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High Yield Bond Funds Net $890M Investor Cash Inflow; 4th Straight Gain

high yield fund flows

Retail-cash inflows to high-yield bond funds were $890 million in the week ended Nov. 12, according to Lipper. This is a fourth consecutive net inflow to the asset class, for an infusion of $6.6 billion over that span.

Moreover, the inflow is light on the exchanged-traded front in a third consecutive week, at just approximately 10% of the inflow, or $93 million this past week. The prior two weeks were just 6% of the inflows, but it was ETF-heavy three weeks ago, at roughly half of the $1.7 billion inflow in the week ended Oct. 22.

With a fourth large inflow, the trailing-four-week average builds to positive $1.7 billion per week, from positive $1.3 billion last week and negative $254 million just four weeks ago.

The full-year reading rises to $1.1 billion, with 11% tied to ETF inflows. Recall that the figure flipped back into positive territory last week for the first time since the record-shattering outflow of $7.1 billion in the week ended Aug. 6.

One year ago at this time flows were positive $1.57 billion, and 98% was ETF-related, or $1.54 billion of the total.

Despite the solid inflow this week, change due to market conditions was negative $40 million, but that’s essentially nil against total assets, which stood at $182.7 billion at the end of the observation period, with 20% tied to ETFs, or $36.9 billion. Recall that a surge in market value by $3.3 billion three weeks ago was the largest upside move in three years.

Total assets are up $6.9 billion in the year to date, reflecting a gain of roughly 4% in 2014. – Matt Fuller

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Supervalu 8-year high yield bonds (B-/B3) price to yield 7.75%

supervalu logoSupervalu yesterday afternoon completed its SEC-registered offering of senior notes via bookrunners Goldman Sachs, Credit Suisse, Morgan Stanley, and Barclays, along with co-managers Bank of America and Wells Fargo, according to sources. Terms were finalized at the tight end of talk. Supervalu is using proceeds, along with borrowings under its amended and restated $1 billion asset-based revolving credit facility, to fund the redemption of the $350 million of 8% notes due 2016. Note the ratings are B-/B3, which reflects an upgrade from Caa1 at Moody’s.

Terms:

Issuer Supervalu
Ratings B-/B3
Amount $350 million
Issue senior (SEC Reg.)
Coupon 7.75%
Price 100
Yield 7.75%
Spread T+557
Maturity Nov. 15, 2022
Call nc-4 @par+50%
Trade Nov. 10, 2014
Settle Nov. 14, 2014 (T+3)
Bookrunners GS/CS/MS/Barc
Co-Managers BAML/WFS
Price talk 7.75-8%
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DISH Network $2B upsized bullet notes (BB-/Ba3) price to yield 5.875%

dish_network_logoDISH Network via its typical issuer entity DISH DBS Corp. this afternoon completed an offering of senior unsecured bullet notes via sole bookrunner Deutsche Bank, according to sources. Terms were finalized at the middle of talk after a $750 million upsizing, to $2 billion. With ratings of BB-/Ba3 and proceeds aimed to support general corporate purposes, the satellite-broadcast-network operator is the latest opportunist to take advantage of strong demand for BB and crossover paper this fall. More specifically, proceeds will help replenish cash used for repayment of a $900 million of 6.625% notes that matured last month, as well as prefunding a $650 million of 7.75% notes due in May. Terms:

Issuer DISH DBS Corp.
Ratings BB-/Ba3
Amount $2 billion
Issue senior notes (144A)
Coupon 5.875%
Price 100
Yield 5.875%
Spread T+352
Maturity Nov. 15, 2024
Call nc-life
Trade Nov. 5, 2014
Settle Nov. 20, 2014 (t+10)
Sole Bookrunner DB
Price talk 5.875% area
Notes upsized by $750 million.
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General Motors prices $2.5B bond offering at tight end of talk

General Motors Company today completed its three-part offering of SEC-registered senior bullet notes via J.P. Morgan (B&D), Goldman Sachs, and Morgan Stanley, according to the firm. Terms on the 10-, 20-, and 30-year tranches were finalized at the tight end of talk. Proceeds will be used to redeem the automaker’s series A cumulative perpetual preferred shares on or after Dec. 31, 2014. Excess capital will back general corporate purposes, filings show. Terms:

