New Clear Channel bonds up as old ease; CIT, AIG active; primary stilled as Formation delayed

By Paul Deckelman and Paul A. Harris

New York, Dec. 21 - With the big primary calendar now emptied out as a result of last week's busy activity, the high-yield market began the traditional end-of-year winding down on Monday, as volume fell off and market participants started counting down to the 31/2-day Christmas holiday break at the end of the week.

Clear Channel Worldwide Holdings Inc.'s big new two-part mega-deal, which priced on Friday and then moved higher in the aftermarket, though finishing off its initial highs, was headed back upward on Monday - about the only major activity seen in Junkbondland, traders said.

While the new issue was adding to Friday's gains, the San Antonio, Tex.-based broadcaster and outdoor advertising company's existing bonds - which had firmed solidly over a number of sessions last week and the week before - were seen having come in by a point or son.

Elsewhere, traders saw some downside activity in the bonds of American International Group Inc. unit International Lease Finance Corp., likely spurred by the aircraft leasing company's Friday ratings downgrade by Moody's Investors Service.

There also seemed to be a continued flurry of activity in the new CIT Group Inc. paper, which made its debut amid considerable market interest a little more than a week ago after the commercial lender emerged from bankruptcy.

Another former bankrupt, General Motors Corp., was in the spotlight with the news that it had hired a new chief financial officer - who was also being talked about as a potential candidate for the automaker's top spot, vacated by the recent abrupt departure of CEO Fritz Henderson.

News that consumer healthcare product maker Chattem Inc. is to be acquired by French pharmaceutical maker Sanofi-aventis in a $1.9 billion deal had exactly zero impact on its remaining outstanding junk bonds, traders said.

In the primary market, already essentially done for the year in the estimation of most people after last week's $8 billion-plus pricing parade, Canadian metals mining and refining company Formation Metals Inc.'s planned offering of units mixing bonds with shares was heard by participants to have been floated off till January. Combined with Friday's disclosure in a regulatory filing that Momentive Performance Materials Inc. has terminated its planned $500 million note sale, that leaves just one deal on the now shrunken year-end calendar - a $100 million offering from Birch Communications, Inc. The Atlanta-based telecommunications carrier's secured notes deal could come to market this week - or just as easily may not.

Clear Channel about the only game in town

A trader said that "basically, the only thing that has been moving around, that we're seeing some activity in," is Clear Channel Worldwide Holdings' new $2.5 billion two-part offering of 9¼% senior notes due 2017, both tranches of which priced at par on Friday after the much-awaited deal had been massively upsized from its originally announced $750 million size.

The two tranches into which the deal was divided have identical terms, other than use of the proceeds. The Texas media company on Friday had downsized the deal's series A tranche to $500 million from the originally shopped $600 million, with the proceeds to go for general corporate purposes, including payment of dividends to shareholders, including parent company Clear Channel Communications Inc. Meanwhile, it radically boosted what originally had been a $150 million series B tranche to be used to pay off an intercompany note, to a whopping $2 billion, after the company had indicated on Thursday that it might use deal proceeds to pay term loan debt at par as well. In aftermarket trading on Friday, the A tranche had been quoted trading at 101 bid, 102 offered, while the B tranche - after initially pushing as high as 103½ on the break - eased from that peak to finish the session at 102 bid 103 offered.

On Monday, the trader said, "first thing this morning," the B tranche had firmed to 102¾ bid, and then moved up above the 103 mark, getting as good as 103 3/8 before going out at 103¼ bid, 103½ offered.

He noted that the deal was producing some decent activity, even on about "the slowest day of the year" so far, because "it's a large, liquid issue," in addition to the fact that Monday was "the first real day that it's been freed up."

He meantime quoted the A tranche as high as 102 1/8 on Monday, after having opened the morning at 101¾ bid, 102 offered, "so they're up slightly from the opening level.

"With the A's being a much smaller issue, and the B's being larger, more liquid issue, it's going to have more activity, just because you have more players," he added.

A second trader quoted the A tranche trading in a 102-103 context, while the B bonds bounced around between 103 and 104.

"CCU had been up and down on Friday," yet another trader said, noting the gyrations from its highs above 103 and its closing price Friday around 102, while on Monday, he said, "they opened up bid," and closed around 103¼ bid, 103¾ offered. "Away from that," he added, "it was pretty quiet."

Existing Clear Channels trade off

A trader said that Clear Channel's existing bonds - which had firmed solidly last week in active dealings on the news that the company was bringing its big, new, eventually sharply upsized deal - were in retreat on Monday.

