NEW YORK, Nov 16 (IFR) - Like a diner pushing back from the
table after a Thanksgiving feast, high-yield investors are now
pulling back from the high-yield primary market after feasting
on a non-stop diet of new issues since September.
The appetite for risk has evaporated and with it the demand
for new issues, said one syndicate official.
Meanwhile, with the presidential election over, attention
has refocused on the fiscal cliff, weak economic data in the US,
geo-political tensions in the Middle East, and the sovereign
credit crisis and economic downturn in Europe, which is now
officially in a recession.
That was a problem for the large amount of deals that were
stacked up to price on Thursday and Friday, and the bad
conditions led some of the more opportunistic issuers to pull
out of the market or revise their deals.
There were no new issue announcements on Thursday, two deals
were postponed, some were restructured, and some priced wide of
Canadian aerospace giant Bombardier postponed its
US$1bn two-part offering, citing market conditions. Proceeds
from the eight-year and 10-year bullet notes were to be used for
general corporate purposes. Deutsche Bank, BofA Merrill, BNP
Paribas, Citigroup, Credit Agricole, JP Morgan, NBF and RBC had
been leading the deal.
Eagle Midco, holding company for Epicor Software, scrapped
plans to price its US$340m five-year non-call one senior
discount notes through BofA Merrill and RBC. The deal had been
one of the more aggressive issues of the week, in terms of
structure and use of proceeds, which were expected to fund a
distribution to equity holders.
Other issuers had to revise their offerings to get them
through. Bubble wrap-maker Sealed Air, for instance, cut
its US$850m offering in half, dropping the 10-year tranche and
going with a US$425m eight-year bullet issue that priced at 6.5%
at par, outside and wide of its 6.25% price talk.
Elsewhere, Alliance Data Systems shortened the
maturity of its bond from a six-year to a five-year, ambulatory
surgery center operator AmSurg dropped its special
call, and Thompson Creek Metals shortened the maturity of
its bond from 5.25y to 5y and its non call period was lengthened
to NC3 from NC2.25.
Some issuers were trying to get tougher transactions done.
For instance, AK Steel and Arch Coal, both in
difficult sectors, looked to bolster liquidity with new bond
offerings while the markets remained open. But the borrowings
resulted in increased leverage and some resulting negative
"These are tough deals," said one investor. "Issuers are
printing big coupons to get these deals done to bolster
liquidity. They are paying the price."
By Friday morning, 12 US dollar deals had priced for a total
of US$4.45bn. There were still four issues in the market to
price by the end of the day while more have been delayed or
Overnight Studio City widened price talk on its USD825m
8yNC3 senior note issue to 8.50% from 8.25% area and and priced
its deal at 8.5% at par at midday.
But others have already changed timing. American Piping
Products US$100m 5y senior secured notes, originally
pricing late this week, has extended the roadshow into next
week. And Eldorado Gold postponed a deal, while Legacy
Reserves pushed one to next week.
The CDX HY19 moved lower most days this week, while the cash
market was off a quarter to a half point most days. Matching
that sentiment, Lipper reported an outflow of US$1.308bn from
high-yield mutual funds and ETFs.
ETFs, which had been reported posting bid lists all week,
made up slightly more than half the outflow at US$723.0m.
That said, the high-yield market held in better than
equities, investors said, owing mostly to the ongoing demand for
"In the old days, money would be flying out the door," said
the investor of the current climate. "But now we've got an
underlying tailwind for high-yield which is the reach for yield
in a super low rate environment, and that's such a good tailwind
to be in."
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