AK Steel prices, trades near issue; Cenveo reshapes, Poindexter, IDQ slate; Sprint stumbles

By Paul Deckelman and Paul A. Harris

New York, March 19 - The high-yield market saw its second consecutive sedate session for pricing on Monday.

As had been the case on Friday, just a single deal priced all day - AK Steel Corp.'s quickly-shopped, upsized $300 million 10-year issue. That offering came to market at par and did not go very far from that in the aftermarket.

Monday's session was a break from the recent pattern of heavy primaryside activity kicking off each week.

Going back to mid-February, every previous Monday saw at least $2.5 billion of new paper for the session, except for Presidents Day when the market was closed.

But without a lot of pricing, syndicate sources heard considerable forward-calendar activity taking place.

Truck body maker and hearse producer J.B. Poindexter & Co. Inc. and IDQ holdings, Inc., a maker of automotive air conditioning maintenance and repair products, were each heard shopping offerings of $200 million.

Germany's Fresenius Medical Care AG & Co. also hit the road Monday with a €300 million issue of seven-year notes.

Among deals already on radar screens, price talk came out on United Surgical Partners International's $440 million eight-year deal, which could come to market Tuesday afternoon.

There also was revised talk out on Cenveo Corp.'s $450 million bond deal, which was heard to have been reshaped into a five-year deal instead of the originally announced eight-year duration. And details emerged on the $3.5 billion of bridge financing that will back the bonds partially financing the acquisition of the EP Energy exploration and production company that natural gas pipeline operator El Paso Corp. is spinning off.

Among recently priced deals, Friday's offering from alarm services company Monitronics International, Inc. held to the premium levels those bonds hit in the aftermarket after pricing at par on Friday.

Other deals that appeared last week, including consumer products company Spectrum Brands Holdings, Inc. and gaming giant MGM Resorts International, were little changed on Monday.

Away from the new-deal arena, traders heard that Sprint Nextel Corp.'s bonds were trading off after a stock analyst warned that there was "a very legitimate risk" that the No. 3 U.S. wireless company could slide into bankruptcy.

Statistical indicators of market performance remained mixed on Monday.

AK Steel upsizes

The Monday primary market saw one deal price.

AK Steel Corp. priced an upsized $300 million issue of 10-year senior notes (B2/BB-) at par to yield 8 3/8%.

The yield printed at the tight end of the 8 3/8% to 8½% yield talk.

Bank of America Merrill Lynch, J.P. Morgan, Citigroup, Credit Suisse, Deutsche Bank and Wells Fargo were the joint bookrunners for the quick-to-market issue, which was upsized from $250 million.

The West Chester, Ohio-based steel producer plans to use the proceeds to repay revolver debt.

The deal appeared to go very well, according to a trader from a high-yield mutual fund who added that in a scenario of economic recovery, steel is a story that junk investors like.

The newly minted United States Steel Corp.'s 7½% notes due March 2022 (B1/BB) were par ¼ bid, par ½ offered heading into the Monday close, the trader added.

The $400 million issue priced at par one week ago.

United Surgical sets talk

United Surgical Partners International, Inc. and USPI Finance Corp. talked their $440 million offering of eight-year senior notes (expected Caa1/confirmed CCC+) to yield 9% to 9¼%.

The deal is set to price on Tuesday afternoon.

Barclays is the left bookrunner. J.P. Morgan, Goldman Sachs and Morgan Stanley are joint bookrunners.

The proceeds, along with proceeds from a new credit facility, will be used to refinance existing debt and fund a special dividend to equity holders.

Meanwhile Cenveo Corp. boosted price talk on its restructured $450 million offering of five-year senior notes.

Talk increased to 12¼% to 12½%. Earlier talk was 11½% to 11¾%.

The maturity of the notes was decreased to five years from eight years and the call protection was decreased to three years from four years.

Bank of America Merrill Lynch, Morgan Stanley, Macquarie and Barclays are the joint bookrunners.

The debt-refinancing deal was shopped on an investor roadshow that concluded March 14.

Poindexter starts roadshow

J.B. Poindexter & Co., Inc. began a roadshow on Monday for its $200 million offering of 10-year senior notes (existing ratings B3/B).

The deal is set to price Friday.

J.P. Morgan has the books.

The Houston-based owner and operator of transportation-related manufacturing businesses plans to used the proceeds to fund the tender offer for its notes maturing in 2014 and for general corporate purposes.

Initial guidance is in the 9% area, according to a buyside source.

IDQ to price mid-week

IDQ Holdings, Inc. plans to price a $210 million offering of five-year senior secured notes (expected ratings B3/B) during the middle part of the present week, via sole bookrunner Jefferies.

