Upsized Icahn megadeal, Ally drive by, downsized Patheon price; Icahn, Ally trade near issue

By Paul Deckelman and Paul A. Harris

New York, Jan. 22 - After a short hiatus for Monday's market holiday and Tuesday's bad weather, high-yield pricing activity resumed on Wednesday, with syndicate sources seeing a pair of fully junk-rated, dollar-denominated new paper, as well as a big split-rated issue that attracted some attention from both junk and high-grade investors.

The latter transaction - holding company Icahn Enterprises LP's eight-year deal - was upsized to $1.35 billion. Traders saw the bonds trading at, or a little below, their issue price when they were freed for aftermarket dealings.

Automotive lender and online banking concern Ally Financial, Inc. brought a quickly shopped $750 million issue of five-year senior guaranteed notes to market, pricing them at a discount to par. After firming initially, the paper came down from those peak levels to trade a little above the issue price in very active trading that also attracted investment-grade players, probably more so than junk investors.

A purely junk deal was JLL/Delta Dutch Newco BV's downsized $450 million eight-year offering, the proceeds of which will be used in the acquisition of pharmaceuticals company Patheon Inc. Those new bonds gained about a point when they began to trade around.

Market sources saw continued heavy trading in the recently priced 10-year notes from a financing unit of Chilean cable and internet company VTR Barda Ancha (Chile) SA, being spun off by international media giant Liberty Global plc.

Away from the new deals, Caesars Entertainment Corp.'s 2018 notes were one of the busiest issues in Junkbondland on Wednesday, participants said. However, their price levels were not much changed, and no fresh news out on the gaming giant that might explain the activity surfaced.

Elsewhere, it was another busy day on the upside for NII Holdings Inc.'s bonds, which have recently been rising in brisk activity, helped by news announcements coming from the company, which sells Nextel wireless service in Latin America.

Statistical measures of junk-market performance remained mixed for a fifth consecutive session.

Ally Financial drive-by

The primary market saw two issuers bring single-tranche junk-rated, dollar-denominated deals, raising $1.19 billion on Thursday.

Ally Financial priced $750 million of 3½% five-year senior guaranteed notes (B1/BB/BB) at 99.095 to yield 3.7%.

The deal, which was priced on the high-grade desk, came in line with the 3¾% yield talk.

Barclays, Citigroup, Morgan Stanley and Deutsche Bank were the joint bookrunners.

Patheon oversubscribed

Patheon priced a downsized $450 million issue of eight-year senior notes (expected ratings Caa2/CCC+) at par to yield 7½%.

The deal was downsized from $500 million, and the yield printed at the tight end of yield talk in the 7 5/8% area.

The book was six-times oversubscribed, and allocations were tough, a factor not helped by the downsizing, according to an investor whose allocation came to 20% of the order.

J.P. Morgan, UBS, Jefferies, KeyBanc and Morgan Stanley were the joint bookrunners for the merger deal.

Steady inflows, no calendar

Every day of 2014 thus far - 14 consecutive sessions - have seen solid positive flows, the investor said.

That's a blessing and a curse, the source added.

The inflows are a curse due to the difficulty of staying invested.

"That's why there were $34 billion of orders for CHS," said the investor, referring to the Community Health Systems, Inc. $4 billion two-part deal that priced on Jan. 15.

Earlier in the day, a debt capital markets banker conceded that the new issue market has been somewhat slow, but professed the expectation that deal flow should remain steady.

Icahn upsizes split-rated deal

In the crossover market Icahn Enterprises LP and Icahn Enterprises Finance Corp. priced an upsized $1.35 billion issue of eight-year senior notes (expected Ba3/confirmed BBB-) at par to yield 5 7/8%.

The deal, via Jefferies, was upsized from $1 billion.

The yield printed at the tight end of the 5 7/8% to 6% yield talk.

The notes were seen as low as 99 3/8 bid, 99 7/8 offered, according to a buyside source who added that later the new Icahn 5 7/8% notes due 2022 firmed to 99¾ bid, par ¼ offered.

Autodistribution talk is 6 ¾%

The news flow from the European high-yield primary market was thin on Wednesday.

France-based Autodistribution Group talked its €240 million offering of five-year senior secured notes (B3//) to yield in the 6¾% area.

The deal is expected to price on Thursday.

JPMorgan has the books for the debt refinancing and acquisition funding deal.

Intrepid Aviation starts Thursday

Intrepid Aviation Management, LLC plans to begin a roadshow on Thursday for a $250 million offering of five-year senior notes.

