Primary revives with Charter, Optima, Landry's; secondary strong, AMR still busy post-filing

By Paul Deckelman and Paul A. Harris

New York, Nov. 30 - The high-yield market closed out November with a bang, as three new deals totaling more than $1 billion of proceeds came to market, including a $750 million drive-by offering from familiar junk issuer Charter Communications Inc.

Also pricing were a downsized and restructured $175 million of five-year notes from Optima Specialty Steel, Inc., and an upsized $115 million add-on offering from restaurant and gaming operator Landry's Acquisition Co.

Although the Charter deal priced fairly late in the session, traders saw the cable operator's new bonds firmer in aftermarket dealings. The Landry's bonds, both the several original tranches and the latest add-on, were also seen higher when they were freed for secondary dealings.

But no trading was immediately seen in the Optima issue.

Besides the three pricings, primaryside players also heard that PFF Corp., a provider of outsourced mortgage and vehicle fleet management services, will quickly shop around a $250 million seven-year deal, for likely pricing Thursday.

And another provider of outsourced services, Expert Global Solutions, Inc. - the company formerly known as NCO Group, Inc. - will hit the road beginning next week to market a $300 million offering of eight-year notes.

Away from the primary realm, traders saw the junk secondary market up pretty much across the board, helped by general optimism in the financial markets stemming from the moves by major central banks to help Europe's beleaguered lenders. Statistical performance measures firmed smartly.

Some of the high-beta names, like Caesars Entertainment Corp.'s 2018 bonds, were seen up as much as 3 or 4 points on the day.

There again was considerable activity in AMR Corp. bonds, a day after the parent of American Airlines filed for Chapter 11. Bonds rose or fell, depending on the underlying collateral, or lack thereof.

Charter prices $750 million

Riding a wave of positive momentum generated in the equity markets, with the Dow Jones Industrial Average up more than 4% on the day, the high-yield primary sparked to life on Wednesday, seeing its first action in the post-Thanksgiving week.

Three issuers, each one bringing a single tranche of bonds, raised a combined total of $1.04 billion.

CCO Holdings, LLC and CCO Holdings Capital Corp., subsidiaries of Charter Communications, priced a $750 million issue of 8.5-year senior notes (B1/BB-) at par to yield 7 3/8%.

The yield printed on top of yield talk.

Bank of America Merrill Lynch was the left bookrunner for the quick-to-market debt refinancing deal. Citigroup, Credit Suisse, Deutsche Bank and UBS were the joint bookrunners.

The order book for Charter's new 7 3/8% bonds was oversubscribed, and the deal went very well, according to a syndicate source.

"It was a very comfortable day to price a deal," the official remarked, noting positive sentiment in the global equity markets sparked by news that China's central bank is cutting its reserve ratio by 50 basis points, as well as news that the U.S. Federal Reserve Bank, the European Central Bank and four other central banks plan to address the ongoing euro zone debt crisis by lowering the cost of accessing dollar swap lines by 50 bps.

Optima downsizes, restructures

In addition to Charter two other deals priced on Wednesday.

Both were led by sole bookrunner Jefferies.

Optima Specialty Steel priced a downsized, restructured $175 million issue of 12½% five-year senior notes (B2/B/) at 96 to yield 13.622%.

The coupon, issue price and yield all came on top of talk.

The bonds were reduced from $200 million, while the equity contribution from Optima Acquisitions, LLC was increased by $50 million, bringing the total equity contribution to $84.9 million.

The maturity of the new 12½% notes was reduced to five years from six years.

Proceeds, together with the sponsor equity, will be used to fund the acquisition of Buffalo, N.Y.-based steel bar producer Niagara Lasalle Corp.

Landry's upsizes add-on

Landry's Inc. priced an upsized $115 million add-on to its 11 5/8% senior secured notes due Dec. 1, 2015 (B3/B) at 102.5 to yield 10.829%.

The reoffer price came on top of talk. The amount was increased from $90 million.

Jefferies & Co. also ran the books for the quick-to-market add-on.

Proceeds will be to help finance the acquisition of McCormick & Schmick's Seafood Restaurants, Inc.

The original $406.5 million issue priced at 98.427 to yield 12% in November 2009.

A $47 million add-on priced at 106 to yield 10.186% in April 2010. Another $87 million add-on priced at 104.25 to yield 10.498% in December 2010.

Hence Wednesday's 10.829% print came rich to the original issue, but cheap to the previous two add-ons.

PHH for Thursday

Following Wednesday's burst of activity the forward calendar remains light, with just two deals on the active calendar.

PHH Corp. plans to price a $250 million offering of non-callable seven-year senior notes (expected ratings Ba2/BB+/BB+) on Thursday.

Citigroup is a joint active bookrunner, and will bill and deliver. J.P. Morgan Securities LLC is also a joint active bookrunner.

Bank of America Merrill Lynch, Goldman Sachs & Co., RBS Securities Inc. and Wells Fargo Securities LLC are joint passive bookrunners.

Proceeds will be used to repay the company's convertible notes due in 2012. Pending that repayment proceeds may be used to temporarily repay borrowings under PHH's amended credit facility, originate mortgage loans or may be invested temporarily in short-term interest-bearing investment funds or similar assets.

Expert Global to roadshow

Expert Global Solutions plans to start an investor roadshow on Tuesday for its $300 million offer of eight-year senior notes (Caa1//).

The roadshow wraps up on Dec. 12.

Deutsche Bank is the left bookrunner. Barclays, J.P. Morgan and RBS are the joint bookrunners.

The Horsham, Pa.-based provider of business process outsourcing services, formerly known as NCO Group, Inc., is also putting in place $870 million of credit facilities.

