Upsized TransDigm, Puget deals price, along with Bresnan, AMC; market firms with equities

By Paul Deckelman and Paul A. Harris

New York, Dec. 1 - The junk bond market rounded the final turn and headed into the home stretch on Wednesday, as the last month of 2010 opened up with a brisk and broad-based rally. The market seemed to shake off the bad karma and holiday-induced lethargy of the last few sessions, trading solidly higher all day in tandem with a strong surge in equities, according to traders.

The recently sedate primary market roared back to life as more than $2.8 billion of new bonds priced, the most since Nov. 18's nearly $4 billion tally. Junkbondland also saw its first mega-deal since that time, as TransDigm Inc. priced a radically upsized $1.55 billion of new eight-year bonds.

Washington State utility operator Puget Energy Inc. also came in with an upsized offering, pricing $450 million of 10-year notes.

Media names were a key component of the day's new-deal activity.

BBHI Acquisition LLC/Bresnan Broadband Holdings, LLC appeared with a $250 million offering of eight-year notes, part of the financing for cable operator Bresnan's pending purchase by larger rival Cablevision Systems Corp. - a deal which had loomed on the forward calendar since the acquisition was first announced back in June.

In contrast to that long-anticipated transaction, AMC Entertainment Holding's $600 million offering of subordinated notes was a quickly-shopped surprise feature from the Kansas City, Mo.-based movie theater operator.

NAI Entertainment Holdings LLC (National Amusements, Inc.) - incidentally, the parent company of AMC rival National Amusements Theatres, as well as broadcasting powerhouses CBS Corp. and Viacom, Inc. - was meanwhile heard by high yield syndicate sources to be getting ready to price its $390 million offering of secured notes on Thursday, as price talk on the deal circulated in Wednesday's market.

Traders saw the new TransDigm and Puget bonds trading pretty much around their respective issue prices, while Bresnan moved up in the aftermarket and AMC appeared too late for any trading.

Away from the new issues, the junk market generally had a firm tone to it, with traders crediting the influence of a big equities rally. A big winner was Realogy Corp., whose bonds shot up smartly on news of the Parsippany, N.J.-based real estate company's exchange offer for several issues of outstanding bonds.

TransDigm massively upsizes

Following the thin issuance volumes seen on Monday and Tuesday, the primary market resumed its pre-Thanksgiving pace on Wednesday as four issuers, each bringing a single dollar-denominated tranche of junk, priced a combined face amount of $2.85 billion.

TransDigm priced a massively upsized $1.55 billion issue of eight-year senior subordinated notes (B3/B-) at par to yield 7¾% on Wednesday, according to an informed source.

The yield printed 12.5 bps beyond the wide point of the 7½% area price talk. The size was increased from $780 million.

UBS Investment Bank was the left lead bookrunner for the quick-to-market deal. Credit Suisse Securities, Barclays Capital Inc. and Morgan Stanley & Co. Inc. were the joint bookrunners.

Proceeds will be used to help fund the acquisition of McKechnie Aerospace Holdings, Inc., to fund a tender offer for TransDigm's 7¾% senior subordinated notes due 2014 and to repay bank debt, with any excess cash to be added to the balance sheet.

AMC sells $600 million

Meanwhile, AMC Entertainment priced a $600 million issue of 10-year senior subordinated notes (Caa1/CCC+) at par to yield 9¾%, at the wide end of price talk.

Goldman Sachs & Co. was the left bookrunner for the quick-to-market issue. J.P. Morgan Securities LLC, Barclays Capital, Deutsche Bank Securities, Citigroup and Credit Suisse were the joint bookrunners.

The Kansas City, Mo.-based motion picture exhibition company will use the proceeds to fund a tender offer for its 11% senior subordinated notes due 2016 and Marquee Holdings 12% notes due 2014.

The deal's triple-C ratings on either side of the divide notwithstanding, AMC is an ultra-familiar name to the high-yield investment community, a market source said.

Also, the deal had a substantial following among investors who were being taken out of the old bonds, and were eager to roll into the new 9¾% paper.

Puget Energy upsizes

Puget Energy priced an upsized $450 million issue of 10-year senior notes (Ba2/BB+) at 99.997 to yield 6½%.

The deal, which was upsized from $350 million, and was run off of the investment-grade desk, priced within guidance, according to one source.

Bank of America Merrill Lynch, Barclays Capital Inc. and J.P. Morgan Securities LLC were the joint bookrunners.

The Bellevue, Wash.-based provider of electric and natural gas service will use the proceeds to repay bank debt.

Bresnan at the tight end

Finally, Bresnan Broadband Holdings, LLC, priced a $250 million issue of eight-year senior notes (B3/B+) at par to yield 8%.

The yield printed at the tight end of the 8 1/8% area price talk.

