CIT soars on revised tender; Ford firmer as sales jumped in July; three secured deals slate

By Paul Deckelman

New York, Aug. 3 - CIT Group Inc.'s volatile bonds started the new month on Monday pretty much the way they had spent most of the old month - with big price moves in response to major news about the New York-based commercial lender. In this case, CIT announced improved terms for its ongoing tender offer for the company's $1 billion of floating-rate notes coming due in two weeks, and those bonds, as well as some of the company's other issues, moved up sharply.

Also seen cruising higher were the bonds of Ford Motor Co. and its Ford Motor Credit Co. automotive financing subsidiary - particularly its huge new issue of three-year bonds that priced on Thursday. They got a boost from Ford's announcement of a year-over-year sales gain in July, the first such rise Ford had seen since the fall of 2007. However, it should be noted that the sales figures doubtless got a jump-start from the "Cash for Clunkers" program.

Texas Competitive Electric Holdings Co.'s bonds and those of corporate cousin Energy Future Holdings Corp. continued the solid gains which the paper was posting on Friday - even in the face of a Moody's Investors Service downgrade and its warning that the former TXU Corp. would likely have to restructure its debt, sooner or later.

The primary market was fairly sedate, calming down after last week's exciting pace which saw deals having a total face amount of some $5.76 billion pricing.

No new deals actually priced on Monday, but three issues - all of them senior secured offerings - moved onto the forward calendar, from Affinia Group Inc., American Casino & Entertainment Properties LLC and Clean Harbors, Inc. Affinia's deal is expected to price this week, the other two next week.

Market indicators move up again

Back among the more established issues, the CDX Series 12 High Yield index - which jumped by a point on Friday - gained another ½ point on Monday, a trader said, ending at 91¼ bid, 91¾ offered.

Meantime, the KDP High Yield Daily Index, which gained 33 basis points on Friday, added another 32 bps on Monday to end at 66.55, while its yield tightened by 10 bps to 9.13%.

In the broader market, advancing issues - which had led declining issues for an eleventh straight session on Friday - remained on top Monday, by a margin of almost two-to-one.

Overall market activity, measured by dollar-volume totals, fell by around 23% from Friday's level.

A trader said that "things still seem to be creeping up a bit," while another trader was more sanguine about things, declaring that "the market did well today."

Tinkered tender terms spark CIT surge

The news that CIT had amended, and extended, its tender offer for the floating-rate notes maturing on Aug. 17 was seen having boosted those bonds solidly, and having lifted a number of other CIT bonds by some points.

Those bonds had finished on Friday around 77 bid - but zoomed to opening levels around 89 on Monday, a market source said, on the announcement about the revised terms. The bonds continued to climb, to around the 93-94 level by the afternoon, on busy trading.

A trader said that "they traded a lot of bonds in the 93-94 area," with the high round-lot print coming at 941/4. "A lot of bonds traded after that, somewhere between 93 and 94."

A market source who saw the bonds going home bid around 93, estimated that at least $40 million had changed hands by the time the market closed.

CIT - which had previously warned that it could still face possible bankruptcy should the tender offer fail - announced that it had extended the early tender deadline on the issue to midnight ET on Aug 5 from the prior deadline of midnight last Friday, and had raised the total consideration it was offering to bondholders tendering by that deadline to $875 per $1,000 principal amount of notes, versus the previous total consideration of $825 per $1,000.

Besides sweetening the deal and extending the time limit, CIT also lowered the participation threshold for the deal to succeed to just 58% from the original 90%. It said that as of last Friday, 64.97% of holders had validly tendered their debt.

While the floaters were the big beneficiary of the changes in terms, other CIT issues were helped as well. A market source quoted the company's 4 1/8% notes slated to come due on Nov. 3 as having jumped as much as 9 points on the day to end at 70 bid.

A source at another desk saw those bonds get as good as 71 bid.

Ex-TXU bonds better; Moody's ignored

A trader said that the bonds of the former TXU Corp. - Texas Competitive Electric Holdings and Energy Futures Holding Corp. - were "making some noise - but I'm not sure if it was warranted or not."

He noted that the bonds of both affiliated companies had risen on Friday on news reports indicating that the Dallas-based utility operator and merchant power producer was taking steps to address its upcoming debt maturities and strengthen its balance sheet.

"They're in the process of doing some kind of financing," he said. "They're substituting some [new] second-lien paper for some [established] first-lien. I'm not sure if that's going to be a bond issue or a bank debt issue like Nuveen, which did the same sort of thing." He was referring to Chicago-based financial services company Nuveen Investments Inc., which last month did a $450 million second-lien loan deal, using the proceeds to pay off first-lien debt.

He said that the companies' bonds "traded up early in the morning. Then Moody's downgraded them, but they didn't really trade off much, they held their levels."

He saw the Energy Future Holdings 10 7/8% notes due 2017 traded in the morning at the 88½ bid level, "before the downgrade." After the Moody's announcement of a one-notch downgrade in the company's corporate family rating, to Caa1, with a continued negative outlook, he saw them in the 873/4-88¼ area, "so off a little bit but not a lot, and up from Friday," when the bonds had traded between 84 and 871/4, after having traded around 83-84 on Thursday.

"So they're up. I guess people didn't care so much about the downgrade."

