Upsized Chrysler two-part leads $4.42 billion session; Regency, Netflix, AMC price; NII jumps

By Paul Deckelman and Paul A. Harris

New York, Feb. 4 - The high-yield market saw its busiest new-issuance session of the year so far on Tuesday, as some $4.42 billion of new paper priced, led by an upsized $2.755 billion two-part deal from Chrysler Group LLC, with each tranche an add-on to an existing issue from the Auburn Hills, Mich.-based carmaker, now a division of Italy's Fiat SpA.

While Chrysler's big deal is not the biggest junk bond issue to price so far in the new year - that honor would go to the $4 billion two-part deal that hospital operator Community Health Systems, Inc. brought to market on Jan. 15 - the day's tally of new paper from Chrysler plus Regency Energy Partners LP, Netflix Inc. and AMC Entertainment Inc. was the heaviest volume of fully junk-rated, dollar-denominated bonds from domestic or industrialized-country issuers seen so far this year, shading the $4.365 billion that Community Health and two other issuers did back on Jan. 15, according to data compiled by Prospect News. In fact, it was the heaviest issuance in Junkbondland since last Oct. 8, when Deutsche Telekom AG successfully did a $5.6 billion five-part secondary offering of bonds of its T-Mobile USA Inc. unit, and the most one-day purely new issuance seen since last Sept. 24, when some $6.04 billion of new paper priced, the data indicate.

Besides Chrysler, oil and gas partnership Regency priced an upsized $900 million of eight-year notes, entertainment content provider Netflix did a $400 million issue of 10-year paper, and theater operator AMC came to market with an upsized $375 million of eight-year subordinated notes - all three of those deals quickly shopped drive-by transactions. AMC's new notes were seen by traders slightly below their issue price, while the other deals came too late in the session for any kind of immediate aftermarket action.

In the secondary market away from the new deals, Latin American wireless service provider NII Holdings Inc.'s bonds were seen up multiple points in heavy trading, in line with a surge in the company's shares.

Statistical market performance measures turned mixed after having been lower across the board over the previous two sessions.

Chrysler upsizes two-part deal

The high-yield primary market demonstrated resilience in the face of cash outflows and turbulence in the global capital markets on Tuesday, as four issuers brought a combined total of five tranches, raising $4.42 billion.

Executions were crisp.

One tranche came rich to the price talk.

Two tranches priced at the tight end of yield talk.

The other two came on top of talk.

Three of the five came as drive-by deals.

Four of the five tranches were upsized.

Chrysler Group priced an upsized $2,755,000,000 two-part senior secured second-lien notes transaction in the form of two add-ons to existing issues (B1/B).

A $1,375,000,000 add-on to the company's 8% notes due June 15, 2019 priced at 108¼ to yield 4.543%. The reoffer price came richer than price talk in the 108 area.

In addition, Chrysler priced a $1.38 billion add-on to its 8¼% notes due June 15, 2021 at 110½ to yield 5.126%. The reoffer price came on top of price talk.

BofA Merrill Lynch, J.P. Morgan Securities LLC, Barclays, Citigroup Global Markets Inc., Goldman Sachs & Co., Morgan Stanley & Co. LLC and UBS Investment Bank were the joint bookrunners.

Proceeds will be used to repay all amounts outstanding under the company's unsecured note issued on June 10, 2009 to VEBA Trust.

Upsized Regency, at a discount

Regency Energy Finance Corp., a wholly owned subsidiary of Regency Energy Partners LP, priced an upsized $900 million issue of non-callable 5 7/8% senior notes (B1/BB) in a drive-by at 98.423 to yield 6 1/8%.

The deal was upsized from $600 million.

The yield printed at the tight end of yield talk in the 6¼% area.

BofA Merrill Lynch, Citigroup, Credit Suisse Securities (USA) LLC, JPMorgan, Natixis, RBC Capital Markets, RBS Securities Inc., SunTrust Robinson Humphrey, Wells Fargo Securities, LLC, PNC Capital Markets LLC, Scotia Capital and UBS Investment Bank are the joint bookrunners for the public offer.

