CIT gyrates on new bankruptcy warning, Wynn up on IPO news; SBA upsizes, CapitalSource prices

By Paul Deckelman and Paul A. Harris

New York, July 21 - CIT Group Inc. maintained its stranglehold on the junk bond market for a ninth straight session on Tuesday as its bonds once more jumped around crazily and on heavy volume on the latest chapter in the New York-based commercial lender's seemingly endless soap opera, as the company - fresh from Monday's very bullish news of its bondholders coming to its rescue with a $3 billion financing plan - warned that it might still end up in the bankruptcy courts if its current tender offer for its floating-rate notes due next month fails.

Elsewhere, Wynn Las Vegas LLC's bonds pushed upward, helped by the news that the Nevada-based gaming company plans to raise between $500 million and $1 billion via an initial public offering in Hong Kong by its Macau gaming operation.

NRG Energy Inc.'s bonds were lower after the Princeton, N.J.-based power generating company's shareholders rejected efforts by would-be purchaser Exelon Corp. to gain control of the NRG board of directors, causing the latter company to drop its unsought and unwelcome takeover try.

In the primary sphere, SBA Telecommunications, Inc. priced an upsized two-part note offering, which firmed slightly to above the par level when the two tranches were freed for secondary dealings.

And during the early evening - long after virtually all trading activity had halted for the night - Chevy Chase, Md.-based commercial lender and money manager CapitalSource Inc. was heard to have priced an offering of five-year senior secured notes.

The forward calendar also got a new entrant, as Plastipak Holdings, Inc. announced plans for a 10-year note issue. High yield syndicate sources expect that deal to come to market on Thursday, following a short roadshow campaign which began Tuesday.

SBA upsizes by $250 million

SBA Telecommunications priced an upsized $750 million two-part senior notes transaction (Ba2/BB-) on Tuesday.

The wireless towers company priced a $375 million tranche of 8% seven-year notes at 99.33 to yield 8 1/8%.

The yield came at the tight end of the 8¼% area yield talk, while the issue price came rich to discount talk that had specified 1.5 to 2.5 points of original issue discount.

SBA also priced a $375 million tranche of 8¼% 10-year notes at 99.152 to yield 8 3/8%.

The yield on the 10-year notes also came at the tight end of the 8½% area yield talk, and the issue price also came rich to the discount talk of 1.5 to 2.5 points of OID.

The deal was upsized from $500 million.

Barclays Capital was the left lead bookrunner for the Rule 144A/Regulation S with registration rights deal. Deutsche Bank Securities, JP Morgan, Citigroup, RBS Securities, TD Securities and Wells Fargo Securities were joint bookrunners.

SBA's steady business

The SBA deal went alright, according to a money manager who played both tranches.

Although it came tight to talk, and rich to the expected discount, the nickels and dimes are not what you should focus on, in a deal like SBA, the investor advised.

"It's not one to get rich on - it's just a placeholder," the money manager said.

Characterizing the tower company as a 'Steady-Eddie' business, the source explained that the company can estimate within a couple of hundred million dollars how well it is going to do for the year.

"If you don't pay the tower rental you don't get the coverage," the investor said.

"Wireless companies never mess around with that."

CapitalSource prices

Elsewhere CapitalSource priced a $300 million issue of 12¾% five-year senior secured notes (Ba3/BB) at 93.966 to yield 14½% on Tuesday.

The yield was printed 87.5 bps beyond the wide end of the 13½% area price talk.

Credit Suisse, Citigroup, JP Morgan and Wells Fargo Securities were joint bookrunners for the debt refinancing deal.

Nuveen plays mostly to loan accounts

Although it had some of the earmarks of a junk deal - a fixed-rate coupon, an equity clawback and high-yield covenants - the Nuveen Investments, Inc. $425 million 12½% second-lien term loan (Caa2) played mostly to bank loan accounts, according to an informed source.

The deal priced Tuesday at 90.00 to yield 15.082%.

It was upsized from $350 million, and priced on top of the 90 price talk.

Deutsche Bank Securities, Banc of America Securities, Morgan Stanley and Wells Fargo Securities were joint bookrunners.

Late Monday the loan was at 93 bid, 94 offered, according to an informed source.

Plastipak starts roadshow

Plastipak Holdings is running a brief Tuesday to Thursday roadshow for its $150 million offering of 10-year senior notes (existing ratings B3/B), according to an informed source.

The deal is expected to price on Thursday.

JP Morgan, Banc of America Securities LLC/Merrill Lynch & Co and RBS Securities Inc. are joint bookrunners.