The roadshow wraps up Friday, and the deal is expected to price on Friday or Monday.

BofA Merrill Lynch and Jefferies are the joint bookrunners.

The Stamford Conn.-base commercial aircraft leasing company plans to use the proceeds for general corporate purposes including the purchase of aircraft.

Icahn trades off

In the secondary market, a trader said that Icahn Enterprises' new 5 7/8% notes due 2022 got as low as 99¼ bid, 99¾ offered when they were freed for aftermarket dealings - down from the par level at which the New York-based diversified holding company had priced its upsized issue earlier Wednesday.

After that, he said, the bonds firmed off those lows to finish around 99¾ bid, 100¼ offered.

A second trader characterized the new Icahn deal as "a little bit of a disaster," with the bonds trading down to a 99½ to 99¾ context before rebounding "a little bit" to 99¾ to par.

A third trader saw the bonds straddling their par issue price, at 99 7/8 bid, 100 1/8 offered.

Existing Icahns little changed

A trader said that the company's 3½% notes due 2017 were at 101½ bid, 101 7/8 offered on Wednesday, unchanged on the day, while its 4 7/8% notes due 2019 were at 101½ bid, 101¾ offered, also unchanged.

Those two issues had both priced at par exactly two weeks ago, on Jan. 8, as Icahn did a massive $3.65 billion three-part split-rated offering, upsizing it from an originally announced $3.5 billion. That deal consisted off $1.175 billion of the 3½% 2017 notes, which priced at par after having been downsized from $1.225 billion; $1.275 billion of the 4 7/8% 2019 notes, which also priced at par after having been upsized from $1.225 billion; and a $1.2 billion add-on to the issuer's existing 6% senior notes due Aug. 1, 2020, which priced at 102 to yield 5.574% after having been upsized from $1.05 billion.

Icahn's 6% notes due 2020 were trading a little above 107 bid, unchanged on the day, with over $15 million having changed hands, putting the issue among the most active credits.

Ally off its highs

A trader said that Ally Financial's new 3½% senior guaranteed notes due 2019 opened as high as 101 bid when the Detroit-based automotive lender and online banking company's new issue was freed for secondary market action - but then he saw those bonds rapidly come off that initial peak level and sink down to around 99¼ bid, just a little above the 99.095 level at which the bonds had priced.

A second trader also saw the new bonds in a 99¼ -to-99½ context, while a third pegged them at 99 1/8 to 99 3/8.

Another market source noted that over $33 million of the new notes traded, topping the junk Most Actives list. He saw the bonds going home at 99 5/16 bid.

One of the traders meantime noted that there had been some junk market interest in both the split-rated Icahn issue and in the Ally deal, which priced off the investment-grade desks despite its nominally high junk rating.

But he acknowledged that despite that interest, "most of the trading in Icahn and Ally was from I-G accounts and hedge funds," rather than from traditional junk bond investors.

Patheon pops a little

Wednesday's other issue - the 7½% notes due 2022 that JLL/Delta Dutch Newco brought as part of the financing for the pending buyout of Durham, N.C.-based pharmaceuticals developer Patheon Inc. - was seen having firmed a little after pricing at par.

One trader saw them break at 101½ bid, but then come back down to 100¾ bid, 101¼ offered.

A second trader, though, saw them last at 101 1/8 bid, 101 5/8 offered, versus a 100½ to 101 context earlier.

A third trader had the bonds at 101 bid, 101½ offered.

VTR bonds stay strong

One of the most actively traded among the recent new deals has been the 6 7/8% senior secured notes due 2024 from VTR Finance BV, a funding unit of Liberty Global's soon-to-be spun-off Chilean cable and internet provider, VTR. The company priced $1.4 billion of those notes at par on Friday, and on Tuesday, over $39 million were seen having traded: $25 million with accounts buying the bonds under Rule 144A and $14 million with accounts purchasing the paper under Regulation S.

A market source saw both of those baskets of bonds trading at 1021/4, although he called that down a little from where they had been on Monday.

Another trader saw them trade as low as 101¾ to 1021/4, but said that later in the day, they were at 102¼ to 102 3/8.

Loan market attracts buyers

A trader said that most of the day's activity was centered around the new deals - "away from that, it was pretty much hunt-and-peck," he said.

He said that appetite for the new bonds was robust, and some investors were having trouble getting their hands on bonds.

"So a lot of guys who were looking for new issues," but who could not find them, "went into the loan market instead for paper.

"The loan market," he declared, "was on fire."

