GM, WCA, Oil States, International Auto price, move up; Endo, W&T slate; funds up $94 million

By Paul Deckelman and Paul A. Harris

New York, May 26 - General Motors Co. led the way on Thursday as the high-yield primary had its busiest session of the week, with over $3 billion seen by syndicate sources to have come to market.

The Detroit giant priced a $500 million issue of seven-year notes, which was seen by traders to have moved up solidly in the aftermarket.

Indeed, after a series of lackluster secondary performance from new issues, several new deals that priced on Thursday were reported to have pushed up by a point or more, including WCA Waste Corp., which did a $175 million offering of eight-year notes that were seen enjoying an aftermarket bounce.

Gains were more modest for diversified oilfield services operator Oil States International, Inc., which weighed in with a $600 million issue of eight-year bonds.

But there was good movement seen in German issuer International Automotive Components Group's $300 million tranche of seven-year senior secured notes.

The big deal of the day came too late in the session for any secondary activity, as U.K.-based global minerals company Vedanta Resources plc priced an upsized $1.65 billion two-part bond offering.

Meanwhile, price talk emerged on equipment-leasing concern Sunstate Equipment Co. LLC's $170 million six-year deal, expected to price on Friday. The forward calendar saw new deal announcements from oil and gas operator W&T Offshore, Inc. and Endo Pharmaceuticals Holdings Inc., which will be marketed to investors in the coming days.

In the secondary realm, there was some brisk activity - but not much price change - in NewMarket Corp. paper, although there was no fresh news out about the Richmond, Va.-based specialty chemicals company.

High-yield mutual funds - considered a good barometer of overall junk market liquidity trends - saw their fourth consecutive weekly gain at $94 million, establishing a new peak level for the year to date.

Funds see inflow

As the session was winding down, market participants familiar with the weekly AMG high-yield mutual fund flow statistics generated by Lipper/FMI said that in the week ended Wednesday, $94 million more came into those weekly reporting funds than left them.

While modest in size, it was the fourth consecutive weekly inflow to the funds, following the $373 million cash injection seen in the week ended May 18. During that four-week period, net inflows have totaled $1.14 billion, according to a Prospect News analysis of the figures.

The latest inflow raised the year-to-date cumulative inflow total to an estimated $7.82 billion, a new peak level for 2011 so far, according to the Prospect News analysis. That was up from the previous week's $7.726 billion estimate, which was also the previous 2011 peak level, the analysis said.

With 21 weeks gone in the year, there have now been 17 inflows recorded against just four outflows.

Fund-flow patterns began the new year on a roll with cash infusions totaling more than $8 billion seen over a 14-week stretch from early December through mid-March, including the more than $6 billion taken in during the first 10 weeks of this year. Since then, however, fund-flow patterns have been choppy: two weeks of declines in March totaling $1.146 billion followed by three weeks of inflows totaling $1.78 billion and then two more weeks of outflows in late April adding up to $190 million and the latest four weeks' inflows.

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.

Analysts say the continued flow of fresh cash into junk - and the mutual funds represent but a small, though observable and quantifiable percentage of the total amount of money coming in - fueled the record new deal borrowing binges seen in both 2009 and then in 2010 as well as the robust secondary market seen both years. Those trends have been pretty much continuing in 2011 as well.

Vedanta ups to $1.65 billion

The Thursday primary market produced an impressive $3.58 billion of issuance, with six issuers bringing a combined seven tranches.

Vedanta Resources priced an upsized $1.65 billion amount of senior notes (Ba2/BB/BB) in two bullet tranches.

The London-based mining company priced a $750 million tranche of five-year notes at par to yield 6¾%. The yield printed at the tight end of the 6¾% to 7% price talk.

In addition, Vedanta priced a $900 million tranche of 10-year notes at par to yield 8¼%. Again, the yield printed at the tight end of the 8¼% to 8½% price talk.

Barclays Capital, Citigroup, Credit Suisse, RBS and Scotia managed the acquisition-financing deal which was upsized from $1.5 billion.

Oils States' $600 million

Elsewhere Oil States International priced a $600 million issue of eight-year senior notes (Ba3/BB) at par to yield 6½%, on top of the price talk.

Credit Suisse Securities (USA) LLC, RBC Capital Markets and Wells Fargo Securities LLC were the joint bookrunners for the debt refinancing and general corporate purposes deal.

GM comes at the wide end

General Motors Financial Co., Inc. priced a $500 million issue of non-callable seven-year senior notes (B1/B/BB-) at par to yield 6¾%.