Proceeds will be used to repay Plastipak's seventh amended and restated credit agreement and for general corporate purposes.

New SBA bonds seen firmer

While SBA Telecommunications' new two-part issue didn't exactly tower over the secondary market after it was freed, several traders did see the new bonds push up from their respective issue prices to above the par bid level.

One quoted the $375 million of 8% notes due 2016 at 100¼ bid, 100¾ offered, up from 99.33, where it had priced earlier in the session. He also saw the offering's other half, the $375 million of 8¼% notes due 2019 at 100½ bid, 101 offered, up from its 99.152 price at issue.

Another trader saw the '16s at 100 1/8 bid, 100 5/8 offered, while its '19s were at 100¼ bid, 100¾ offered.

Market indicators remain ahead

Back among the more established issues, the CDX Series 12 High Yield index - which had jumped a full point on Monday - edged up by another 1/8 point on Tuesday, a trader said, to finish at 86 1/8 bid, 86 3/8 offered.

The KDP High Yield Daily Index, which had gained 29 basis points on Monday zoomed by another 50 bps on Tuesday to end at 64.05, while its yield tightened by 27 bps, to 10.06%.

In the broader market, advancing issues - which had led declining issues on Monday for a second straight session, made it a hat trick on Tuesday, although they triumphed by a relatively narrow 13-to-12 margin.

Overall market activity, measured by dollar-volume totals, shot up by nearly 91% from Monday's level.

CIT cyclone continues to blow

As has been the case each session for nearly two weeks - much of that activity was generated by CIT Group paper, which continued to dominate the Most Actives lists for yet another day. A trader said that "we still had lists of CIT bonds up for sale, and the number of issues is still pretty much up there, as far as volume goes."

It was the "same stuff as yesterday," a trader said, "except that prices were a little lower" after the company warned that it still may face bankruptcy, even with the $3 billion of financial firepower its bondholders are willing to lend it.

He saw the floating-rate notes coming due on Aug. 17 ending in an 84-86 range, adding that "who knows what ending up really is? It's so volatile," he said, that any quotes were really nothing more than a snapshot of where a bond might be at any given moment.

He saw the floaters go from lows of 80-82 earlier, then "up, back down," and finally in the mid-80s. There was "huge size trading - it was up and down, between 84 and 86 was where most of the volume was. Most of the trades were in the mid-85 range."

He saw the 6 7/8% notes maturing on Nov. 1 at 66 bid, 68 offered, down 8 points on the day.

He said "who knows?" when asked what was the main driver of Tuesday's action - profit-taking off Monday's gains or the renewed bankruptcy fears sparked by the company's statement that a failure of its current tender offer for the $1 billion of outstanding August floaters could force it into bankruptcy after all, other recent rescue efforts notwithstanding. "Billions of dollars of paper have changed hands over the last two weeks - so I don't know."

A trader saw the August floaters actually going home at 85¼ bid, up from 84½ on Monday, with $107 million of the notes changing hands, by far the most of any junk bond on Tuesday. He thought it odd that the bonds were trading about the 82.5 total consideration level the company has established for those holders who tender their bonds by the early consent deadline of 5 p.m. ET on July 31.

"Maybe people anticipate a higher tender," he suggested.

The trader saw CIT's floating-rate notes due in March 2010 as the second busiest issue, with $47 million traded, but said those bonds "got hammered" down to 60¼ bid from 74 on Monday, investors apparently spooked by the re-emergence of bankruptcy talk.

Trading in round-lots, the 5.40% notes due 2012 eased to 54 from 561/4, on volume of $41 million, while its 4¾% notes due 2010 fell to 59½ bid from 64¼ on Monday, with $34 million traded.

At another desk, a trader saw the 43/4s at 58 bid, 60 offered, but pegged them down 10 points from Monday's levels, and saw CIT's 4 1/8% notes maturing on Nov. 3 also down 10 points, at 66 bid, 68 offered.

"Things really started falling in mid-afternoon," he said, "falling like 5 points every hour."

Some of the longer paper, though, showed less of a plunge, he said, with the 5.40% notes due 2013 at 51½ bid, 53½ offered, down about 3 points on the day, while its 5.85% notes due 2016 were down a deuce at 50 bid, 52 offered.

Another trader saw CIT's 7 5/8% notes due 2012, "which was the larger issue that was in the index before the whole thing went KABLOOEY," pretty much unchanged around 53-54.