The proceeds will be used to refinance debt and to fund a distribution to shareholders.

IDQ is a Tarrytown, NY.-based provider of air-conditioning maintenance and repair solutions for the do-it-yourself automotive aftermarket.

Fresenius starts roadshow

In the European market, Fresenius Finance BV started a roadshow Monday for its €500 million offering of non-callable seven-year senior notes (expected ratings Ba1/BB+).

Joint bookrunner Deutsche Bank AG will bill and deliver. BayernLB, Commerzbank, LBBW and Royal Bank of Scotland also are joint bookrunners.

The Bad Homburg, Germany-based provider of dialysis services and products plans to use the proceeds for acquisitions, to refinance debt and for general corporate purposes.

New AK Steel little moved

Traders said that aftermarket dealings in the new AK Steel paper were dull and within a very narrow range.

One trader said he initially saw the bonds trading at par bid, 101 offered, right around the $300 million issue's par pricing level.

Later on, he saw the bonds tightening to par bid, 100¼ offered.

A second trader declared that "AK went nowhere. Bonds are just trading at the [issue] level."

At the suggestion that perhaps it was still a little too early for real levels to emerge, he said, "They're trading. It's definitely freed and broken and it's trading at the level."

Yet another trader quoted the new bonds going home at a tight par bid, 100 1/8 offered level.

At another desk, AK Steel's existing 7 5/8% notes due 2020 were seen down about a half-point, at 98½ bid.

Monitronics hangs onto gains

Traders saw Monitronics International's new 9 1/8% notes due 2020 holding to the higher levels they reached on Friday after the Dallas-based security alarm company priced its $410 million offering at par. The offering was downsized from an originally planned $460 million.

"I think those bonds kind of held their gains, right around the 102 area," one said.

"It didn't rally today," the trader said. "It kind of rallied up to there on Friday and it's just holding on today."

A second trader saw two-sided markets at 102 bid, 102¾ offered, essentially unchanged from the strong levels that the bonds notched in their initial aftermarket dealings Friday.

MGM holds steady

Going back a little further last week, a trader said that MGM Resort International's 7¾% notes due 2022 were trading at bid levels between 100¼ and 100 3/8.

He said he didn't think there was that much change from the levels that the Las Vegas-based casino giant's quickly-shopped $1 billion issue traded at on Friday when the bonds began trading. That deal - upsized from the originally announced $750 million - priced at par late Thursday, but didn't start trading around until the next day.

A second trader initially said Monday that he had not seen the MGM bonds since last week, although he later dug up a 100½ bid quote. But he said he "did not get a single message today from anyone about MGM."

Another market source, though, did see about $18 million of the bonds changing hands, pegging them about that same 100½ bid level.

MGM's existing 11 3/8% notes due 2018 were steady at 119 bid on volume of about $7 million.

Thursday's other notable deal - Spectrum Brands Holdings' 6¾% notes due 2020 - was pretty much unseen on Monday, traders said.

One trader said he last saw trading of the $300 million issue on Friday, when it held bid levels between 101 and 102.

The Madison, Wis.-based maker of iconic consumer products like the George Foreman electric hamburger grills, Remington electric shavers, Rayovac flashlight batteries and Black Flag insecticide priced its quick-to-market offering on Thursday at par, after upsizing it from an originally announced $275 million.

Omega still struggling

A trader said Omega Healthcare Investors Inc.'s 5 7/8% notes due 2024 "are kind of interesting. They just can't seem to get out of their own way."

He saw the issue trading Monday at 98¾ bid, 99½ offered.

The Hunt Valley, Md.-based health facilities REIT priced its quickly shopped, $400 million issue on March 5, pricing the bonds at par. The split-rated deal (Ba2/BBB-) initially attracted some interest from both junk players looking for quality and high-grade crossover investors seeking yield. After pushing a little higher to the 100¼ to 100½ range, the bonds dropped back to their issue price and then continued to take on water.

"I think it was one of those issues that immediately wasn't trading as well as anticipated," the trader theorized.

Slow start to the week

Whether it was because market participants were playing hooky due to the mild weather on the last official day of day of winter or the continued "March Madness" distraction of the televised college basketball championship playoffs, traders saw not much doing overall.

"It was pretty quiet," one observed. "There was not a ton of trading and not many stories to tell today."

A second trader agreed. "There was not a heck of a lot of excitement. It took the first half of the morning to get any meaningful volume to pop up on Trace."

Market signs stay mixed

For a third straight session, statistical measures of junk-market performance were seen mixed on Monday.

A market source said that the CDX North American Series 17 High Yield index was up by just over a half-point to close at 98 15/16 bid, 99 1/16 offered, after having risen by 3/8 point on Friday. It was the third straight upside session.