"Guys are selling the existing bonds to buy the new ones," he said, quoting the established bonds "down about a point or so."

Clear Channel's 10¾% cash-pay notes due 2016, which last week had reached at high as the 80-81 mark, were seen on Monday at 78½ bid, while its 11% PIK toggle notes due 2016, which had firmed into the mid-70s, around 74-75, were seen at 73½ bid.

Clear Channel's 5½% notes due 2014, recently around the 66 level, finished Monday just below 65.

Recent Geokinetics little moved

Looking at other recently priced deals, a trader quoted Geokinetics Holdings Inc.'s new 9¾% senior secured notes due 2014 at 98 bid, 98½ offered. - not too far from the 98.093 level at which the Houston-based provider of seismic data services to the energy industry had priced its $300 million offering Friday, upsized from $275 million originally, to yield 10¼%.

He meantime said that he had not seen any trace of Friday's other new issue, from another Houston-based energy industry company, well driller P2021 Rig Co., a unit of Vantage Drilling Co. That $135 million issue of 13½% senior secured notes due 2013 had priced at 97, to yield 14.655%

Market indicators resume advance

Among statistical measures of market performance not related to the new-deal market, a trader saw the CDX Series 13 index up by ¾ point on Monday to 99 bid, 98 3/8 offered, matching its Friday advance.

The KDP High Yield Daily Index meanwhile was up by 4 basis points on Monday at 70.85, after having been unchanged Friday at the lower levels to which it had fallen on Thursday. Its yield narrowed by 2 bps to 8.16%, after having held steady the previous session.

In the broader market, advancing issues again led decliners on Monday, for a 15h straight session, holding a not quite six-to-five advantage.

Overall market activity, as measured by dollar-volume, slid 31% from Friday's already slowed pace.

"Volumes across the board," a trader said are pretty much half of what they usually are."

The market, he said, was "kind of limping into the close today. We've got [Tuesday] and Wednesday. Then that's about it."

"Is this the new normal," a trader asked, perhaps rhetorically, "or is it going to pick up again after the first of the year?"

Apart from the activity in the old and new bonds of Clear Channel, the trader said that he had seen "maybe one or two other things trade," but added that they were "nothing out of the ordinary, or anything exciting to write home about."

GM in drive after CFO news

The trader did say that General Motors' paper "seems to be trading up on the announcement that they got a new CFO from Microsoft." He quoted its 7.40% bonds due 2025 as trading up at 24 7/8, and said that the company's paper "had a much better feel this morning."

He said that GM s benchmark 8 3/8% bonds due 2033 were "pretty much unchanged" at 26 to 261/2, on only $3 million traded - continuing the low volume trend seen last Friday, when only $1 million of the long bonds traded, at 26¼ bid.

The auto giant announced that it had hired Chris Liddell, heretofore the CFO at software king Microsoft, to come to Detroit and take over its finances as GM continues its efforts to re-invent itself as a leaner, meaner and more financially savvy company now that it shed considerable debt as part of its bankruptcy reorganization earlier this year.

Liddell has a reputation as a cost-cutter, and some analysts have opined that the CFO job could function like an audition to see how Liddell might fit the larger job of CEO, vacated recently by longtime GM veteran Fritz Henderson as part of a shakeup in the company's management by GM's chairman, Ed Whitacre.

Another trader saw the GM '33s up ½ point at 26 bid, 27 offered, while seeing GM domestic arch-rival Ford Motor Co.'s 7.45% bonds due 2031 at 87 bid, 89 offered, unchanged on the day.

CIT still popular

Bonds of another survivor of the bankruptcy process, CIT Group, meantime continue to draw investor interest. A market source noted that its new 7% notes due 2013 were up nearly a point in fairly busy trading at the 91 level, while its 7% notes due 2014 also gained about a point to 89. Its 7% notes due 2015 were hovering around 87 bid, while its 7% notes due 2016 and 2017 were perhaps slightly better at 85.

There were no quotes seen on CIT's other series of five bonds, the 101/4s, also due from 2013 to 2017, spaced tightly at levels slightly above par.

The bonds were issued when the big New York-based commercial lender emerged from Chapter 11 on Dec. 10.

Downgrade downs AIG unit's debt

Also among the financials, a trader said "a lot of the trading" that there was in the market Monday, apart from Clear Channel, "was in AIG paper." He said that the bonds of the big New York-based insurance company and such subsidiaries as International Lease Finance Corp. - such as the latter's 4 7/8% notes due 2010 -- "were trading all over the place. Some of these AIG bonds are off several points."