"I think as you get closer to the 50s and 40s, the market is unchanged to down a point or two." He said that the bankruptcy warning "was why the higher dollar-price items tanked a little bit here, more than the rest."

'A feeding frenzy'

While CIT once again was the dominant name in Junkbondland on Tuesday, and its issues were mixed, with many of them multiple points lower, a trader said that overall, "I would categorize our market as a feeding frenzy on the positive, on the buy side."

The advance did not cover everything "from A to Z," he said, "but certainly, selected issues were being bid up and were trading what I think are very tight spreads - probably the tightest in a couple of years."

For instance, he said, AK Steel Corp.'s 7¾% notes due 2012 traded up to par after the West Chester, Ohio-based specialty steel alloy maker released second-quarter earnings.

"But who ever heard of a junk bond trading at [a yield of] 7¾% in this environment? Did we forget what we went through six to 12 months ago," when that particular AK issue was finishing out 2008 yielding 16.40% and the average junk issue was topping 20%?

The AK bonds' par level was an improvement from Monday's 98 1/8 bid, on $10 million traded. The trader allowed that "they did come out with [favorable] earnings (parent AK Steel Holdings Corp.'s loss of $47.2 million, or 43 cents per share, was a deterioration from its year-ago $1.29 per share profit - but was a sequential improvement from its first-quarter loss of $73.4 million, or 67 cents per share, and beat Wall Street expectations of a 75-cent per share loss) and it is [relatively] short - but we're talking about junk yielding 7¾%."

'Barometer names' quietly higher

As an example of the overall firm tone in the market, he said some of the big "barometer" names were solidly up - though on relatively light dealings. He saw, for instance, Franklin, Tenn.-based hospital operator Community Health Systems Inc.'s 8 7/8% notes due 2015 firm to 101 ¾ bid, up ¾ point on the day, "but on only $1 million - very, very light for a supposed barometer issue."

He saw Greenwood Village, Colo.-based financial transaction processor First Data Corp.'s 9 7/8% notes due 2015 at 73¾ bid, well up from 70½ on Friday, the last time those bonds traded, "quite a move - but also very light volume," of $3.5 million. And he saw Philadelphia-based food-service operator and uniform distributor Aramark Ltd.'s 8½% notes due 2015 at 99½ bid, up a point, but on only $4 million of turnover, "not much for the kind of multi-billion-dollar tranches these barometers have."

Wynn a winner on IPO news

On the other hand, the trader said, there were non-CIT issues that saw "decent volume, and were up over a point."

Chief among these, he said was Wynn Las Vegas, whose 6 5/8% notes due 2014 firmed to 90½ bid, up from Monday's 891/4, on $23 million, the heaviest volume of any non-CIT credit on Tuesday.

Another saw them doing even better, up 2½ points at 90 bid, 92 offered.

Yet another trader said there was 'a lot of trading, a whole s*** load of it," at 91½ earlier in the day, although he too saw the bonds going out around 901/2, "up one or two" points on the day, and noted that they were at 87-88.

The bonds firmed on the news that the company, which operates casinos in Las Vegas and in the gambling enclave of Macau - China's answer to Vegas - took the first step towards partly spinning off partial ownership of some of its lucrative Macau assets via an IPO in Hong Kong, by filing for an IPO with regulators there.

It hopes to raise as much as $1 billion. The move by Wynn - considered one of the better-run companies in the sagging U.S. gaming industry-is seen by analysts to be a shrewd and opportunistic move to raise relatively cheap capital and nothing more, since Wynn does not actually need that capital to complete any pending projects , unlike rival Las Vegas Sands, also planning to tap the Hong Kong IPO market, which needs about $2 billion to finish its latest Macau hotel and casino project.

NRG nixes Exelon, bonds ease

A downsider on the day was NRG Energy, whose bonds eased after the company's shareholders rebuffed attempts by would-be-buyer Exelon Corp. to take over the target company by getting its own representatives elected to NRG's board of directors. That caused Exelon - which last fall proposed an acquisition, subsequently sweetening that bid to about $7.7 billion total - to withdraw its bid and declare its takeover try finished.

The possibility of a takeover had been helping to push NRG's bonds higher -- for instance, they had firmed several points earlier in the year when Exelon raised its offer to NRG. With that option now off the table, a trader said that its most active issue, the 7 3/8% notes due 2016 dipped to 96 bid, 96¾ offered, from 96½ bid, 97¼ offered on Thursday.

Its 8 ½% notes due 2019 were trading around the 97 level, off from around 99 the previous week.

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