Issuer General Motors Company
Ratings BBB-/Ba1/BB+
Amount $500 million
Issue senior notes (SEC Reg.)
Coupon 4%
Price 99.273
Yield 4.087%
Spread T+175
Maturity April 1, 2025
Call nc-life
Trade Nov. 4, 2014
Settle Nov. 12, 2014 (t+5)
Bookrunners JPM/GS/MS
Co-Managers n/a
Price talk T+180 bps area
Notes carries T+25 make-whole call provision.
Issuer General Motors Company
Ratings BBB-/Ba1/BB+
Amount $750 million
Issue senior notes (SEC Reg.)
Coupon 5%
Price 98.795
Yield 5.099%
Spread T+205
Maturity April 2, 2035
Call nc-life
Trade Nov. 4, 2014
Settle Nov. 12, 2014 (t+5)
Bookrunners JPM/GS/MS
Co-Managers n/a
Price talk T+210 bps area
Notes carries T+30 make-whole provision.
Issuer General Motors Company
Ratings BBB-/Ba1/BB+
Amount $1.25 billion
Issue senior notes (SEC Reg.)
Coupon 5.2%
Price 99.266
Yield 5.25%
Spread T+220
Maturity April 1, 2045
Call nc-life
Trade Nov. 4, 2014
Settle Nov. 12, 2014 (t+5)
Bookrunners JPM/GS/MS
Co-Managers n/a
Price talk T+225 bps area
Notes carries T+35 make-whole provision.
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As appetite for risk reappears, leveraged loan returns lag other asset classes in October

returns by asset class

 

Leveraged loans managed a 0.26% gain in October, lagging the four other asset classes tracked by S&P Capital IQ/LCD, as investor appetite for riskier assets began to re-emerge during the month, after a brutal September. (You’ll notice that, while they lost ground, leveraged loans fared better than the other asset classes in the decidedly risk-off month of September.)

The leveraged loan returns are per the S&P/LSTA Index.

For the year to date, leveraged loans trail the pack again, returning 2.38%, as declining Treasury rates impacted the market segment. Equities lead the way, of course, helped along by a stellar October, when they saw a 2.44% return.

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Standard Pacific inks 10-year bullet notes (B+/B1) to yield 5.875%

standardpacific

 

Standard Pacific this afternoon completed its offering of 10-year bullet notes to support general corporate purposes, via J.P. Morgan, Citi, Bank of America, and Credit Suisse. Terms on the B+/B1 issue were finalized at the midpoint of talk. The homebuilder is back in market after 15 months. Note the investment-grade style par call six months prior to maturity, filings show.

Terms:

Issuer Standard Pacific
Ratings B+/B1
Amount $300 million
Issue senior notes (SEC Reg.)
Coupon 5.875%
Price 100
Yield 5.875%
Spread T+351
Maturity Nov. 15, 2024
Call nc-life
Trade Nov. 3, 2014
Settle Nov. 6, 2014 (T+3)
Bookrunners JPM/Citi/BAML/CS
Co-Managers BNPP/Comerica/USB
Price talk 5.75-6%
Notes Investment-grade call six months prior to maturity.
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Scientific Games debt, shares gain as co. readies M&A bond offering

sgi_webScientific Games shares rallied almost 18% today, to $11.33, and debt backing the issuer edged higher after investors learned on a conference call that a long-awaited M&A bond deal is expected to launch to syndication within the next two weeks, according to a conference call transcription. Management said they accelerated the timing on third-quarter results, as did takeover target Bally Technologies, so as to be “better positioned to go to the marketplace,” the filing shows.

As outlined earlier, the acquisition financing calls for $2.485 billion of new secured debt, to be split between term loans and secured notes, along with $2.7 billion of new unsecured notes. The bonds are backstopped, of course, by fully committed bridge financing via J.P. Morgan, Bank of America, and Deutsche Bank.

In the loan market, Scientific Games $2 billion, seven-year B-2 term loan (L+500, 1% LIBOR floor) advanced to 98/98.75 today, from 97.5/98 yesterday, sources said. The covenant-lite B-2 loan was issued in September at 99 to support the Bally transaction.

As for bonds, Scientific Games 6.625% subordinated notes due 2021 changed hands at 80.25, up from 78 amid the market rout two weeks ago. Recall that the B-/B3 paper fell into a bit of price discovery just below 80 on Monday when press reports circulated about the syndication of the bridge loan.

Indeed, a Bloomberg News report claimed the syndication effort was “pulled,” citing unnamed sources. Market sources, however, relay it’s an ongoing effort that’s fully underwritten, yet to close, and still not funded.

With the target for a primary high-yield market execution now outlined as “within the next two weeks,” the deal sits on the LCD shadow backlog of business. Tranching is now expected to be $485 million secured and $2.7 billion unsecured in two series. Details are available online to subscribers at LCD U.S. High-Yield Forward Calendar. –Staff reports

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Catalyst Paper to tap ABL, PIK-toggle notes for acquisition

logo_catalystCatalyst Paper disclosed that it intends to finance its acquisition of two paper mills by tapping its asset-based revolver and through $25 million of PIK-toggle notes.