Caesars seen active

A trader said that the Caesars 10% notes due 2018 - really, the legacy bonds issued by predecessor corporate entity Harrah's Entertainment Inc. - were actively traded.

"I did see a lot of that stuff cross," he acknowledged. "It looks like they're up at the top of the [Most Actives] charts, with close to $30 million traded, and, counting all of the smaller odd-lot trades as well as the round-lot transaction, "probably way over that."

He saw the bonds ending around 51¾ bid, after most of the day's trades took place between 51 and 52. He characterized those levels "about unchanged over the last few days -unchanged, but on a lot of volume."

He saw no fresh news out on the Las Vegas-based gaming giant that might explain the activity in the bonds, adding that with the company's other paper not trading particularly actively on Wednesday, "the 10%, for whatever reason, was the hot hand today."

A second trader agreed on the lack of any particular news that might be driving trading in the 10s, which he called "pretty active" in a 51½ to 51¾ context, although he noted that "for the most part, that's where it has been," or "maybe, a smidge better."

The issue "is always pretty active."

NII stays busy

A trader said that NIHD Holdings, Inc.'s bonds were once again active on Wednesday, just as the Reston, Va.-based telecommunications company's paper had been on Tuesday, and over several of last week's sessions.

He said that its NII Capital Corp. 10% notes due 2016 were "pretty active" in a 65 to 66 context, commenting that the notes "had dropped down into the low 50s for a while, at the end of last year, but in January, it came to life and went from the mid-50s to where it is now."

The trader added that on Wednesday, "it was pretty much unchanged" from where it had been on Tuesday, trading at bid levels between 65½ and 661/2. He estimated volume at between $12 million and $15 million.

He said that the company's 7 5/8% notes were pretty much unchanged on the day, trading between 45¼ and 46¼ bid, on volume of between $9 million and $10 million.

"NIHD continues to trade," a second market source asserted, quoting the 7 5/8s about unchanged from where they had been, around "46-ish." Meanwhile, he saw the 10s between 66 and 67 during the afternoon, "so call it up a couple of points."

He noted recent news announcements coming from the company, which sells Nextel wireless service, including its popular push-to-talk function, in Mexico and several other Latin American countries.

On Monday, it said that its PRIP Push-to-Talk app would be available on iPhones in the United States, where push-to-talk, formerly offered by Sprint Corp., which bought Nextel several years ago, was discontinued when Sprint abolished the legacy Nextel platform and migrated its former customers over to its own operating system. NII, meanwhile, already has a version of the app out that is compatible with the popular Android wireless phones.

That was the third significant announcement in the past 10 days from NII. On Friday, it declared that it had entered into an agreement with Apple Inc. that will allow NII to offer the Apple iPhones 5S and 5C to its Nextel customers in Brazil as early as the end of this month.

And last Monday, NII said it had inked a pact with Spanish telecom company Telefonica SA that will let it use Telefonica's existing 3G networks in Mexico and Brazil, saving itself the necessity of a costly infrastructure build-out to reach remote customers.

The trader said the new app news, "coupled with the Telfonica news from a week ago, is what has been driving the bonds."

At another desk, the NII 10s were quoted at 65¾ bid, which was called unchanged on the day, with over $10 million having changed hands.

Market indicators stay mixed

Statistical junk-market performance indicators were mixed for a fifth consecutive day on Wednesday.

The Markit Series 21 CDX North American High Yield index lost 1/16 point for a second day in a row on Wednesday, its fifth straight loss, to close at 107¾ bid, 107 7/8 offered.

The KDP High Yield Daily index, though, saw its second consecutive gain after two straight losses before that, as it rose by 4 basis points to end at 75.01; it had also gained 4 bps on Tuesday.

Its yield came in by 2 bps, to finish at 5.39%, its second straight session on the decline. The yield also fell by 2 bps on Tuesday.

And the widely followed Merrill Lynch High Yield Master II index's amazing winning streak rolled on for a 23rd consecutive session on Wednesday; that surge dates back to Dec. 19. It was up by 0.l028%, on top of Tuesday's 0.04% advance.

That lifted its year-to-date return to 1.185% from Tuesday's 1.157%. Wednesday's finish was its 14th straight new peak level for 2014.

The index's yield to worst came in to 5.386% on Wednesday, its ninth consecutive new low level for the year. On Tuesday, it had fallen to 5.395%.

Its spread to worst tightened to 398 bps over comparable Treasuries, a third straight new tight level for the year so far. That eclipsed the previous tight level of 402 bps over, which was set on Tuesday.

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