LifePoint, Calumet lead $1.65 billion day; Bon-Ton jumps; Toys slumps; funds up $783 million

By Paul Deckelman and Paul A. Harris

New York, Nov. 21 - The high-yield market's drive-by pricing parade continued to roll on Thursday. Four issuers brought a total of $1.65 billion of new dollar-denominated, fully junk-rated paper to market during the session, three of them in the form of opportunistically timed, quickly shopped same-day transactions.

Among the latter group was the day's biggest deal, health-care operator LifePoint Hospitals, Inc.'s upsized $700 million issue of eight-year notes, and specialty chemicals and fuels producer Calumet Specialty Products Partners, LP's upsized $350 million of eight-year paper. Builder Meritage Homes Corp. priced an unscheduled $100 million add-on to its existing 2020 notes.

There was also one scheduled forward-calendar deal, electrical and industrial products provider Wesco Distribution, Inc.'s upsized $500 million tranche of eight-year notes.

None of the day's deals arrived in time for any kind of aftermarket dealings, traders said.

But T-Mobile US, Inc.'s $2 billion two-part behemoth of a recent deal continued to trade actively.

Away from the new-deal sphere, traders saw a pair of retailing names making some noise and going in opposite directions. Bon-Ton Stores Inc.'s bonds firmed smartly after the department store operator reported better quarterly numbers, but Toys 'R'Us Inc.'s bonds pushed lower on a media warning that a poor Christmas selling season could push the struggling company into default - a possibility the company denies.

Overall, statistical market performance indicators were mixed for a fourth consecutive session.

But the flow of money into and out of high-yield mutual funds and exchange-traded funds - considered a key barometer of overall junk market liquidity trends - showed a strongly positive reading this week, its second straight weekly gain.

Lipper funds gain $783 million

As Thursday's proceedings were winding down, junk market participants familiar with the fund-flow statistics generated by AMG Data Services said that during the week ended Wednesday, $783 million more came into those funds than left them.

It was the second consecutive net cash addition to the funds, coming on the heels of the $219 million inflow reported last week by Arcata, Calif.-based AMG, a unit of the Lipper analytics division of Thomson Reuters Corp., for the period ended Nov. 13. Inflows over the two weeks have totaled about $1 billion, according to a Prospect News analysis of the figures.

And those two weeks, in turn, are part of a larger, overwhelmingly positive trend, according to the analysis. The latest week's inflow was the 10th in the past 11 weeks, dating back to the week ended Sept. 11 - a stretch interrupted by a solitary negative week, the week that ended Nov. 6, when the funds had lost a net of $879 million. That was their first outflow in two months.

During that 11-week stretch, net inflows have accumulated to the tune of $9.37 billion, according to the analysis.

But the year as a whole so far has been considerably less lopsided, with inflows having now been seen in 30 weeks, against 17 weeks of outflows, according to the Prospect News analysis. For a number of weeks, cumulative fund flows for the year as a whole even turned negative, due to a sizable losing streak seen during May and June that included several multi-billion-dollar outflow numbers prompted by investor worries over whether the Federal Reserve would end its accommodative monetary policy. At one point in late June, the red ink topped the $9 billion mark, according to the analysis.

However, encouraged by recent indications that the central bank would not be trimming its bond-buying policies as quickly as feared due to a still-shaky economy, inflows began to mount up, with the negative number for the year gradually whittled down week by week and eventually swinging the year-to-date fund-flow number back into the black, according to the analysis.

Market sources said that the latest weekly inflow brought the year-to-date total up to an estimated $2.38 billion.

Meanwhile, another fund-tracking service - Cambridge, Mass.-based EPFR Global - reported a $1.62 billion inflow on the week. The latter company's methodology for tracking fund flows differs from AMG/Lipper's in that its fund universe includes a number of non-U.S.-domiciled funds, while AMG/Lipper watches strictly domestic funds.

In fact, in noting the latest weekly inflow, EPFR said that "European high-yield funds took in fresh money for an 18th consecutive week."

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

The sustained flows 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 more than $1 trillion junk market - were seen by analysts as a key catalyst 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 ultimately produced about $327 billion of new dollar-denominated, junk-rated paper from domestic or industrialized-country issuers, according to data compiled by Prospect News.

It was also seen as one of the major drivers behind the robust patterns of primary activity and secondary strength that had continued for much of this year's first half before turning choppy over the past several months.

The recent run of consecutive net inflows coincided with the explosive expansion of junk primary activity seen in September when more than $47 billion of new paper priced, according to the Prospect News new-issuance data - the biggest September ever, and the continued healthy pace of scheduled and, particularly, opportunistically timed new deals during October and now continuing into this month.

LifePoint upsizes

The Thursday session saw four issuers complete single-tranche dollar deals and raise a combined total of $1.65 billion.

Three of the four deals came as drive-bys.

Three of the four were upsized.

Two priced at the tight end of talk, and one priced on top of talk.