Bank of America Merrill Lynch, Citigroup Global Markets Inc., Barclays Capital Inc., Credit Suisse and UBS Investment Bank were the joint bookrunners.

The issuing entity is BBHI Acquisition LLC, an indirect wholly owned subsidiary of Cablevision Systems Corp., which is to be merged with and into Bresnan.

Proceeds, together with proceeds from a credit facility and an equity contribution from a subsidiary of Cablevision, will be used to finance the merger of BBHI Acquisition and Bresnan and to provide working capital for Bresnan, a Purchase, N.Y.-based broadband telecommunications company.

National Amusements sets talk

Looking ahead to the Thursday session, National Amusements talked its $390 million offering of seven-year senior secured notes (B1/BB) with an 8¼% to 8½% yield.

Barclays Capital Inc. has the books for the debt refinancing deal.

Pilgrim's Pride roadshow

Elsewhere, Pilgrim's Pride Corp. will begin a roadshow on Thursday in New York City for a $350 million offering of eight-year senior notes.

Barclays Capital, BMO Nesbitt Burns, Jefferies & Co., Morgan Stanley and Rabo Securities are the joint bookrunners for the debt refinancing.

Durr add-on

Finally, from Europe, Germany's Dürr AG plans to begin building a book for a €75 million add-on to its 7¼% senior notes due September 2015 (existing ratings B2/B) on Monday.

The book is expected to remain open through the week ahead.

The notes are being offered at 104.90.

Close Brothers Seydler Bank AG is leading the deal, which is in the market as a private placement.

The original €150 million issue priced at par in September 2010.

TransDigm trades near issue

When TransDigm's new eight-year bonds were freed for secondary dealings, a trader declared that the Cleveland-based aircraft components company's new issue "couldn't get out of its own way" after pricing earlier at par. "They're basically wrapped around issue," he said.

He noted that the company "massively" upsized the deal, roughly doubling it from the originally announced $780 million, and suggested that the upsizing helped blunt aftermarket demand for the new paper

A second trader also saw the upsized new mega-deal trading right around the par mark. "It didn't even flinch" on the huge upsizing to $1.55 billion, he said.

Yet another trader pegged the new bonds at 100 1/8 bid, 100 3/8 offered, but dismissed that slight rise as "no great shakes."

...as does Puget Energy

A trader saw Bellevue, Wash.-based utility operator Puget Energy's new 10-year bonds get as good as 100¾ bid, 101¼ offered in early aftermarket trading.

However, a second trader queried later on said there was "not much" change in them versus their 99.997 issue price, quoting the notes at 99¾ bid, 100¼ offered.

Bresnan breaks out

A trader said that Bresnan Broadband Holdings' new eight-year bonds were going home having risen to 100¾ bid, 101¼ offered, up from the Purchase, N.Y.-based cable operator's par pricing level.

The day's other new issue, AMC Entertainment's 10-year subordinated notes, priced too late in the session for any late trading around, market participants said.

Tuesday add-ons not seen

A trader noted that pretty much nobody in the market saw the two add-on deals which had priced during Tuesday's sessions - Pepper Pike, Ohio-based coal operator Murray Energy Corp.'s $150 million of 10¼% notes due 2015, which priced at 103, and Miami-based tobacco holding company Vector Group Ltd.'s $90 million tranche of 11% senior secured notes due 2015. That latter deal, upsized from the originally announced $75 million, also priced at 103.

"The add-ons go back to the guys who didn't get their allocations" when the original issue of bonds priced, a trader said. "They say 'we can fill you now.' Those are easy trades."

He noted that the Vector offering - a drive-by deal - "was kind of done on the sly. We heard about it, it priced, and then it was gone.

"Not that we had any [accounts] who would have bought it - but it just seemed like it came and went."

Secondary indicators snap back

Away from the new-deal realm, a trader saw the CDX North American Series 15 HY index jump by 1 3/8 points on Wednesday to end at 99¾ bid, par offered, after having eased by 3/16 point on Tuesday.

The KDP High Yield Daily index meantime shot up by 19 basis points on Wednesday to close at 73.39, after having declined by 14 bps on Tuesday. Its yield rose by came in by 5 bps to 7.58%, after having risen by 3 bps on Tuesday

The Merrill Lynch High Yield Master II index gained 0.172% on Wednesday after having lost 0.225% on Tuesday. That left its year-to-date return at 13.392%, up from Tuesday's 13.197%, though still down from the 2010 peak level of 15.602% recorded on Nov. 9.

Advancing issues moved back ahead of decliners on Wednesday after two straight days on the downside. They led by a better than seven-to-six margin on Wednesday, after having trailed by a nearly eight-to-five ratio the previous two days.

Overall activity, represented by dollar-volume levels, rose by 11% on Wednesday, after having increased by 47% on Tuesday from the previous day's relatively quiet levels.

