Nationstar does small add-on; market awaits 99 Cents; Verizon talk boosts Netflix; Vulcan down

By Paul Deckelman and Paul A. Harris

New York, Dec. 13 - The high-yield primary market saw but one small add-on deal priced on Tuesday - a quickly shopped $35 million transaction from residential lender Nationstar Mortgage LLC, which was not seen in the aftermarket.

New-deal players heard price talk emerge on extreme value retailer 99 Cents Only Stores Inc.'s planned $250 million bond offering, which is expected to come to market after the order books close on Wednesday.

Traders saw no activity on Tuesday in A.M. Castle & Co.'s new five-year secured notes, $225 million of which priced on Monday.

Recently priced deals from Ford Motor Credit Co. LLC and NII Capital Corp., which on Monday had seemed to have lost some of the luster, were seen among the most actively traded Junkbondland issues on Tuesday.

Away from the new-deal realm, traders said that the market seemed generally firmer, though not aggressively so. Statistical performance indicators, which had fallen on Monday, were mixed on Tuesday.

There was a lot of activity in Sprint Nextel Corp.'s bonds, although not much movement.

Also in the communications and media sphere, Netflix Inc.'s bonds were better as its stock gyrated on speculation that phone giant Verizon might be interested in buying the movie-rental company.

Vulcan Materials Co., whose bonds got a big boost on Monday on merger & acquisition-related activity, was seen backing off from some of those gains on Tuesday.

Nationstar add-on

Nationstar Mortgage priced a $35 million add-on to its 10 7/8% senior notes due April 1, 2015 (B2/B) at 99.26 to yield 11.137% late on Monday, and the terms did not circulate until Tuesday morning.

RBS was the bookrunner for the quick-to-market general corporate purposes deal.

The original $250 million issue priced at 97.205 to yield 11 5/8% in March 2010, and the company realized 0.5% of interest savings with the add-on notes versus the print on the original issue.

99 Cents talks $250 million

RBC is the left bookrunner for 99 Cents Only's LBO deal.

The company talked its $250 million offering of eight-year senior notes (Caa1/CCC+) with a yield in the 10% area on Tuesday.

The books close at 10:30 a.m. ET on Wednesday, and the deal is set to price thereafter.

BMO and Deutsche Bank are the joint bookrunners.

This is one of just two deals remaining in the market.

Expert Global Solutions, Inc. has been marketing a $300 million offering of eight-year senior notes (Caa1//) via Deutsche Bank, Barclays, J.P. Morgan and RBS.

The roadshow was scheduled to wrap up on Monday.

No price talk on the deal has circulated, and the buzz in the market is that the deal may be delayed or postponed.

News on the deal, which represents part of the funding for the merger of NCO Group and APAC Customer Services, was expected on Tuesday night.

However, no such news had circulated at press time.

Rally required

Apart from deals on the active calendar, there is a modest pipeline of deals - some of them opportunistic, which are prepped and ready. Those could come on very short notice, market sources say.

However, issuers are disinclined to bring drive-by deals when volatility is rocking the global capital markets, as was the case on Monday and Tuesday, a debt capital markets banker said.

"Not only are you contending with the volatility, but you are also facing circumstances created by the market heading into the end of the year, which is never the best time to come," the banker said.

"When you add it all up, you might just be better off pushing the deal into 2012."

Nationstar, Castle no-shows

Several traders said that they saw no secondary market activity in the new Nationstar add-on deal the Dallas-based residential lender priced on Tuesday.

They also did not see any second-day dealings in the new 12¾% senior secured notes due 2016, which A.M. Castle & Co. priced on Monday.

Castle, an Oak Brook, Ill.-based global distributor and processor of specialty metals and industrial plastic products, came to market with a $225 million issue of those bonds upon the completion of a roadshow, which began on Dec. 1. The issuer priced the bonds at 96.5 - in line with price talk - to yield 13.741%.

The new bonds were last quoted on Monday at 98½ bid, 99½ offered.