But the KDP High Yield Daily Index meantime eased for a second straight session on Monday, losing 3 basis points to close at 74.16, on top of the 6 bps retreat Friday. Its yield rose by 3 bps to 6.53% after having narrowed by 1 bp on Friday.

The widely-followed Merrill Lynch High Yield Master II Index scored its second consecutive advance on Monday, rising by 0.058% on top of the 0.007% improvement seen Friday when the index bounced back from Thursday's loss, the first after six straight gains before that.

The latest gain lifted the index's year-to-date return to 5.17% on Monday, versus Friday's 5.109% reading. However, it is still down from its peak level for 2012 of 5.361% recorded on March 2.

Sprint slips after warning

Among specific non-new deal names, a trader said that Sprint Nextel Corp. paper and its Sprint Capital Corp. financing subsidiary were fairly active, but trading softer.

The stock analyst said there was a "very legitimate risk" of the company filing for Chapter 11 protection within the next five years.

Another trader also said the bonds were lower, as there was "a lot of negative news coming out."

The first trader deemed the debt down about a point, seeing the Sprint Capital 8¾% notes due 2032 at 87 bid, 87½ offered and the parent company's 6% notes due 2016 at 91 bid, 911/2.

The second trader called the 6% notes down more than a point around 91, while the 8¾% notes dipped a point to 871/4.

He also saw Sprint Capital's 6.9% notes due 2019 at 873/4, down 1¼ points.

Yet another trader located the 6s at 90½ bid, which he called down 1¾ points, on "pretty good volume," which he estimated to be in the $15 million to $20 million range.

A market source at another desk called the 6% notes among the most active Junkbondland issues on the session according to the Trace system, with more than $20 million traded. Nearly $11 million of the 6.9% issue changed hands, while volume in the 8¾% notes registered about $9 million.

The source also saw brisk trading of more than $11 million in the 6 7/8% notes due 2013 issued by the former Nextel Communications, which were assumed when Nextel was merged into Sprint Nextel in 2005. Those bonds were down more than a point, trading at just over par.

In a research note out early Monday, stock analyst Craig Moffett of Sanford C. Bernstein said there was "a very legitimate risk" that the Overland Park, Kan.-based wireless telecommunications provider could fall into bankruptcy sometime within the next five years.

Moffett downgraded the stock to underperform. By day's end, those New York Stock Exchange-traded shares had fallen by 13 cents, or 4.5%, to $2.76. Volume of 103 million shares was more than twice the norm.

In his analysis, Moffett said that it could go one of two ways for Sprint: One, it could follow through on its network upgrades and help its Clearwire Corp. partner get on firmer financial footing; or it could be further impaired by its contract with Apple Inc. and face a heavy debt burden.

Sprint, like larger wireless rivals AT&T Inc. and Verizon Communications Inc., has spent heavily on Apple's popular iPhones, providing the hot new instruments - first 3G and now 4G - to its customers at a fraction of the phones' normal cost in order to keep them from jumping to one of the other carriers that offered a better iPhone deal.

Moffett noted that Sprint has the ability to service its debt obligations through 2013, though it gets a little dicey in 2014. He also said the credit-default swaps were indicating a 50/50 risk on a bankruptcy filing.

"To be clear, we are not predicting a Sprint bankruptcy," Moffett wrote in the note. "We are merely acknowledging that it is a very legitimate risk."

Connacher climbs on sale talk

In the Canadian high-yield market, Connacher Oil & Gas Ltd.'s Canadian dollar-denominated and U.S. dollar-denominated bonds traded better on Monday amid speculation about a sale of the Calgary-based integrated energy company.

A market source said that the company's 8¾% Canadian dollar-denominated senior notes due 2018 and its U.S. dollar 8½% senior notes due 2019 were seen at 99 bid on Monday, well up from the 97½ bid level that both tranches of bonds recently held.

Connacher said in January that it began a strategic review to examine the company's business plan after it rejected an unsolicited takeover offer in December.

Connacher was seen as vulnerable to a takeover or possibly receptive to a buyout bid amid various troubles over the last few months, including an ongoing management shakeup that resulted in former president Peter D. Sametz being appointed as interim chief executive officer in February.

The company's recent financial results have proved disappointing.

On Friday, Connacher reported that revenue, net of royalties, rose to C$226.45 million in the fourth quarter from C$177.25 million in the same period last year. But its fourth-quarter losses more than doubled, to C$59.48 million, or 13 cents a share, from its year-earlier red ink of C$25.62 million, or 6 cents a share.

Stephanie N. Rotondo and CristalCody contributed to this report

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