LifePoint Hospitals priced an upsized $700 million issue of eight-year senior notes (Ba1/BB-) at par to yield 5½%.

The quick-to-market deal was upsized from $500 million.

The yield printed on top of yield talk.

Barclays was the lead left bookrunner. BofA Merrill Lynch, Citigroup Global Markets Inc. and Goldman Sachs & Co. were the joint bookrunners.

The Brentwood, Tenn.-based hospital company plans to use the proceeds to fund acquisitions and for other general corporate purposes, which may include, among other things, the repurchase of common stock from time to time.

Wesco at the tight end

Wesco Distribution priced an upsized $500 million issue of eight-year senior notes (B1/B+) at par to yield 5 3/8%.

The deal was upsized from $400 million.

The yield printed at the tight end of yield talk set in the 5½% area.

BofA Merrill Lynch was the left bookrunner for the debt refinancing. Wells Fargo Securities LLC was the joint bookrunner.

Calumet at a discount

Calumet Finance Corp., a subsidiary of Calumet Specialty Products Partners, priced and upsized $350 million issue of 7 5/8% eight-year senior notes (B2/B+) at 98.494 to yield 7 7/8%.

The quick-to-market issue was upsized from $225 million.

The yield printed at the tight end of yield talk set in the 8% area.

BofA Merrill Lynch was the left bookrunner. Barclays, RBC Capital Markets and J.P. Morgan Securities LLC were the joint bookrunners.

The Indianapolis-based specialty hydrocarbon products and fuel products producer plans to use the proceeds for general partnership purposes, including working capital, capital expenditures and acquisitions.

Meritage taps 7.15% notes

Meritage Homes priced a $100 million add-on to its non-callable 7.15% senior notes due April 15, 2020 (B1/B+) at 106.699 to yield 5 7/8%.

There was no official price talk.

Citigroup, Deutsche Bank Securities Inc., JPMorgan and BofA Merrill Lynch were the joint bookrunners.

The Scottsdale, Ariz.-based homebuilder plans to use the proceeds for general corporate purposes, including the acquisition and development of land and home construction.

Dollar Financial for Friday

DFC Global Corp. set price talk for its $650 million equivalent two-part offering of senior notes (B2/B).

A Canadian dollar-denominated tranche of eight-year notes, via issuing entity National Money Mart Co., is talked to price with a yield in the 9¼% area. It is being managed by left lead bookrunner Credit Suisse Securities (USA) LLC and joint bookrunners BMO Securities, Barclays and SG CIB.

A sterling-denominated tranche of seven-year notes, via issuing entity DF UK Holdings plc, is talked to yield 8¾% to 9%. It is being managed by left lead bookrunner Deutsche Bank and joint bookrunners Credit Suisse, Barclays, Nomura and SG.

Tranche sizes remain to be determined.

Both tranches are expected to price on Friday.

Elsewhere, Brand Energy & Infrastructure Services, Inc. is expected to price its $550 million offering of senior notes due 2021 (Caa1/CCC+) on Friday.

Yield talk of 8% to 8¼% surfaced on Wednesday, and the books were scheduled to close midday Thursday.

Some market observers were expecting final terms on Brand Energy to surface before the Thursday close; however, none materialized, according to a market source, who added that there could be a restricted payments covenant tweak on the deal, which is now expected to price on Friday.

Also expected on Friday is Kratos Defense & Security Solutions, Inc.'s $675 million offering of senior secured second-lien notes due 2020 (expected ratings B3/B) via left bookrunner Wells Fargo and joint bookrunner SunTrust.

No price talk was heard on the deal during the Thursday session, market sources said.

Grainger prices inside of talk

Turning to Europe and the United Kingdom, England-based Grainger plc priced a £200 million issue of non-callable seven-year guaranteed secured notes (/BB+/BB+) at par to yield 5%.

The yield printed 12.5 basis points inside of original yield talk in the 5¼% area.

Barclays, HSBC, Lloyds and Royal Bank of Scotland were the active bookrunners for the debt refinancing.

SNAI starts roadshow

SNAI SpA began a roadshow on Thursday ahead of a possible €460 million two-part issue of senior notes.

The deal will include €300 million of 4.5-year senior secured notes (expected: mid- to high-B) and €160 million of five-year senior subordinated notes (expected: high CCC).

JPMorgan will bill and deliver for the debt refinancing.

Gateway comes atop talk

In the Canadian dollar-denominated market, Gateway Casinos & Entertainment Ltd. priced a C$200 million issue of seven-year second-priority senior secured notes at par to yield 8½%, on top of yield talk.

TD Securities, BMO Securities, Morgan Stanley and SunTrust Robinson Humphrey were the active joint bookrunners.

Proceeds will be used to refinance the company's existing senior secured credit facility, to fund the tender offer for C$170 million of its 8 7/8% second-priority senior secured notes due 2017 and to fund a distribution to shareholders.

Day's deals unseen

In the secondary market, traders said that they once again saw no aftermarket in the day's new deals, owing to the lateness of the hour at which the transactions were finally priced and freed to trade - a recent and growing trend in Junkbondland.