The Dallas-based oil and gas master limited partnership plans to use the proceeds to repay debt outstanding under its revolver and for general partnership purposes.

Netflix 10-year bullet

In other drive-by action, Netflix priced a $400 million issue of non-callable 10-year senior notes (Ba3/BB-) at par to yield 5¾% on Tuesday, according to a syndicate source.

The yield printed on top of yield talk.

Morgan Stanley, Goldman Sachs and JPMorgan were the joint bookrunners.

The Scotts Valley, Calif.-based provider of on-demand internet streaming media plans to use the proceeds for general corporate purposes.

AMC Entertainment increases

AMC Entertainment priced an upsized $375 million issue of eight-year senior subordinated notes (B3/B-) at par to yield 5 7/8% in a Tuesday drive-by.

The deal was upsized from $325 million.

The yield printed at the tight end of yield talk in the 6% area.

Citigroup Global Markets, BofA Merrill Lynch, Barclays, Credit Suisse Securities and HSBC Securities were the joint bookrunners.

The Kansas City, Mo.-based movie exhibitor plans to use the proceeds to retire all of its 8¾% senior notes due 2019.

Talking the deals

Looking ahead to the middle part of the week, Boise, Idaho-based semiconductor manufacturer Micron Technology, Inc. talked its $500 million of eight-year senior notes (/BB-/) with a yield in the 6% area.

Books close at 10 a.m. ET on Wednesday, except for West Coast accounts that have meetings, and the deal is set to price thereafter.

Morgan Stanley, Credit Suisse Securities and Goldman Sachs are the joint bookrunners.

Lennar Corp. set price talk for its planned $250 million issue of senior notes (Ba3/BB-/BB+) due 2026 in the area of 4¼%.

The issue is expected to price on Wednesday.

Joint bookrunners are Citigroup Global Markets, BMO Capital Markets Corp., BofA Merrill Lynch, Deutsche Bank Securities Inc., JPMorgan, UBS Securities LLC and Wells Fargo Securities.

Proceeds will be used for general corporate purposes.

And Lansing Trade Group talked its $175 million offering of seven-year senior notes (B3/B+) to yield 8¾% to 9%.

Order books close at 3 p.m. ET on Thursday.

Macquarie Capital has the books.

American Greetings PIK toggle

Century Intermediate Holding Co. 2, the parent of American Greetings Corp., plans to participate in a New York group meeting and an investor call, which are both set to get underway at 12:30 p.m. ET on Wednesday.

Under discussion will be Century's $275 million offering of five-year senior PIK toggle notes (expected ratings B3/B-).

BofA Merrill Lynch, Deutsche Bank Securities, PNC Capital Markets, RBS Securities and Wells Fargo Securities are the joint bookrunners.

BBVA, Mitsubishi UFJ, Scotia Capital and US Bancorp are the co-managers.

Proceeds, together with cash on hand and/or a draw on the revolver of up to $50 million, will be used to fund the redemption of Koch Investment's preferred equity interest in Century Intermediate Holding and to help fund the construction of American Greetings' new world headquarters.

American Greetings is a Cleveland-based greeting card company.

New AMC just below issue

AMC Entertainment's 5 7/8% senior subordinated notes due 2022 was the first of the day's issues to price and the only one that came to market in time for any secondary dealings, traders said.

One of them quoted the company's new deal trading between 99¾ and par bid, with "a bunch of them" trading at 99 7/8 bid, just below the par issue price.

A second trader pegged the bonds in a 99 7/8 to 100 1/8 context, observing that at his shop, "we traded a lot of the AMCs, a boatload," and noting that there were "a tremendous amount of flippers in that deal."

Chrysler tug of war?

Before the Chrysler deal priced, a trader said that based on the conversations he had been having with potential investors, "I'm sure that everybody and their mother is going to have to own it" - which, he said, would set up an interesting dilemma for when the bonds would come to market.

"It's in the index, so everybody has kind of got to own it, right?" he asked, rhetorically. Given the intense interest in the deal, "I think the company kind of has a lot of the accounts right where they want them," in terms of getting them to buy the deal at the kind of tight levels the company would want.

