Brightstar, downsized Alliance One price to cap $6.2 billion week; new CIT issue busily traded

By Paul Deckelman and Paul A. Harris

New York, July 26 - Alliance One International, Inc. came to market on Friday with a downsized $735 million issue of eight-year senior secured notes, syndicate sources said.

The tobacco merchant's deal was the largest transaction of a session that also included a $250 million pricing from Brightstar Corp., a provider of services to the wireless industry.

The nearly $1 billion of new bonds capped a week that saw some $6.21 billion of new dollar-denominated, fully junk-rated paper from domestic or industrialized-country borrowers price, according to data compiled by Prospect News - up from the $5.37 billion in 16 tranches that had come to market the previous week ended July 19.

That brought year-to-date issuance to some $185.34 billion in 422 tranches, running about 18.5% ahead of the new-issuance pace seen last year, which turned out to be a record-setting year for the junk market. By this time last year, issuance totaled $156.27 billion in 340 tranches, according to the data.

Traders said that the new Brightstar and Alliance One deals priced too late in the session for any immediate aftermarket activity.

Among the issues that had priced earlier in the week, Gibson Brands, Inc.'s five-year secured notes continued to trade at sharply higher levels than the musical instrument manufacturer's issue had priced at on Wednesday.

But Thursday's tranche of seven-year bonds from oilfield services provider Parker Drilling Co. was proving to be something of a disappointment, traders said.

CIT Group Inc.'s new 10-year notes that had also come to market on Thursday were seen little changed from their pricing level but racked up impressive trading volume.

A trader called the overall market generally firm but also "lackluster."

Statistical indicators of market performance were meantime seen mixed for a second straight session but were down across the board on a week-to-week basis from where they had ended the previous Friday.

Alliance One prices wide

A relatively quiet Friday in the dollar-denominated primary market saw a pair of issuers complete single-tranche deals, raising a combined total of $985 million.

Executions were a mixed bag, with one deal pricing inside of talk and the other pricing well wide of talk.

Alliance One priced a downsized $735 million issue of 9 7/8% eight-year senior secured second-lien notes (Caa1/B-) at 98 to yield 10¼%.

The debt refinancing deal was downsized from $790 million.

The yield printed 87.5 basis points beyond the wide end of yield talk that was set in the 9¼% area.

Deutsche Bank, Credit Suisse, ICBC, ING, Natixis and Standard Chartered Bank managed the sale.

Brightstar at the tight end

Brightstar priced a $250 million issue of 7¼% five-year senior notes (B1/B+) at 98.973 to yield 7½%.

The yield printed at the tight end of the 7½% to 7¾% yield talk.

Brightstar also increased the first call premium to par plus 75% of the coupon from 50%.

J.P. Morgan, Goldman Sachs and Jefferies were the joint bookrunners.

The Miami-based provider of services to the wireless industry plans to use the proceeds to repay ABL debt and for general corporate purposes.

Manutencoop restructures

News volume in the European primary market also thinned on Friday.

Italy's Manutencoop priced a downsized €425 million issue of 8½% seven-year senior secured notes (B2/B+) at 98.713 to yield 8¾%.

The transaction was downsized from €450 million, and a proposed tranche of floating-rate notes was eliminated.

The coupon and yield came on top of talk.

JPMorgan, UniCredit, Banca IMI and Mediobanca were the joint bookrunners. JPMorgan will bill and deliver.

The Bologna, Italy-based facilities management company plans to use the proceeds to repay debt.

WCI Communities starts Monday

The July-August crossover week will get underway with a $1.5 billion active dollar-denominated calendar.

And market sources expect the primary market to remain reasonably busy.

One roadshow announcement surfaced on Friday.

WCI Communities, Inc. plans to start a roadshow on Monday for its $200 million offering of eight-year senior notes (B3/B).

Citigroup, JPMorgan, Credit Suisse and BofA Merrill Lynch are the joint bookrunners.

The Bonita Springs, Fla.-based real estate developer and homebuilder plans to use the proceeds to prepay its senior secured term notes due 2017 at 101 plus accrued and unpaid interest as well as for general corporate purposes, including the acquisition and development of land and home construction.

In another bit of Friday primary market news, LSB Industries, Inc. is expected to price its $400 million offering of eight-year senior notes (Ba3/B+) early in the week ahead, according to an informed source.

The market had previously been watching for the deal to price before Friday's close.

LSB talked the notes in the 6¾% area on Wednesday.

