prospective European issuers.

Norway's Interoil Exploration & Production ASA announced plans to sell as much as NOK310 million of secured notes, adding that it plans to use the proceeds to take out several series of existing dollar- and kroner-denominated bonds. High-yield syndicate sources believe that deal won't come to market till sometime in September.

Also expected in September will be an issue of bonds from Tomkins plc to help back the pending £2.89 billion leveraged buyout of the British manufacturer of automotive transmissions and bathtubs by Canadian private equity firm Onex Corp. and the Canada Pension Plan Investment Board.

Among recently priced issues, traders saw Goodyear Tire & Rubber Co.'s $100 million add-on offering from Friday as well as Thursday's deal from Mueller Water Products, Inc. each move up a little from Friday's levels.

Away from the new deals, not too much was going on, traders said, although NewPage Corp.'s recently beleaguered bonds seemed to recover a little from last week's slide.

Dog Days arrive

Uncertainty as to whether the Dog Days of August have finally arrived in the high-yield primary market was laid to rest on Monday.

"There was nothing going on today," a syndicate banker said, adding that junk traded flat as equities continued to sell off.

"I don't think anything is likely to happen tomorrow either," the banker added.

Pipeline, pending events

A formidable September deal pipeline continues to take shape, the syndicate banker said, just after the Monday close.

One name added to the mix is London-based Tomkins, which is expected to sell dollar-denominated high-yield bonds in late September as part of the $3.2 billion of debt backing the LBO of the company.

Bank of America, Citigroup, Barclays Capital, RBC Capital Markets and UBS Securities are leading the debt financing.

Onex and the Canada Pension Plan Investment Board are acquiring the company in a $4.37 billion LBO.

"We're expecting to see September return to the pace we saw in July and early August," the banker said.

However, the source added, the September deal pipeline could be negatively influenced by economic events, as well as by continued selling in the broader capital markets between now and September.

New Goodyear, Mueller bonds firm

Among recently priced issues, a trader quoted Goodyear's 8¼% notes due 2020 at 103 bid, 103½ offered.

That was up from aftermarket levels of 102½ bid, 103½ offered at which the Akron, Ohio-based tiremaking giant's bonds - both the original $900 million priced back on Aug. 10 and the $100 million add-on priced on Friday - were trading after the latter deal priced at 100.75 to yield 8.119%.

However, at another desk, a trader said that he "just saw bids looking; I didn't see any offers."

Goodyear's outstanding 10½% notes due 2016 were quoted down 1 point at 111¾ bid.

The first trader meantime saw Mueller Water Products' 8¾% notes due 2020 trading at 100½ bid, 101½ offered.

That was up from the 100¼ bid, 100¾ offered, which the bonds hit in the aftermarket following their Thursday pricing, and well up from the 98.37 where the Atlanta-based water pipe and flow-control equipment maker's $225 million deal priced earlier that session to yield 9%.

Market indicators start week mixed

Apart from the new-deal realm, a market source saw the CDX North American HY Series 14 index about unchanged on Monday at 96 7/8 bid, 97 3/8 offered, after having lost ¼ of a point on Friday.

The KDP High Yield Daily index meantime eased by 4 basis points on Monday to end at 71.89, after having pushed up by 3 bps on Friday. Its yield rose by 2 bps to 8.26%, after having held steady on Friday.

The Merrill Lynch High Yield Master II index moved back up on Monday by 0.078%, after having edged down on Friday for the first time in five sessions. It ended the day with a year-to-date return of 8.665% versus Friday's 8.58%. However, the index remains below its peak level for 2010 so far - the 9.085% recorded on Aug. 9.

Advancing issues remained narrowly behind decliners for a third consecutive session on Monday. As was the case on both Thursday and Friday, just a couple of dozen issues out of the nearly 1,400 tracked separated the two groups.

Overall activity, represented by dollar-volume levels, jumped 33% on Monday, after having slid by 45% on Friday.

A trader said that he was "bored to tears."

"There was not a whole lot of activity on this side of the world. It was pretty quiet," he added.

Another trader, who likewise saw little activity, even in widely held, liquid names, characterized Monday's market action as "steady as she goes."

NewPage sees modest gain

NewPage's bonds moved up a little bit after spending most of last week on the slide.

One trader called the 11 3/8% senior secured notes due 2014 up "almost a point" around 81, while another quoted the issue at 80½ bid, 81 offered.

The first trader also saw the 10% subordinated notes due 2012 trading around 33. However, those bonds ended about 1½ points weaker, he said.

While NewPage reported a wider second-quarter loss versus a year ago around the beginning of this month and said at that time that a pending asset sale would not be completed this year, contrary to previous expectations, there has not been any fresh news out on the company recently. But that hasn't stopped investors from putting pressure on the Miamisburg, Ohio-based papermaker's debt.

"The paper is not good," said one market source.

One analyst, who preferred to remain anonymous, said that the management changes announced earlier this summer, when chef executive officer E. Thomas Curley abruptly departed after having held the CEO post for only months, coupled with "a huge amount of debt," had resulted in a skittish investment community.

