Global Crossing upsizes, jumps in trading; new Standard Pacifics up; Claire's climb continues

By Paul Deckelman and Paul A. Harris

New York, Sept. 11 - Global Crossing Ltd. put the finishing touches on a rousing week that saw over $4 billion of new junk paper priced, as the high yield primary market roared back to life after its extended summer vacation. After the Bermuda-based international telecommunications carrier's upsized Friday pricing, the new bonds moved up smartly, with some traders seeing them up more than 5 points when they were freed for trading.

Another new issue seen doing quite well in Friday's dealings was Standard Pacific Corp., which had priced at a deep discount on Thursday, moved up solidly in the aftermarket later that session, and pretty much held those gains on Friday.

The new-deal gains came against the backdrop of a secondary market which was on the upside all week as Junkbondland finally shook off the late-summer lassitude which had held it back for much of the second half of August and the beginning of September, up until Labor Day. The secondary, as measured by numerical indicators such as the CDX HY Series 12 index or the KDP High Yield Daily Index, was once again higher on Friday.

Among the continued gainers was Claire's Stores Inc. whose bonds had firmed smartly on Thursday after the Pembroke Pines, Fla.-based specialty retailer reported a narrower loss for the latest quarter, surprising analysts. The retailer was seen adding to those gains in Friday's dealings.

Another retailer seen gaining on investor perception that the economy may finally be coming out of its near-coma was Camp Hill, Pa.-based drugstore chain operator Rite Aid Corp.

Global Crossing brings $750 million

In Friday's primary market Global Crossing priced an upsized $750 million issue of 12% six-year senior secured notes (B2/B-) at 97.944 to yield 12½%.

The deal was increased from $650 million.

The yield printed at the tight end of the 12½% to 12¾% yield talk, while the issue price came slightly cheap to discount talk of approximately 2 points.

Goldman Sachs & Co. was the left lead bookrunner for the Rule 144A and Regulation S with registration rights offering. Credit Suisse and J.P. Morgan Securities Inc. were joint bookrunners.

$4.16 billion week

With Global Crossing into the mix, the primary market saw just over $4.16 billion of issuance price in eight tranches during the four-session post-Labor Day week, according to Prospect News data.

However the week ahead is apt to be even busier, according to one high-yield syndicate official who professed visibility on at least five deals. Most are likely to come in the form of deals in the $300 million to $500 million range, rather than $1 billion-plus blockbusters, the banker said.

The five are in addition to the pair of junk deals now on the road.

Concho Resources Inc. is marketing $250 million of eight-year notes (B3/BB-), which are expected to price during the week ahead.

J.P. Morgan Securities Inc., Bank of America Merrill Lynch, BNP Paribas Securities Corp. and Wells Fargo Securities are joint bookrunners for the debt refinancing.

Also marketing junk is Mexico's Axtel, SAB de CV, which is attempting to place dollar-denominated 10-year senior unsecured notes (Ba2/BB-/BB).

Bank of America Merrill Lynch and Credit Suisse are joint bookrunners for the debt refinancing and general corporate purposes deal, which some are viewing as primarily an emerging markets corporate play.

The spreads of summer

The S&P speculative-grade composite spread was 823 bps, on Friday, slightly wider from Thursday, according to Diane Vazza, head of global fixed income research for S&P.

However that spread tightened by 267 bps since the beginning of summer, according to information which Vazza provided to Prospect News.

On May 26, 2009, the day the markets re-convened after the Memorial Day weekend in the United States, the speculative-grade composite spread was 1,090 bps.

During the same period the investment-grade composite spread tightened by 140 bps. On Friday that spread was 239 bps, marginally tighter on the day. On May 26 the investment-grade composite spread was 379 bps.

Global Crossing goes up

When the new Global Crossing 12% senior secured notes due 2015 priced - it was upsized to $750 million from the originally anticipated $650 million - the new bonds moved up as soon as they were freed.

A trader saw the notes get as good as 104 bid, before backing slightly off that peak level to end at 103¼ bid, 103½ offered - well up from the 97.944 level at which the bonds had priced earlier in the session to yield 12½%.

Global Crossing, he said, "was well received."