He suggested that "it looks like maybe a year-end blowout," but otherwise was unaware on any specific factor that was a catalyst for the action, although another source pointed to Friday's downgrade of those bonds to junk status by Moody's Investors Service. The ratings service cut ILFC's bond rating to B1 from Baa3 previously, citing its expectations of reduced support for ILFC by parent AIG.

A market source saw those 4 7/8% bonds - which on Friday had finished around 98 bid in size trading, with a few smaller trades late in the day pushing them near the par level - gradually pushed down during the day before going home at 95, on busy volume of over $30 million, mostly in several big round-lot trades.

Another market source quoted IFLC's 5.65% notes due 2014 down as much as 6 points on the day in brisk trading, finishing at 77 bid.

No chatter on Chattem

A trader said that there was "nothing" going on in Chattem's 7% notes due 2014 on the news that the Chattanooga, Tenn.-based maker of over-the-counter healthcare products maker - known for brands like Gold Bond medicated powder and Selsun Blue medicated dandruff shampoo, is to be bought by French drugmaker Sanofi-aventis in a $1.9 billion deal which will see the buyer assume Chattem's debt of some $400 million.

The trader noted that with just $91 million of the 7% bonds still outstanding, out of the originally issued $125 million, Chattem's paper pretty much trades by appointment. The 7s last traded, he said, more than a week ago, on Dec. 11, at 1023/4, on small volume.

The last round-lot-sized trade, he said, took place nearly a month ago at 102 \1/4.

Terex trades up on divestiture deal

Elsewhere, Terex Corp.'s 7 3/8% notes due 2014 were seen by a market source to have gained 1½ points, up to the 101 mark, in relatively active trading, while its 8% notes due 2017 firmed to 96¾ bid.

That followed the news that the Westport Conn.-based maker of construction, industrial and mining equipment had had agreed to a deal to sell its mining equipment business to Bucyrus International Inc. for $1.3 billion, allowing Terex to exit a business where it faced large capital requirements to build up a service network for the equipment it had sold, and meanwhile focus more on its core operations.

Terex's chairman and chief executive officer, Ronald M. DeFeo, said in a statement announcing the deal and reiterated on a follow-up conference call that "the attractive cash offer provides us excellent financial flexibility, as our cash balance will substantially equal our outstanding indebtedness.

"The approximately $1 billion of after-tax proceeds will allow Terex to invest in its current, high return-on-capital businesses, or to look to add new, well positioned niche manufacturers with strong market presence to the company's portfolio."

Terex executives noted on their conference call that they are obligated under the terms of their bank credit agreement and bond indentures to either plow the money back into the business to make it grow, or repay debt.

Terex's New York Stock Exchange-traded shares meantime jumped $1.73, or 9.01%, on Monday, to end at $20.94. Volume of 11.6 million shares was more than three times the norm.

Primary in hibernation

The high-yield primary market began what is expected to be a two week-long winter's nap, on Monday.

Having already churned out record issuance, players are catching a breather ahead of what is anticipated to be a very busy January.

Birch possible before year-end

At least one deal could price before the end of the year, sources say.

Birch Communications, Inc. continues to be in the market with its $100 million offering of six-year senior secured notes (B3/CCC+), according to an informed source.

Proceeds from the deal, which is being led by Knight Libertas Capital Group, will be used to repay outstanding debt, to purchase outstanding warrants for its common stock and for general corporate purposes, including future acquisitions.

Formation Metals for January

However one deal that was previously announced as this week's business now moves back to January.

Formation Metals Inc. moved the sale of its 102,041 notes and shares units into the New Year, according to Leianne Emery, the company's business improvement director.

"We had anticipated closing the financing the week of Dec. 21, but have had to adjust plans slightly to accommodate a very large institutional order coming in early January," Emery wrote in a Monday email to Prospect News.

"We also cannot guarantee that each investor's requested position will be filled, so earlier notification of interest is at least preferred," she added.

The units will be comprised of $100 million of five-year senior secured notes and C$60 million of common shares.

The notes will bear interest at 10% for the first two years, after which the rate steps up to 12%.

The units are offered at 98.00.

Jennings Capital Inc. is the lead agent. Blackmont Capital Inc. and Acumen Capital Finance Partners Ltd. are agents.

© 2015 Prospect News.
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