New Ford Credit busy again

But traders saw considerable activity in the recently priced Ford Motor Credit 5 7/8% notes due 2021, which priced a week ago to its existing $1 billion of those bonds sold this past summer.

In fact, a market source estimated that over $19 million of the notes changed hands - over triple Monday's volume of about $6 million, though well below the kind of $100 million volumes that were recorded last week. Those spikes occurred the first couple of days after the upsized $1 billion tap priced.

The new Ford Credits were being called the busiest junk bond in Tuesday's session.

A trader called them up three-quarters of a point on the day, at 102½ bid, noting that "it's a benchmark issue, and most of the market was up" in explaining the gain.

However, at another desk, a market source later on saw the bonds essentially unchanged at 101¾ on a round-lot basis. Counting some smaller late trades, though, he saw them up nearly a point on the day.

Ford Credit, the loan-financing arm of Dearborn, Mich.-based automotive giant Ford Motor Co., had priced its drive-by transaction last Monday at 101.8 to yield 5 5/8%, versus the 5 7/8% yield at which the original tranche of bonds had priced.

After pricing, the new bonds quickly shot above 102 bid and moved all the way up to quoted levels as high as 103 by last Thursday, before starting to come down off of those peaks to around current levels.

NII shows gains

Another busy bond in Tuesday's dealings was NII Capital's add-on to its 7 5/8% notes due 2021.

Like the Ford Credit issue, the $700 million NII tranche - upsized from an originally announced $500 million - had been one of the busiest issues in junk last week, registering some $50 million of turnover last Tuesday, the day after the quickly marketed issue priced, but then activity dwindled.

On Tuesday, however, over $15 million of the bonds were seen having traded, putting the credit well up on the most-actives list.

A market source saw the bonds at 98 1/8, up five-eighths point from the 97½ level at which they had finished in light trading on Monday.

But the bonds were still below their issue price.

NII Capital, a unit of Reston, Va.-based NII Holdings Inc., the now-independent former international arm of Sprint Nextel Corp. providing wireless service to markets in Latin America, came to market a week ago with its fully fungible add-on to the existing $750 million of bonds that had priced at par back in March.

The new bonds priced at 98.5 to yield 7.852%, actually wide of the original tranche's 7.625% yield.

While those new bonds initially firmed after pricing, those quick gains faded as last week worse on, dropping them to the kind of levels below 98 at which they ended last week and began this week.

Sprint trades around

Away from the new-deal arena, NII's former parent, Sprint Nextel, was one of the most active issues on the day, with round-lot volume on its 6% notes due 2016 approaching $20 million as the day wound down.

"There were a lot of Sprint trades today," a trader mused, although he saw no real movement in the price of the Overland Park, Kan.-based wireless service provider's paper, pegging the notes around the same 80 bid level at which they had traded on Monday.

There wasn't much actual news out about Sprint itself on Tuesday that could produce that kind of frenzied activity, other than the company, as expected, asking a federal judge to put its lawsuit against the planned $39 billion purchase of Sprint sector peer T-Mobile USA by larger rival AT&T on hold for a month while AT&T decides whether it will in fact go though with the T-Mobile deal in the face of opposition from the federal government.

Washington earlier agreed to put its own lawsuit against the deal on hold in order to give "Ma Bell" a month to figure out whether it wants to do the deal and fight the feds in court, restructure the deal to address federal antitrust concerns raised by both the Federal Communications Commission and the Justice Department, or just forget the whole thing and walk away, paying T-Mobile an estimated $6 billion break-up fee in the process.

Sprint, already a distant No. 3 in the wireless industry, lagging way behind top dog Verizon Wireless and current No. 2 AT&T, fears allowing the latter to get even bigger by gobbling up fourth-place operator T-Mobile.

The trader said that in view of that, "maybe it's just people jockeying for position, [anticipating] whatever's going to happen with T-Mobile."

Another trader saw "huge volume" in both the 6% notes and the company's Sprint Capital Corp. unit's 6.9% notes due 2019. He said, however, that both bonds "were still around 80, right where they had been."