Proceeds, together with a new credit facility, will be used to refinance debt and to help fund the merger of NCO Group and APAC Customer Services, which are One Equity Partners portfolio companies, into Expert Global Solutions.

A 'wait-and-see' pipeline

Beyond the PHH and Expert Global Solutions deals, market sources provided mixed estimates of primary market volume expected in the run-up to the new year, during Wednesday conversations.

One syndicate banker maintained that activity will probably remain light, with as few as a dozen more deals clearing before year-end.

However an official from a different syndicate said that the market could see new issue activity well in excess of a dozen deals.

"It's no secret that there is an opportunistic pipeline out there," the sell-sider said.

"If the positive sentiment which we saw today continues, people will probably bring their deals before the market shuts down for the holidays."

Although the new issue market was on pace to set a new yearly issuance record for the first half of 2011, the 2010 all-time issuance record of $292.6 billion now appears quite likely to remain intact when the new year is rung in.

With the month of November now in the books, 2011 year-to-date junk-rated, dollar-denominated issuance stands at $253.2 billion, according to Prospect News data.

Given that 18 market sessions remain before the Christmas weekend, with Friday, Dec. 23 being the last of that 18-session run, an average daily issuance of $2.19 billion would be required to bridge the gap.

Such a figure would represent a massive step-up from the $1.46 billion daily average seen over the past 18 sessions.

New issues trade up

Although the new Charter Communications issue came to market fairly late in the session, a trader saw the St. Louis-based cable operator's quickly-shopped deal trading at 101 bid, 101½ offered, versus the par level where those bonds had priced.

Among the existing Charter paper, the company's CCO Holdings LLC 6½% notes due 2021were the most actively traded Charter issue on the day, knocking down over $25 million.

A market source saw those bonds ending at 96¼ bid - down about 7/8 point from where the bonds had finished on Tuesday, though throwing out any non-round-lot trades shows the bonds going out actually up ¼ point.

Among the three Charter issues being tendered for, only the last of the three - the CCH II, LLC 13½% notes due 2016 - was seen trading on Wednesday, with a market source calling the bonds up 1½ points, though on relatively restrained dealings of $2 million.

A trader said that the new Landry's Acquisition add-on to its 2015 notes was quoted at 1033/4, versus the 102½ level seen at the deal's pricing. However, he never saw an offering.

He saw some of the Houston-based hospitality company's existing 2015s were trading before the pricing at 1043/4, suggesting "maybe that defines the market in the new ones as well - 103¾ to 1043/4."

Another trader said that the bonds were at 104 bid, "back to where they were prior to the add-on pricing a little lower."

There was no aftermarket trading seen in the Optima Specialty Steel bonds after the downsized $175 million issue priced at 96 bid.

Market turns higher

Away from the new deal arena, a trader exclaimed that "the market was up, up and away today."

A second trader declared that "the market had a good tone today," helped by the sharp upturn in stocks seen in response to news that the world's major central banks, including the Federal Reserve, had acted jointly to provide cheaper dollar funding to European banks facing a credit crunch. Also helping was the news that China had eased certain bank reserve requirements.

The trader said that "the really high-beta stuff was up 3 to 4 points, including Caesars Entertainment's 10% notes due 2018, which gained 4 points to around the 64 level, and United Rentals (North America) Inc.'s 8 3/8% notes due 2020, which he pegged at 98½ bid, up 3 and 4 points.

As for the more non-high-beta credits, he said "the generic stuff was up 1 to 2 points."

Another trader agreed that the high-beta names were up by at least 3 points, while "the on-run stuff was up a half to 1 point."

He saw the Caesars bonds - familiarly known under the company's former name, Harrah's Entertainment - trading "all over the lot." He said the bonds had gone home on Tuesday night at 60¼ bid, 60¾ offered, then got as high as 64½ in Wednesday's dealings, before finally going home in a 63½ to 64½ context.

Indicators are improved

Among the statistical measures of market performance, things turned decidedly more bullish on Wednesday, after having been mixed on Tuesday.

A trader saw the CDX North American series 17 High Yield index jump by 2¼ points on Wednesday to end at 91¼ bid, 91¾ offered, after having been up ¼ point Tuesday.

The KDP High Yield Daily index rose by 35 basis points on Wednesday to 71.10, after having lost 3 bps on Tuesday.

Its yield declined by 10 bps, to 7.89%, after having been unchanged on Tuesday.

The junk market moved up in tandem with sharp gains in stocks on the European bank news.

The bellwether Dow Jones Industrial Average - which on Tuesday had risen by 32.62 points - soared by 490.05 points on Wednesday, or 4.24%, to end at 12,045.68. It was the Dow's best one-day showing since March 2009.

The S&P 500 zoomed by 4.33%, while the Nasdaq index climbed by 4.17%.

AMR active again

A trader said that "AMR continues to be a big story, with some up and some down again," a day after the Fort Worth, Tex.-based parent of American Airlines sought Chapter 11 protection.

He saw its 7% notes due 2018 "continuing to grind higher," quoting the bonds bid around 81-82 "and looking for paper. Some are hard to find like that."

He said that on the other hand, the company's American Airlines 7½% notes due 2016 off by 2½ points to around the 76 bid level.

He also saw the most active AMR issue of the day, the airline unit's 10½% notes due 2012, also "down a couple of points," to around the 88 level.

"Again, there was a lot of activity in AMR, but really, it depended on the issue, what the trade was in that one."

A market source saw over $22 million of the latter bond changing hands, in the high 80s.

A trader said that some of the unsecured paper which had gotten clobbered on Tuesday, falling into the teens to high 20s from prior levels in the 60s and 70s, "improved today by a couple of points - but still, on a relative basis to where it was, they're still down substantially - but they did have a good day today."

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