Primary quiet as Radian shops deal, eyes Tuesday pricing; recent issues steady; market softer

By Paul Deckelman

New York, June 15 – The week got off to a quiet start on Monday in Junkbondland, with a stock market downturn that kept many investors hugging the sidelines.

Primary activity was muted, with only one real piece of news: mortgage insurer Radian Group Inc. began shopping a $300 million five-year offering around to potential buyers via a short roadshow. Pricing on the deal is expected on Tuesday.

The deals that were already on the road being marketed, such as Tribune Media Co., Eclipse Resources Corp. and Georgia Renewable Power, Inc., remained there, but were not expected to imminently come to market.

Traders saw some of the recently priced new issues, such as ATS Automation Tooling Systems, Inc., Alere, Inc., Sealed Air Corp. and Carmike Cinemas, Inc., mostly continuing to hold the gains they notched in trading towards the end of last week, in the face of a generally softer market Monday, but with little real volume seen.

Away from the new deals, one of the more active junk names was Peabody Energy Corp., whose bonds have been pushed lower on reports that the coal company may be forced to pay more for its mine liability insurance.

Bonds of Standard Pacific Corp. and Ryland Group, Inc. were quoted higher on the news the two homebuilders will merge to form the fourth-largest home-building company in the United States – but on little real trading volume, traders said.

Statistical indicators of junk market performance were lower across the board for a second consecutive session on Monday; they had turned downward on Friday after having been higher all around on Thursday. It was the eighth such down day in the last 10 sessions.

Radian hits the road

In the primary market, the only real news came from Philadelphia-based mortgage insurance company Radian Group (current ratings B2/B), which announced plans to sell $300 million of five-year senior unsecured notes.

High-yield syndicate sources said that the deal is expected to price on Tuesday.

The Securities and Exchange Commission-registered public offering will be brought to market via joint bookrunning managers Goldman Sachs & Co., BofA Merrill Lynch and Deutsche Bank Securities Inc.

Marketing to potential investors began with a presentation in New York on Monday, including a luncheon and a midday conference call, and will continue in Boston on Tuesday, with pricing expected thereafter. It is also being marketed via Netroadshow.

Radian plans to use the proceeds from the bond deal, along with shares of its common stock, to purchase some of its $381 million of outstanding 3% convertible notes due 2017, and after that, to repurchase some of the common stock the company may issue in connection with such purchases, and otherwise for general corporate purposes.

Other deals marketed

The syndicate sources said that not too much else was happening in the new-deal market on Monday.

Deals that had made their debut last week and were being shopped around to potential investors remained in a roadshow mode.

These included My Alarm Center LLC, a Newtown Square, Pa.-based provider of security alarm and home automation solutions that is bringing a $265 million offering of five-year senior secured notes to market. Imperial Capital is the bookrunner on the Rule 144A-Regulation S for life deal, the proceeds of which will be used to refinance debt, to terminate an interest-rate swap and for general corporate purposes. There was no immediate word on the timing of the deal.

Tribune Media, a New York-based broadcasting company, was continuing the roadshow for its $1 billion two-tranche offering of eight- and 10-year notes, the proceeds of which will be used to repay a portion of its term loan. Deutsche Bank, Citigroup Global Markets Inc., BofA Merrill Lynch, J.P. Morgan Securities LLC, Goldman Sachs and Morgan Stanley & Co. LLC are the joint bookrunners on the deal, which is being sold under Rule 144A and Regulation S with registration rights and is expected to price on Thursday.

Eclipse Resources, a State College, Pa.-based independent oil and gas exploration and production company, continues to shop its offer of $650 million senior notes due 2023, with the proceeds earmarked for financing the redemption of its outstanding 12% senior PIK notes due 2018, funding its capital spending plan and general corporate purposes. Deutsche Bank, BMO Securities, Goldman Sachs, Citigroup, Morgan Stanley, KeyBanc Capital Markets, Capital One South Coast, RBC Capital Markets and Wells Fargo Securities LLC are the joint book-runners for the Rule 144A and Regulation S with registration rights deal; an investor call on the offering is scheduled for Tuesday.

And Georgia Renewable Power, an Albany, Ga.-based renewable power generating company, continues to market its $225 million of first-lien senior secured notes due 2022 (expected rating Ba) via sole bookrunner Seaport Global; proceeds from the offering will go for general corporate purposes.

Recent deals hold gains

In the secondary arena, a trader said that “it was kind of a quiet day.”

The only one of the recently priced new deals that saw considerable volume was Friday’s $250 million offering of 6½% notes due 2023 from ATS Automation Tooling Systems.

A market source said that over $16 million of the Cambridge, Ont.-based automation solutions provider’s notes had changed hands, putting them high up on the Most Actives list.

He said that the notes had gained ¾ point to end at 102½ bid.