Another trader saw the new bonds trading at 103¼ bid, 103¾ offered.

Standard Pacific holds gains

A trader saw Standard Pacific's 10¾% senior notes due 2015 trade as high as 96½ bid, but they "came in a little bit," to finish at a bid price in the 951/4-95½ area.

A second trader said the new bonds "pretty much stabilized" around a 95-96 context, about there they had finished on Thursday.

Earlier in Thursday's session, the Irvine, Calif.-based homebuilder had priced its $280 million issue of the bonds - upsized from the originally announced $200 million - at 91.997, to yield 12½%. The bonds had then shot up in initial aftermarket dealings to levels above 95, where they went out on Thursday.

Ferrellgas hovers at high level

A trader saw Overland Park, Kan.-based propane distributor Ferrellgas, LP's new issue of 9 1/8% notes due 2017 trading during the morning at 101 bid, 101¼ offered, and then went out at that level.

On Wednesday, the company, along with its Ferrellgas Finance Corp. unit, priced $300 million of those bonds - upsized from the original $250 million - at 98.599, to yield 9 3/8%. Those bonds then firmed by about a point in initial aftermarket dealings to the mid-99 level, and then proceeded to strengthen further on Thursday, moving up to around a 101-101½ context, and pretty much staying there during Friday's trading.

A trader said that the day's activity was largely new-issue driven. "People didn't get great allocations, so they were active in the secondary to buy them. I guess that's why they ran-up so much."

But not all of the new paper was necessarily running up. Traders did not see much trading Friday in other new-deal names which priced earlier in the week, including Wednesday's $900 million offering for Cablevision Systems Corp., the $720 million Tuesday add-on deal for Harrah's Operating Co., Inc., the $600 million of Huntsman International LLC bonds which were sold at mid-week and the pair of $400 million transactions for Plains Exploration & Production Co. and Petroplus Finance 3 Ltd. Those bonds were seen during the week trading only modestly higher than their respective issues prices, and on restrained volume.

A trader said that he "did not see anything major" in the bonds of companies other than Global Crossing or Standard Pacific.

At another shop, a trader said that "generally, the market was still somewhat muted. I believe there's a big calendar coming next week" - assuming that prospective issuer Warner Chilcott plc drops by with its $1.4 billion offering of senior unsecured notes - "so I think that was most of the focus, scaring [investors ] off from the new issues."

Market indicators extend gains

Back among the established issues not connected to new-deal issuance, a trader saw the CDX Series 12 index up ¾ point at 91¾ bid, 92¼ offered, continuing the momentum seen on Wednesday when the index had risen a full point. Friday's advance was the fifth consecutive gain for the index. Friday's index was up tremendously - more than 4 full points - from the 87¼ bid, 87¾ offered at which it had closed the previous week, ended Friday, Sept. 4.

The KDP High Yield Daily Index jumped by 48 basis points on Friday to 67.48, while its yield fell below the psychologically potent 9% marker to end at 8.93%, down 11 bps on the day. The index continued the definitively positive trend seen on Thursday when it had rose by 12 bps, while its yield had tightened, also by 12 bps. The KDP index had finished the previous Friday at 66.39 with a yield of 9.26.

In the broader market, advancing issues led decliners for a seventh straight session on Friday, holding a roughly seven-to-four advantage.

Junk market activity, reflected in dollar-volume totals, slid by nearly 32% from Thursday's busy level.

A trader said that the overall tone in the junk bond market was "pretty strong, I would say, in the face of some decent new issuance."

Another trader estimated that overall junk was up by ¼ to ½ point. "There was not tremendous volume - but certainly for a Friday it was OK, although it kind of tailed off late in the afternoon."

Aside from the summer Friday effect,, overall activity in the financial markets broadly was somewhat muted Friday due in part to the activities earlier in the day in Lower Manhattan - right on the doorstep of the city's Financial District - commemorating the eighth anniversary of the 9/11 terrorist attacks.

Claire's continues its climb

Among specific issues, a trader said that Claire's Stores Inc.'s 9 5/8% notes due 2015 "continued to firm up a little bit" to bid levels in the lower 50s Friday, versus around 44 on Thursday post-numbers, although at some other desks, those bonds had been seen Thursday as high as 48ish, well up from previous levels around 41 bid, 42 offered.