The yield printed at the wide end of the 6½% to 6¾% price talk.

J.P. Morgan Securities LLC and Deutsche Bank Securities Inc. were the joint physical bookrunners.

GM plans to use the proceeds for general corporate purposes and to redeem its 8½% senior notes due 2015.

Lonking five-year deal

China's Lonking Holdings Ltd. priced a $350 million issue of five-year senior notes (Ba3/BB) at par to yield 8½%, at the tight end of the 8½% to 8¾% price talk.

Credit Suisse and Standard Chartered Bank managed the transaction.

The Fujian, China-based construction machinery manufacturer plans to use the proceeds for general corporate purposes and capital expenditures.

IAC prices restructured deal

International Automotive priced a $300 million issue of seven-year senior secured notes (B3/B) at par to yield 9 1/8%.

The yield printed at the wide end of price talk, which had been set in the 9% area.

The deal underwent a structural change that saw the removal of a special 10% annual call at 103, which would have been in effect during the non-call period. Under the final terms of the deal, the new notes feature a standard call structure through which the notes become callable at 104.56 on June 1, 2015.

Deutsche Bank Securities Inc., Bank of America Merrill Lynch and J.P. Morgan Securities LLC were the joint bookrunners.

The Krefeld, Germany-based automotive components company plans to use the proceeds to repay debt and fund a distribution to its shareholders.

The IAC deal went well, according to a buyside source, who spotted the bonds trading 102 bid, 102½ offered in the secondary.

WCA prices at the tight end

WCA Waste priced a $175 million issue of eight-year senior notes (B3/B-/) at par to yield 7½%, at the tight end of the 7½% to 7¾% price talk.

Credit Suisse Securities (USA) LLC ran the books for the debt refinancing deal.

Xella completes secured deal

In Europe, Germany's Xella International SA priced a €300 million issue of seven-year senior secured notes (Ba3/B+) at par to yield 8%, at the wide end of the 7¾% to 8% price talk.

BNP Paribas and UniCredit were the global coordinators and physical bookrunners for the debt refinancing. Goldman Sachs International, JP Morgan and Credit Agricole CIB were the joint bookrunners.

Sunstate talk

One deal remains to be priced on Friday. Sunstate Equipment Co. LLC and Sunstate Equipment Co. Inc. talked their $170 million offering of six-year senior secured second-lien notes (Caa2/CCC+) with an 11% to 11¼% yield.

Bank of America Merrill Lynch is the bookrunner.

Endo starts Tuesday

Looking to the week ahead, Endo Pharmaceuticals will begin a roadshow on Tuesday for its $700 million offering of senior notes (/expected BB-/).

The maturity and call structure of the deal remain to be determined.

Bank of America Merrill Lynch, Morgan Stanley & Co., Inc., Citigroup Global Markets and Deutsche Bank Securities Inc. are the joint bookrunners.

Proceeds, along with cash on hand and proceeds from the new also $2.9 billion credit facility, will be used to finance the acquisition of American Medical Systems and refinance AMS debt and Endo's existing credit facility.

W&T kicks off $600 million

Finally, W&T Offshore plans to host an investor conference call at 11 a.m. ET on Tuesday for its $600 million offering of eight-year senior notes.

The deal is expected to price late in the week ahead.

Morgan Stanley & Co. Inc. has the books.

The Houston-based oil and natural gas company plans to use the proceeds to fund the cash tender offer for its 8¼% senior notes due 2014 or to redeem or repurchase the notes not tendered. Remaining proceeds will be used to repay debt under its revolving credit facility and to fund a portion of the recent acquisition in the West Texas Permian Basin.

New deals up on break

A trader said with no small amount of understatement that "there were a lot of deals today" between the domestic issuers like General Motors Co. and various international issuers, which also did dollar-denominated paper.

And unlike recent junk issues that edged up perhaps one-eighth of a point or one-quarter point in the aftermarket if they edged up at all, Thursday's deals were generally well-received, and several of them were up by a point or more.

"They've got some legs all of a sudden." he said, adding, "I think they quit pricing things so rich, too," which would tend to discourage aftermarket gains.

GM cruises higher

When GM's new seven-year notes were freed for trading, for instance, a trader saw the bonds at 100¾ bid, 101¼ offered versus their par issue price earlier in the session.

A second trader said the huge carmaker's deal took an upside ride to 101 bid, 101¼ offered going out.

Thursday deals heading up

Apart from GM, a hugely familiar high-yield name with its predecessor company's old 8 3/8% benchmark bonds due 2033 as one of the most widely traded issues in Junkbondland, another new deal seen doing pretty well out of the gate was Houston-based WCA Waste's $175 million issue of eight-year paper.