The regularly scheduled forward calendar offering had priced at par on Friday and had firmed smartly to a mid-101 context in initial aftermarket action.

A second trader said that the bonds had traded “in a kind of wide” 101½-to-103½ context, and had moved up to around a 102-to-102¾ range on Monday.

Among deals from earlier that week, a trader saw Alere’s new 6 3/8% senior subordinated notes due 2023 “wrapped around 101,” which he described as “a little better – but not off to the races.”

Alere, a Waltham, Mass.-based provider of medical diagnostic services, priced $425 million of the notes at par on Thursday as a regularly scheduled forward calendar transaction, and the bonds pushed up to around the 101 bid level in active dealings after they were freed to trade.

Another trader quoted the bonds in a 100¾-to-101¼ context.

He also saw Sealed Air’s new 5½% notes due September 2025 also in a 101ish context, which he described as “nothing too crazy, but a little better.”

At another desk, a trader saw the bonds at 100½ bid to 101¼ offered.

The Charlotte, N.C.-based plastic packaging products producer had priced its $400 million issue at par as a regularly scheduled forward calendar offering on Thursday. Those bonds, in turn, were part of a larger, $850 million equivalent offering that also included €400 million of 4½% notes due September 2023, which also priced at par.

A trader called Carmike Cinemas’ 6% notes due 2023 “actually better,” around 101½ bid.

“It’s a small issue, but they traded up to a 101 price handle and stuck there.”

The Columbus, Ga.-based movie theater operator priced $250 million of the notes at par on Wednesday in a scheduled forward calendar deal.

Peabody is punished

One of the most active names on Monday, and a major mover to the downside, was St. Louis-based coal mine operator Peabody Energy.

A trader saw its 10% notes due 2022 down ¾ point at 63 bid, with more than $17 million bonds traded.

He also saw its 6% notes due 2018 down 1½ points, at 50 bid, on volume of $13 million.

The debt “continues to keep getting hammered,” a trader said, seeing the 6¼% notes due 2021 at 38. Another market source pegged the 6½% notes due 2020 at 40 bid, down a point on the day.

Peabody’s bonds continued to be in focus following a news report out Friday that indicated the company could be required to pay more for its mine liability insurance.

A Bloomberg article out Friday reported that the Wyoming Department of Environmental Quality’s Land Quality Division is taking a look at 2014 financial data from both Peabody and Arch Coal Inc. in order to see if the companies continue to qualify for a so-called “self-bonding” program that allows coal producers to insure cleanup costs in the event of a bankruptcy at cheaper rates. Should the companies fail to meet certain financial requirements, they will be forced to buy certain debt instruments or hold enough cash to cover any reclamation liabilities.

In May, Alpha Natural Resources Inc. was informed that it could no longer self-bond and was given until Aug. 24 to either post collateral or cash against $411 million of reclamation liabilities.

Merging homebuilders higher

A trader quoted the bonds of both Standard Pacific and Ryland Group higher in the wake of the announced news that the two California-based homebuilders will merge, creating the fourth-largest U.S. homebuilder.

But he did not see very much actual trading in the notes of either company.

He said that Standard Pacific’s several series of bonds had been trading around 103½ bid at the end of last week, and were around 104-to-104¼ bid Monday.

And he saw Ryland’s paper “up significantly” to 101¾ bid, from 100 ½ near the end of last week.

Standard Pacific and Ryland plan to leave their existing high-yield and convertible debt outstanding, executives of the two companies said.

They also plan to “immediately start working with our revolving credit lenders to appropriately size a new revolver,” SPF’s chief financial officer said (see related story elsewhere in this issue).

Indicators off again

Statistical indicators of junk market performance were lower across the board for a second consecutive session on Monday; they had fallen on Friday after having been higher all around on Thursday. Monday was the eighth such down day in the last 10 sessions.

The KDP High Yield Daily index plunged by 13 basis points on Monday to end at 70.62 after having lost 6 bps on Friday and having gained 4 bps on Thursday – which had broken a string of seven successive downside days.

Its yield moved up by 3 bps to 5.64% after having fallen by 1 bp Friday. Monday marked the eighth widening in the last nine sessions.

The Markit Series 24 CDX North American High Yield index was down by 15/32 point on Monday, on top of Friday’s 7/16 point drop, to close at 105 21/32 bid, 105 23/16 bid. Monday’s downturn was its eighth such setback in the last 10 sessions.

And the Merrill Lynch North American Master II High Yield index fell by 0.215% on Monday, on top of Friday’s 0.091% retreat.

It was the index’s ninth loss in the last 11 sessions, dropping its year-to-date return back to 2.871% from 3.093% on Friday. Those levels remain well down from the 4.062% reading, the index’s peak level for the year so far, recorded on May 29.

Stephanie N. Rotondo contributed to this review.

© 2015 Prospect News.
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