"Investors are realizing [that there are concerns] and seeing that there is that much to go around [in the event of a bankruptcy]," he said.

Cenveo news has little bond impact

Traders said that Cenveo Corp.'s decision to withdraw its acquisition bid for the bankrupt National Envelope Corp. - which sent the company's shares plunging - had little or no impact on its bonds.

A trader said that he "didn't see much going on" in the company's paper, noting that it had last traded during the prior week in the upper 90s.

Another trader said that Cenveo's 7 7/8% senior subordinated bonds due 2013 and its 8 7/8% senior second-line notes due 2018 were both being quoted around the 97 bid, 98 offered level, "exactly where they were quoted on Friday."

Cenveo, a Stamford, Conn.-based manager and distributor of print and related products and services, was in the hunt to acquire NEC Holdings Corp., the parent of National Envelope, and offered to buy NEC for at least $140 million in cash in June.

However, on Monday, it abruptly withdrew its bid, causing its New York Stock Exchange-traded shares to tumble by 73 cents, or 11.16%, ending at $5.81 apiece on volume of 1.66 million shares, about four times the norm.

Cenveo said in a statement that it had offered National Envelope's unsecured creditors "what we believed to be the highest potential recovery out of all the bids at the auction," but added that at some point, "it became very clear to us that the debtors and the creditors' committee were requiring significantly more in cash and guarantees from Cenveo than from the other bidders and seeking to saddle Cenveo with unacceptable risk that no other bidders were being asked to bear," causing Cenveo to abandon its quest for National Envelope.

"Under those circumstances, Cenveo had no interest in acquiring these assets," the company declared.

With Cenveo out of the picture, NEC chose a $149.9 million cash offer by the Gores Group, a Los Angeles-based private-equity firm, as the stalking horse bid at the court-supervised auction.

Automotive names stuck in neutral

A trader said that General Motors Corp.'s 8 3/8% bonds due 2033 were "threatening to go lower," and at one point, actually dipped below the 33 bid level. He saw those benchmarks ultimately trading in a 331/2-34 range and ending around 34 bid, which he said was unchanged to maybe down ½ a point on "some volume."

He said the downside move breaching 33 - another market source had seen them as low as 32 7/8 - was "only for a flash."

"And, also, when you don't have enough players in, you can get moved around on no volume," he said, adding that, "They might have dropped down there - but it was truly insignificant, the amounts."

He did not see much activity at all in GM rival Ford Motor Co.'s 7.45% bonds due 2031, calling them unchanged at 97 bid, 98 offered.

Rite Aid holding steady

Rite Aid Corp.'s debt was holding its ground during the first trading session of the week, according to traders.

One trader placed the 9 3/8% notes due 2015 at 811/2, which he deemed unchanged. Another trader echoed that level, also calling it steady on the day.

The second trading also pegged the 9½% notes due 2017 at 801/2.

At another desk, though, the company's 10¼% notes due 2019 were seen having gained a full point to end at 103½ bid, while the 9 3/8s, while located at 811/2, were deemed to have fallen by 1½ points.

Last week, the Camp Hill, Pa.-based drugstore chain announced that it had completed a refinancing effort that included a new $1.175 billion revolving credit facility due 2015 and the issuance of $650 million of new 8% notes due 2020.

The new credit facility replaced an equal-amount facility that was to have matured in 2012. The facility came at reduced pricing, but also carried a clause that requires Rite Aid to repay or refinance its senior credit facility.

No AIG boost from loan repayment news

A trader saw the American General Finance Corp. 6.90% notes due 2017 unchanged at 77 bid, 78 offered, apparently not much moved by the news that its corporate parent, the troubled New York insurance giant American International Group, Inc., had made a nearly $4 billion payment to the federal government on its outstanding debt to Uncle Sam, the largest such payment by the company so far.

He said that most of AIG's other paper is "well bid-for," trading in the upper-90s to par area.

At another desk, the American General bonds were quoted down about 7/8 of a point at just over 78 bid. AIG unit International Lease Finance Corp.'s 8¾% notes due 2017 eased to 1021/2, down half a point, and a trader saw ILFC's 4 7/8% notes "wrapped around par."

Also among the financials, Nuveen Investments Inc.'s 10½% notes due 2015 saw "some activity," calling them "pretty much unchanged, or maybe down a half," around 95½ bid, 95¾ offered.

On Friday, the bonds had fallen about a point to that level, although there was no fresh news out on the Chicago-based financial services company that might explain the decline.

ATP Oil trades, but goes nowhere

A trader said that ATP Oil & Gas Corp.'s 11 7/8% second-line senior secured notes due 2015 "probably didn't do much," pegging the Houston-based energy exploration and production company's bonds around 80 bid, 81 offered.

"That's where they spent most of the day, and that's about where they ended," he said, calling the bonds pretty much unchanged on the day.

Stephanie N. Rotondo contributed to this report

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