Wells Fargo is the left bookrunner. BofA Merrill Lynch and JPMorgan are the joint bookrunners.

Day's deals are no-shows

In the secondary market, traders said that the day's two new deals - from Brightstar and Mooresville, N.C.-based tobacco merchant Alliance One - priced too late in the session, especially for a summer Friday afternoon, for any kind of aftermarket activity.

Parker Drilling little moved

One of the traders opined that he "thought that Parker Drilling would do much better," quoting the Houston-based energy industry contract drilling company's 7½% notes due 2020 as "just hanging around 100 1/8, in a locked market."

"I thought that they would do much better, truthfully."

The $225 million of notes had priced on Thursday at par.

While one trader quoted the bonds on Thursday as trading above 101 bid, two others located them in a 100½ to 100¾ bid context.

On Friday, a second trader also saw the new deal struggling a little, quoting the bonds down as much as 5/8 point on the day from where he had seen them Thursday, ended at 100 1/8 bid, 100 5/8 offered.

Gibson's virtuoso performance

While there seemed to be little upside in the Parker Drilling notes and some of the other bonds that priced over the last few days - a trader said that they pretty much hovered around where they had been on Thursday, not too far from their respective issue prices, and "nothing ran away" - Wednesday's deal from Nashville-based musical instrument manufacturer Gibson "was really well received."

He quoted those 8 7/8% senior secured notes due 2018 trading in a 102½ to 103 bid context.

On Wednesday, the $225 million of notes had priced at par. Although they stayed close to that issue price initially, they were seen by several traders to have pushed northward during Thursday's dealings to as high as the 103 mark.

CIT deal busily traded

CIT Group's new 5% notes due 2023 were easily the most heavily traded issue in the junk space on Friday, a trader said, quoting the New York-based commercial lender's bonds at around a 99 1/16 bid level. With over $77 million of the notes having changed hands by mid-afternoon, they far outdistanced the next nearest issue.

However, he noted that much of that buying had come from high-grade accounts reaching for yield, buying the notes as a crossover play, rather than from traditional junk bond investors.

CIT had priced its quick-to-market $750 million deal on Thursday at 99.031 to yield 5 1/8%.

The bonds initially dipped below the 99 level when they first hit the aftermarket on Thursday but had come back to around their issue price on Friday.

A second junk trader on Friday saw them trading in a 99 to 99 1/8 bid context.

Overall quiet market

One of the trader characterized Friday's session as "slow - ridiculously so."

While he saw most of the new deals at least holding around their issue prices, with the exception of Gibson's surge, he said there seemed to be some "nervousness" in the overall market as people awaited "the next show to drop" from the Federal Reserve as to the central bank's intentions.

He said many accounts were moving out of bonds of 10-years or longer duration and rotating back to the shorter end of the curve.

Market signs down on week

Statistical junk market performance indicators were mixed for a second straight session on Friday. They had turned mixed on Thursday after having been lower across the board on Wednesday.

But they turned lower all around on the week, after having risen over the previous two weeks.

The Markit Series 20 CDX North American High Yield index rose by 9/32 point to end at 105¾ bid, 105 7/8 offered, its second straight gain after three straight losses. On Thursday, it had gained 3/16 point.

But it was down from the 106 5/16 bid, 106½ offered level at which it had ended the previous week on Friday, July 19.

The KDP High Yield Daily index saw its fourth consecutive loss on Friday, backtracking by 16 bps to close at 73.94, on top of Thursday's 30-bps slide.

Its yield rose by 5 bps to finish the week at 5.95%, its third straight increase. On Thursday, it had risen by 11 bps.

Those results compared unfavorably to the 74.48 index reading and 5.79% yield seen the previous Friday.

And the widely followed Merrill Lynch High Yield Master II index lost 0.068% Friday, its third consecutive downturn. It had fallen by 0.374% on Thursday.

The loss dropped the index's year-to-date return to 3.466% from Thursday's 3.536% level.

The return was down from its peak level for the year so far of 5.835%, recorded on May 9, though up solidly from its 2013 low point of 0.384%, set on June 25.

For the week, the index was down by 0.568%, its first weekly downturn after the two consecutive weeks before that on the upside, including the week ended July 19, when it had risen by 1.281%, the biggest weekly gain of 2013 and one of the largest weekly gains ever. That gain had left the year-to-date cumulative return at 4.057%.

© 2015 Prospect News.
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