"They'll probably price these and free them to trade a minute after I go home," one observed, tongue only partially in cheek.

A second trader said that the overall market was quiet Thursday because "all of these guys were sitting around, waiting for their allocations [of the new bonds]."

Alternatively, he suggested "or maybe they just decided not to trade. They decided to sit and watch a movie this afternoon, or something."

Other deals little seen

The lack of activity spilled over into some of the deals that priced on Wednesday or earlier in the week.

For instance, a trader said that he had seen no activity in either of Wednesday's new deals: Parsippany, N.J.-based car-rental giant Avis Budget Group, Inc.'s drive-by offering of $250 million floating-rate notes due 2017 or Canadian environmental services provider Tervita Corp.'s upsized $335 million of 10 7/8% notes due 2018.

He likewise saw no trading in Tuesday's $400 million add-on offering from Los Angeles-based oil and natural gas company BreitBurn Energy Partners LP to its existing 7 7/8% notes due 2022.

However, a second trader did see BreitBurn's bonds Thursday at 101½ bid, 102 offered. They had priced at 100¼ to yield 7.823% after the deal was upsized from an originally announced $300 million.

T-Mobile trades actively

The sole exception to that general pattern came from T-Mobile, the Bellevue, Wash.-based No. 4 U.S. cellular service provider, which had priced a $2 billion two-part drive-by offering on Monday via its wholly owned T-Mobile USA Inc. subsidiary. Those bonds racked up incredibly heavy trading volumes - in the several hundreds of millions of dollars - on Tuesday when they were freed for aftermarket dealings.

On Wednesday and again on Thursday, activity remained brisk, although considerably below those Tuesday totals.

A trader said that the T-Mobile bonds "opened weaker this morning, but then they traded up." He saw late trades of 100 5/8 bid on its new 6½% notes due 2024 and 101 3/8 bid on the 6 1/8% notes due 2022. The company had priced $1 billion of each of those credits at par late Monday.

Although a market source did quote the 6½ notes as having traded as high as above the 102 mark during the session, by the end of the day, they had fallen back down to their usual levels.

A trader said that about $52 million of the 6½% notes traded, with the bonds ending the day "wrapped around" 1001/2.

He saw $34 million of the 6 1/8s having changed hands, likewise "wrapped around" 101 3/8 bid.

Bon-Ton sizzles...

Away from the new deals, a trader said that Bon-Ton Stores' 8% notes due 2021 jumped some 4 points on the session to go home at 98 bid, calling them "the biggest point gainer on the day."

He also characterized volume in the issue as "pretty good," topping the $35 million mark.

A second trader said the bonds were up 3 points on the day at 97 bid, 97½ offered.

Those bonds bounced after the York, Pa.-based department store operator lost $931,000, or 5 cents per share, for the period ended Nov. 2 - considerably improved from year-ago red ink of $10.1 million, or 55 cents per share. Analysts were looking for a loss of about 29 or 30 cents per share.

Bon-Ton's Nasdaq-traded shares zoomed by $2.82, or 23%, to end at $15.08, on volume of 1.3 million shares, around five times the norm.

...but Toys 'R' Us fizzles

But another retailer, Wayne, N.J.-based Toys 'R' Us, was getting clobbered after a Moody's Analytics senior analyst appeared on CNBC to warn that "investors are currently quite bearish" on the company's prospects, particularly if it does not do well during the all-important year-end holiday selling season.

A trader said its 10 3/8% notes due 2017 had been hammered down to 93 bid, 94 offered from recent levels around 95, citing the broadcast's negative impact.

A second trader saw them fall ¾ point to 93½ bid, on volume of $11 million, saying that "if this is a bad Christmas for them, it could be their last Christmas."

Analyst Jerry Templeton said that the bonds' current prices equate to a 13% yield, which would justify a "C" rating - Moody's lowest, currently several notches below their Caa1 rating - and said that historically, such companies go on to default within the next three years an average of four times out of five - although Toys 'R' Us answered that it has ample liquidity and no bond maturities coming up for several years.

Market signs stay mixed

Overall, statistical junk-market performance indicators remained mixed for a fourth consecutive session on Thursday.

The Markit Series 21 CDX North American High Yield index gained 9/32 point on Thursday to end at 106 23/32 bid, 106 27/32 offered, after having been unchanged on Wednesday.

But the KDP High Yield Daily index posted its second straight loss, falling by 5 bps to 74.28, after having stumbled by 4 bps on Wednesday to break a three-session winning streak.

Its yield meantime was unchanged at 5.72%, after having come in for five straight sessions before that.

And the widely followed Merrill Lynch High Yield Master II index's five-session winning streak came to an abrupt end on Thursday, as it fell by 0.098%, in contrast to Wednesday's 0.028% rise.

The loss dropped the index's year-to-date return to 6.324% - down from Wednesday's 6.428%, which set a new peak level for 2013.

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