The company has received a commitment letter from CIBC and Wells Fargo to increase its asset-based revolver by $50 million, to $225 million and to use the proceeds to back the acquisition.

Catalysts secured notes due 2017, traded at 87, up from 84/86 earlier this week on the news. The notes are callable at par, bear an 11% coupon, and have $250 million outstanding.

Catalyst is planning to acquire the Biron paper mill located in Wisconsin and the Rumford pulp and paper mill located in Maine from NewPage Corp for $74 million.

In September 2012, Catalyst completed a reorganization, reducing debt by $390 million, eliminating $80 million of accrued interest, and reducing annual interest expenses and other cash costs by roughly $70 million. At the time, holders of $390.4 million in first-lien notes received $250 million aggregate principal of the secured notes due 2017. – Richard Kellerhals/Matt Fuller

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Arch Coal high yield bonds, leveraged loans mixed in trading after co. posts 3Q results

Arch Coal debt was mixed today after the company posted a wider-than-expected loss, but better-than-expected revenue for the third quarter as it continues to face depressed pricing amid challenging conditions in the sector.

Arch Coal’s senior notes have sold off considerably over the past several weeks and remain close to record-low levels. The 7.25% notes due 2020 are down five points from before the earnings release, at 46/47, and are significantly lower than where the notes were trading in the mid-70s when it reported its second-quarter earnings in July. The 7.25% due 2021 bonds meanwhile are down a point, at 38.5, versus the high 60s in July.

In contrast, Arch Coal’s covenant-lite B term loan due 2018 (L+500, 1.25% LIBOR floor) edged up a quarter of a point, to 87.75/88.75. The loan traded in the 98 context around the time of the company’s second-quarter earnings release.

The St. Louis-based company said that net loss narrowed to $97 million, or $0.46 per share, from $128.4 million, or $0.61 a share in the prior-year quarter. According to analysts surveyed by Zacks, the results did not meet Wall Street consensus estimate of a net loss of $0.41 per share.

Quarterly revenue, meanwhile, came in at $742 million, above street forecasts of $711.1 million, according to Zacks.

Buyback speculation
The company expects to end the year with approximately $1 billion in cash and short-term investments, which coupled with the fact that it has no meaningful debt maturities until mid-2018, “provides Arch with the financial flexibility needed to navigate current coal market conditions,” said Arch’s CFO John Drexler in a statement.

This improved liquidity position and the fact that its senior notes are now trading in the sub-50 level prompted increased speculation on its earnings call that Arch Coal may look to deleverage and take out its most covenant-restrictive 2020 bonds.

Arch Coal’s representatives did not categorically dismiss the idea should the opportunity present itself, but emphasized its current plan to preserve liquidity to ride out the current conditions in the commodity sector.

Company representatives however said that they believe the current coal market conditions are “in the process of bottoming out,” but they remain conscious on prices.

“We are adequately prepared in case coal recovery is delayed,” said chief operating officer Paul Lang.

Arch’s cash margin per ton increased quarter-over-quarter by 24% in the Powder River Basin and 7% in the Bituminous Thermal segment. That margin expansion helped offset lower cash margin per ton in Appalachia in the third quarter, which stemmed the previously announced idling of Cumberland River as metallurgical coal prices headed toward a six-year low.

For the first nine months of 2014, Arch generated adjusted EBITDA from continuing operations of $164 million, versus $218 million in the prior-year period. – Rachelle Kakouris

Follow Rachelle on Twitter for distressed debt news, analysis and market talk.

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Building Materials $1.1B 10-year high yield bonds (BB+/Ba2) price to yield 5.375%

Building Materials Corp. of America (BMCA) this afternoon completed its offering of senior notes via bookrunners Deutsche Bank, Citi, and Bank of America. Terms on the BB+/Ba2 deal were finalized at the midpoint of talk. The deal is a refinancing exercise targeting the borrower’s 6.875% notes due 2018; 7% secured notes due 2020, and 7.5% notes due 2020. BMCA has been absent the primary high-yield market since April 2011 when it placed the above mentioned 6.875% paper.  BMCA manufactures and markets asphalt and polymer-based roofing products, including insulation. Terms:

Issuer Building Materials Corp. of America
Ratings BB+/Ba2
Amount $1.1 billion
Issue senior (144A-life)
Coupon 5.375%
Price 100
Yield 5.375%
Spread T+312
Maturity Nov. 15, 2024
Call nc-five
Trade Oct. 27, 2014
Settle Nov. 10, 2014 (T+10)
Bookrunners DB/Citi/BAML
Price talk 5.25-5.5%