He saw Texas Competitive's 10¼% notes due 2015 going home at around 78 bid, 79 offered, versus 78½ earlier in the session, but still well up from a 74-78 context on Friday, and a 69-73 range on Thursday. "So it's moved up quite a bit."

A market source at another desk saw the company's bonds up nearly 2 points at just under 79. Dealings were seen busy, with at least $20 million traded.

In downgrading the credit, Moody's said that its actions "reflect our concerns regarding the long-term sustainability of EFH's business model. These concerns primarily reflect the approximately $44 billion of debt and roughly $20 billion of other gross liabilities currently on the balance sheet versus negative book equity of $3.2 billion."

Moody's senior vice president for global infrastructure finance, James Hempstead, added that the rating action "also reflects our view that the capital structure is untenable and will likely prompt the company to pursue some form of restructuring activity. These actions are likely to address the company's liquidity profile and its substantial maturities upcoming in 2014. Moody's is likely to view any such action as a 'distressed exchange' event and will score such event as a default, albeit one that is immediately cured."

Ford firms up as sales pick up

The news that Ford Motor Co.'s July sales were actually up by 2.3% from a year earlier - its first such year-on year sales gain since the fall of 2007 --- caused the Number-Two domestic carmaker's bonds, and those of its auto-loan financing arm, Ford Credit, to step on the gas and move higher.

For instance, a trader said, parent Ford's 7.45% bonds due 2031, move up 2 points to 75½ bid, 77½ offered.

Meanwhile, the new Ford Credit 7½% bonds due 2012, which on Thursday had priced at 91.589 to yield 10 7/8%, were in a 921/4-93 context on Monday - up from the 911/2-92½ range seen on Friday.

"A lot of bonds traded on Friday," he said, "and today, they were a little bit higher."

A market source saw the new Ford bonds as one of the most active issues on the day, with over $60 million traded.

Ford's total sales for the month were 165,279, up 2.3% from 161,530 a year earlier. Car sales for the month were 62,176, up 8.7% from 57,177 last year, while truck sales for July were 96,662, down 2.6% from 99,229 in 2008.

New bonds stay firm

Besides the Ford Credit mega-deal, traders saw other recently priced issues holding their own.

One saw Duane Reade Inc.'s 11¾% senior secured notes due 2015 - which on Friday had priced at 97.417 to yield 12 3/8%, and then moved sharply higher -- trading as well as 1021/2, 103½ offered.

A trader saw Jabil Circuit Inc. 's new 7¾% senior notes due 2016 - which had priced Friday at 96.183 to yield 8½%, but which then had moved to a closing price of 98¼ bid, 99¼ offered - having gotten as good as 99 1/8 bid..

Another saw the bonds at 99 bid, 99½ offered.

A trio of secured deals

No new issues priced on Monday. However, high yield syndicate sources were following a trio of new senior secured deals

Ann Arbor, Mich.-based Affinia Group, a manufacturer of automotive parts, announced plans Monday to sell $225 million of senior secured notes due 2016. The issue will be secured by a first-lien on everything except its current assets; those will be used to secure a $315 million asset-backed revolver which the company is expected to launch shortly.

A syndicate source said that the company was beginning a roadshow on Monday to market the deal to potential investors, with pricing expected this coming Friday.

The offering is being managed by underwriters JP Morgan Chase & Co., Bank of America Merrill Lynch, Barclays Capital and Deutsche Bank Securities.

Affinia said that it plans to use the deal proceeds and other funds to repay its existing term loan, its existing revolving credit facility and its accounts receivable securitization facility.

American Casino hits the road

American Casino & Entertainment Properties LLC - whose 1,000-foot plus Stratosphere casino resort is an iconic landmark on the Las Vegas Strip - said that it will sell $375 million of new five-year senior secured notes.

The deal will be brought to market via book-running manager Goldman Sachs & Co.

The company kicked off a roadshow among potential investors on Monday, with pricing expected to take place next week, possibly around mid-week, a primaryside source said.

The company plans to use the proceeds of the bond sale to refinance its senior secured term loan from Goldman Sachs.

Clean Harbors hopes to clean up

Clean Harbors, Inc., a Norwell, Mass.-based provider of environmental and hazardous waste management services, said Monday that it will offer $250 million of new senior secured notes due 2016.

Market sources said the company will begin a roadshow on Wednesday to market the deal to prospective investors, with pricing expected sometime around the middle of next week. The deal is being led by joint book-running managers Goldman Sachs and Bank of America Merrill Lynch.

The company plans to use the deal proceeds to repay certain debt, including approximately $235 million that it assumed as part of Clean Harbors' $400 million acquisition of Eveready, Inc., a Canadian company that provides various industrial services to the oil and gas, chemical, pulp and paper, manufacturing and power generation industries.

Some of the proceeds are also expected to go for general corporate purposes.

Global Aviation deal still up in the air

A primary market source saw nothing else happening in the new-deal arena.

He said that participants were also waiting for several deals that have been on the calendar for a while, including the $165 million of senior secured notes due 2013 that Global Aviation Holdings Inc. is expected to bring via Jefferies & Co.

The Peachtree City, Ga.-based passenger and air cargo carrier will use the proceeds to refinance bank debt.

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