"It was a good day," a trader exclaimed. "The market was very firm today."

"It was a very big day, said a second trader who noted the gains in the CDX index.

The junk market, said yet another trader, "just opened up higher, and we never looked back." He opined that "all of this talk about the U.S. supporting the European rescue," by endorsing the idea of an extra commitment of money from the International Monetary Fund to its EU Stability Fund, and a favorable employment number "just gave equities a lift, and helped our market."

Boosted by hopes that the larger IMF commitment would settle nervous financial markets as well as the report from payrolls provider ADP Employer Services saying that small businesses added the largest amount of workers in three years last month - handily beating Wall Street's forecasts - pushed the bellwether Dow Jones Industrial Average up by 249.76 points, or 2.3% - the Dow's biggest gain in three months - to a close at 11,255.78.

With stocks leading the way and junk bonds coming along for the ride, "[Tuesday's] offers were today's bids. The market, generally speaking, was up a point," the trader said.

He asked - rhetorically - "were people grabbing for paper? No, I don't think so." But he acknowledged that Tuesday "felt pretty heavy in the morning, people were hitting some bids, and there was some decent selling, as accounts came in selling and lightening up," although later Tuesday, the pendulum swung back and junk seemed largely unchanged.

Then on Wednesday morning, he said, "following equities, it just seemed to be better bid."

Realogy rallies on exchange offer news

Among specific names, a trader said that Realogy "had a nice day," seeing the Parsippany, N.J.-based real estate company's bonds up by 5 points on the session on news of its offer to give holders of its outstanding 10½% senior notes due 2014, 11.00%/11¾% senior toggle notes due 2014 and 12 3/8% senior subordinated notes due 2015 new debt in exchange for their existing bonds.

For instance, the 101/2s finished at 93½ bid, up from prior levels in the upper 80s.

A market source at another shop also saw a 93½ bid closing price - but said that represented a fully 7½ point leap up from prior trading levels, on brisk demand.

Baldor hangs on to gains

A trader said that his shop was "a better buyer" for Baldor Electric Co.'s 8 5/8% notes due 2017, which had firmed anywhere from 3 to 6 points on Tuesday, depending on whom you spoke to, to go home trading around 111 bid, powered by the news that the Fort Smith, Ark.-based maker of industrial electric motors and power transmission equipment had agreed to be acquired by larger European rival ABB Ltd. for $63.50 per share, or $3.1 billion total, with ABB additionally assuming Baldor's $1.1 billion of net debt.

He said that the paper remained at the 111-112 area at which it had traded on Tuesday.

"They clearly held their gains, there continues to be some buy interest in it, but it was no different than it was" on Tuesday, when the bonds traded for the first time in around a week.

But at another desk, the bonds were being traded around ¾ point above Tuesday's finish, to 111¾ bid.

Boyd bounces back

A trader saw Boyd Gaming Corp.'s recently priced issue of 9 1/8% notes due 2018 having "snapped back up" by 1½ points to 96 bid - although that was still well below the par level at which the Las Vegas-based company, an operator of casinos catering to local players rather than high-rolling tourists, had priced its $500 million offering back on Oct. 28.

"That one had been beaten up pretty good," he said, falling into the low-to-mid 90s in the weeks since its pricing, "but it had a nice bounce today."

However, he said, "on the flipside," Mohegan Tribal Gaming Authority's bonds were down 1 to 2 points after the Uncasville, Conn.-based operator of Connecticut's big Mohegan Sun casino resort was downgraded on Tuesday by Moody's Investors Service, which dropped most of its ratings by two notches, lowering its corporate family and probability-of-default ratings to Caa2 from B3, its secured notes to B3 from B1, its senior unsecured notes to Caa1 from B2 and its senior subordinated notes due 2015 Caa3 from Caa2, a one-notch decline.

"There's some pressure on that one," he said, quoting its 6 7/8% notes due 2015 at 67 bid. Its 8% notes due 2012 lost nearly a point to end at 87½ bid.

Auto names cruise higher

A trader said that Motors Liquidation Co.'s 8 3/8% bonds due 2033 - the benchmark bonds issued by the "old" General Motors Corp. - rose 1¼ points to end at 32¼ bid, 33¼ offered, while GM domestic arch-rival Ford Motor Co.'s 7.45% bonds due 2031 gained 1 5/8 points to finish at 108 5/8 bid, 109 5/8 offered.

He did not know whether the two car companies' bonds were lifted on the news of November auto-sales gains versus year-earlier levels - 20% for Ford and 12.2% for GM - or if they just rose along with a generally buoyant junk bond market.

When GM reorganized last year, it separated the profitable car production operations which became the "new" GM from the debt, other liabilities and unprofitable operations and useless or unwanted assets which stayed at the "old" company, which was renamed Motors Liquidation.

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