Netflix rises on Verizon talk

Also in the communications and media arena, a trader saw "a little bit of volume" in Netflix's 8½ notes due 2017, which he saw having risen to 103½ bid, up 1½ points on the day.

Another trader saw the bonds hit a high of 103¾ bid, which he said was up 2 points from where the bonds had last traded on Friday.

The Los Gatos, Calif.-based movie-rental company's Nasdaq-traded shares were gyrating around on conflicting reports - all unofficial and none of it coming from either company - quoting different analysts on the possibility that telecommunications giant Verizon might seek to acquire Netflix in order to improve its own video-streaming capabilities for its FiOS customers.

The shares were up solidly in morning trading, but then "suffered a slow descent, starting in the afternoon," the second trader said. The equity closed down $3.15, or 4.19%, at $72.11, on volume of 10.3 million shares - about the usual daily turnover.

He noted that after an analyst being interviewed on CNBC said that Verizon had not talked to Netflix about a possible combination, the takeover talk began to lose its momentum, at least on the equity side of the fence - but the bonds stayed strong and went home higher on the day.

Vulcan backs off

Trader saw Vulcan Materials' several series of bonds, which shot up solidly on Monday on news of a hostile takeover for the company, come down from those peak levels on Tuesday.

The Birmingham, Ala.-based construction materials company's 7½% notes due 2021, which on Monday zoomed 10 points to the 112 level on heavy dealings of over $30 million, were down 2 points on Tuesday, to 110 bid, on greatly reduced volume of about $4 million.

Counting a few smaller late trades, the bonds were off even more on the day, losing almost 4 points to close around 108.

The 6½% notes due 2016, which had jumped some 6½ points on Monday to end at 105 bid, were seen down a deuce on Tuesday at just under the 103 mark. Volume went from Monday's $18 million to about $9 million.

The company's 7% notes due 2018 were seen down by 1½ to 2 points on Tuesday, at 103. Volume, though, actually more than doubled, to about $5 million.

A trader quoted the old market saying of "buy the rumor, sell on the fact" and suggested that investors "should have sold on the news [Monday]," when the bonds were trading at higher level, as Vulcan industry peer Martin Marietta Materials, Inc. said that it had begun an unsolicited takeover try, taking its appeal over the heads of a reluctant Vulcan management and going right to the shareholders.

"They're off a lot," a second trader said of the Vulcan paper.

He suggested "maybe they're fighting the acquisition," although there was no immediate official word from Vulcan. Alternatively, he offered that perhaps investors looked at the deal and found "the combined entity would be highly levered," causing some bondholders to bail out.

Market heads lower

Away from the excitement generated by the Martin Marietta-Vulcan news and the renewed trading in the new Ford Credit issue, a trader said that ""there was a sense of quiet in the market. There was a fair amount of stuff getting done, but nothing stood out."

Statistical measures of junk market performance, which had turned negative on Monday, went back to the kind of mixed status seen at the end of last week.

A trader saw the CDX North American series 17 High Yield index lose 3/8 of a point on Tuesday to end at 91 bid, 91¼ offered, after having lost 13/16 of a point on Monday.

The KDP High Yield Daily index was up by 1 basis point on Tuesday, closing at 71.69, after having fallen by 13 bps Monday. Its yield rose by 3 bps, to 7.75%, after having gone up by 4 bps on Monday.

But the widely followed Merrill Lynch High Yield Master II Index was back in the black after two sessions on the downside, which in turn had broken a seven-session winning streak.

Its 0.065% gain on Tuesday stood in contrast to its 0.075% loss on Monday.

The gain brought the index's year-to-date return back up to 3.288%, from 3.221% on Monday.

Year-to-date returns remain below the recent peak level of 4.28%, recorded on Oct. 28, and are well below its high-water mark for the year of 6.362%, which was set on July 26.

However, they are still well up from the 2011 low-point, a 3.998% deficit recorded Oct. 4.

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