However, he said that he "didn't see a lot of that" higher-level trading.

Another trader also saw the Claire's notes "a little bit higher," with the 9¼% notes due 2015 at 61 bid, 63, which he called up 2 points. The 10½% notes due 2017 went out at 51 bid, 52 offered, also up 2 points, while the 9 5/8s finished at 51 bid, 52 as well.

At another desk, a market source pegged the 101/2s at just a hair under 50 bid, but called the paper up nearly 4 points on the day.

In Thursday's action, following the release of the retailer's results for the fiscal second quarter ended Aug. 1, Claire's 9 5/8s were seen up about 7 points on the session, around the 48 level, on very active volume, while its 101/2s gained 6 points to end at 46, and the 91/4s were seen up 7 points at 60 bid.

For the quarter, the company reported a net loss of $3.7 million, versus a net loss of $16.9 million in the second quarter of 2008.

And, net sales for the quarter were $314.2 million, down 12.7% from $360 million in the comparable period last year.

Claire's also reported adjusted EBITDA for the second quarter of $50.5 million, compared to $58.1 million in the prior year.

While the results showed that the company was still being challenged by the overall economic downturn, they were believed to have exceeded analysts' even more gloomy expectations.

Rite Aid bonds rally

Also in the retailing sphere, Rite Aid Corp.'s 9½% notes due 2017 were seen up by 3½ points on the session to 78½ bid. A market source said the Number-Three U.S. drugstore chain operator's issue was one of the busiest junk credits of the day, with over $25 million having changed hands just by mid-afternoon alone. It was estimated to be going home at 78¼ bid, up more than 3 points.

Rite Aid's 8 5/8% notes due 2015 were seen by another market source at 78½ bid, up some 5 points on the session.

There was no fresh news out on the company, which announced earlier in the week that it will release its second-quarter results on Sept. 24.

Freescale flies again

A trader saw Freescale Semiconductor Inc.'s 8 7/8% notes due 2014 at 77½ bid, 78½ offered, while its 9 1/8% notes due 2014 at 68 bid, 69 offered. Its 10 1/8% 2016 notes were at 64½ bid, 65 offered.

At another desk, a trader saw the 8 7/8s "up the most," quoting them at 76½ bid, 77½ offered, which he called a 2 point gain. He saw its 10 1/8% notes due 2016 gaining a point to 66 bid, 67 offered, while its 9 1/8% notes due 2014 ended at 67½ bid, 68½ offered, "also a point" better. Those gains came after the bonds had risen 4 points or 5 points on Thursday.

While some people in the market have attributed the rise to investor optimism about the high-tech sector after the Austin, Tex.-based computer chip manufacturer was reported to be hiring back some employees, a sign of increased orders, he said that "I can't say it's so much fundamental as it is short covering, lack of supply, a couple of guys who really want to get involved, there are no bonds around. You get one print and the next thing you know, you're up 2 points. The majors aren't taking a lot of the risks they do usually, so bonds move up quick - really quick."

He also saw Freescale sector peer NXP BV's 7 7/8% notes due 2014 better by 2 points at 76 bid, 77 offered, and its 9½% notes due 2015 up by 3 points at 60 bid, 62 offered. The Dutch semiconductor maker's bonds had risen between 3 points and 5 points on Thursday, in sympathy with the rise in the Freescale paper.

DirecTV activity continues

A trader saw more activity but "little movement" in the bonds of DirecTV Holdings LLC, which has been one of the busiest names in the high-yield area this week, although much of the trading may have involved high grade investors, since the El Segundo, Calif.-based satellite TV broadcaster's bonds are split-rated at Ba2/BBB-/BBB- .

He saw the 6 3/8% notes due 2015 at 103¼ bid, 104¼ offered, while its 7 5/8% notes due 2016 were at 107 bid, 108 offered, both largely unchanged.

A market source who saw the latter bonds continuing to hover just below 108, said that over $30 million had traded at mid-afternoon - presumably with both junk accounts and high-grade players involved - making it one of the day's Most Active issues.

There was no fresh news seen out on the company that might explain the recent activity in the bonds.

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