After pricing at par, a trader saw the bonds move up to 100½ bid, 101 offered, but by the end of the day, they were seen having gotten as good as 101¾ bid, 102¼ offered.

German auto parts company International Automotive's $300 million offering of seven-year senior secured paper was seen trading up around 102 bid, 102½ offered, also versus a par issue price.

One Thursday deal seeing a more modest gain in the secondary arena was Houston-based oilfield services company Oil States International's $600 million of eight-year notes, which had priced at par. Two traders at separate shops saw the bonds at 100½ bid, 100¾ offered.

"Quite a busy day," one of them observed.

Level 3 moves up

Traders saw Level 3 Communications Inc.'s new issue of 8 1/8% notes due 2019 having firmed a little from the levels it held after that upsized $600 million drive-by deal priced on Wednesday.

One quoted the Broomfield, Colo.-based telecommunications and internet network operator's bonds at 100¼ bid, 100¾ offered, while a second trader pegged them at 100 5/8 bid, 101 offered.

The bonds - upsized from the originally announced $500 million - priced at 99.264 on Wednesday to yield 8¼%, and then in the initial aftermarket dealings, that paper pushed up to around 99 3/8 bid, 100 1/8 offered, setting the stage for further gains on Thursday.

However, the company's existing notes, which had been seen struggling a little on Wednesday in apparent response to news of the big new deal, remained under pressure on Thursday. A trader saw its 9¼% notes due 2014 down another one-quarter point on Thursday at 102 5/8 bid, 103 1/8 offered.

A market source at another desk saw busy dealings in that particular issue - over $31 million of the bonds having changed hands around 103, unchanged on the day.

But the company's 10% notes due 2018 were sighted at 108¼ bid, down one-quarter point on the session.

Secondary issues shunned

A secondary market trader said, "It looked like everybody was rushing to get their new deals in before the holiday," which will see an abbreviated session on Friday, likely to be lightly staffed and pretty inactive, followed by a full-market close on Monday in observance of Memorial Day.

And with new deals dominating the activity, he said that things in the secondary market were "new issue driven. Everybody [among investor clients] was saying 'don't bother me' on any secondary report on anything in their portfolios - it was just new-issue driven."

He said, though, that a couple of accounts had indicated that they were getting "full to the gills with new issues" and that "come next week, we're going to re-address our portfolios and do a little housekeeping before the summer months begin."

With that in mind, he opined: "I think everybody is starting to get sick of the new issue calendar, to be completely honest.

"I think we're coming to the end, and everything is capitulating a little bit here," he said in explanation of the backup seen in some of the new deals, which have not traded that well in the secondary.

"Everybody says 'it can't get any tighter, it can't get any tighter,' but it has gotten tighter."

That, he said, "is not helping us in the secondary market; as a broker-dealer, you want to be as busy as possible."

He said that while he is trading bonds, "it's very situational, with a lot of one-off things."

Market measures slightly firmer

Away from the new issues, statistical measures of market performance were seen a little firmer on the session.

A trader saw the CDX North American Series 16 HY index up by one-eighth of a point for a second straight day on Thursday, ending at 102 1/16 bid, 102 3/16 offered.

The KDP High Yield Daily Index closed unchanged on Wednesday at 75.95, after having dropped by 10 basis points on Tuesday. Its yield came in by 1 bp, to 6.48%, after having moved up by 4 bps on Wednesday.

And the Merrill Lynch High Yield Master II Index posted its first gain of the week on Thursday after three straight sessions on the downside. It saw a 0.006% advance, which followed Wednesday's 0.084% loss.

That lifted its year-to-date return a little to 5.89% from Wednesday's 5.883%. But the cumulative return remains below last Friday's 6.071%, the index's peak level for 2011 so far.

A trader said that "there was a decent amount of volume out there."

Brisk volume in NewMarket

A trader said that "the name that traded a lot" from where he sat was NewMarket, whose 7 1/8% notes due 2016 saw "$5 million to $10 million bonds traded in the past two days" - fairly busy trading for a $150 million issue on which no fresh news was seen.

A market source at another desk pegged Richmond, Va.-based chemical additives manufacturer's bonds right around a 104¾ bid level, up by one-quarter point from Wednesday, when the bonds traded for the first time since early April. They had also been anchored north of 104 back then.

The source saw over $8 million of the notes changing hands on Wednesday, followed by over $10 million of round-lot turnover on Thursday.

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