At the same time, though, given the weakness seen in the junk market over the past few sessions, "with the market having sold off, maybe the accounts have the company where they want them, too. So I think it's kind of like an even play."

That having been said, though, he predicted that "if you don't get your allocation in the new issue, if you're going for some big size, if not, you've got to trade it. So I think that thing could do well, no matter what."

"I know it's a big deal - and all of the big boys will be doing it," he concluded.

A lackluster session

A trader said that people were mostly sitting around, waiting for the other new deals to price, and apart from that, "it was kind of a quiet day. Maybe it's because of the weather and the storm" - the New York area was supposed to get socked with several more inches of snow later Tuesday, on top of the more than eight inches that fell on Monday - "or maybe because it's the beginning of the month, but there was not much activity," including dealings in the issues that had priced last week.

A second trader, though, opined that on Monday, "you would have thought the world was ending and everybody was running away from bidding on anything," even as the equity markets were all sliding, with the major indexes all down more than 2%.

In contrast, on Tuesday, when stocks rebounded across the board, although less than the magnitude of Monday's loss, he said that "it's all like 'I can't get enough of this stuff.'"

A trader at another desk meantime saw Seven Generations Energy Ltd.'s 8¼% notes due 2020 unchanged on the session, at 107 bid, 108 offered. The Calgary, Alta.-based company priced a $300 million add-on to its existing notes on Friday at 107 bid to yield 6.652%. The deal came to market too late in the session for any initial dealings on Friday, but the bonds started trading on Monday.

He saw both halves of Ardagh Group's two-part offering a little better on Tuesday, after those notes had traded down by around 5/8 point on Monday. He saw its 6¼% notes due 2019 up ¾ point at 101 bid, 101 1/8 offered and its 6¾% notes due 2021 at 100¼ bid, 100¾ offered, up ½ point. Through its Ardagh Packaging Finance plc and Ardagh Holdings USA Inc. funding subsidiaries, the Dublin-based glass and metal beverage, food and consumer products packaging company priced $830 million of bonds in a two-part offering last Wednesday: $415 million each of the 61/4s and 63/4s, both of which came at par.

But while the Ardagh bonds were improving, he also saw Westmoreland Coal Co.'s 10¾% senior secured notes due 2018 off by 1/8 point Tuesday at 108 3/8 bid, 108 7/8 offered, although that was still well up from the 106 7/8 level at which the Englewood, Colo.-based thermal coal producer and power generation company priced its $425 million of the notes as an add-on to its existing paper last Wednesday, yielding 6.975%, after the deal was upsized from an originally announced $400 million.

And he saw Radio One Inc.'s 9¼% senior subordinated notes due 2020 trading at 102 bid, 102¾ offered, calling that a 5/8 point drop, on top of Monday's ¼ point dip. The Silver Spring, Md.-based broadcaster and diversified media company priced $335 million of the notes at par on Wednesday, and they were seen having firmed smartly in aftermarket dealings later Wednesday and on Thursday.

NII trades higher

Away from the new-deal realm, a market source saw heavy trading in NII Holdings' bonds , with its 10% notes due 2016 having jumped some 3¼ points to close at 67 bid, round-lot volume of over $28 million, topping the junk market's Most Actives list.

The company's 8 7/8% notes due 2019 were seen going home at 50½ bid, up about 1 point from Monday's close and up 4 points from its most recent previous round-lot level, at 46½ around the middle of last week. Volume was over $17 million.

The bonds rose in tandem with a surge in the company's New York Stock Exchange-traded shares, which jumped by 34 cents, or 11.48%, to close at $3.35. Volume of 11.4 million shares was almost twice the norm.

There was no fresh news out about the company, but on investment-oriented internet forums, there was no shortage of speculation about what might have been pushing the stock up and carrying the bonds along for the ride. Some posters suggested it was a matter of short-covering, since there was 30.7% short interest at the end of last month.

Others cited technical factors, while still others suggested the Reston, Va.-based company, which sells Nextel-branded wireless service in Mexico, Brazil, Argentina and Chile, is a good candidate to be acquired. One of the names mentioned as a potential buyer was Sprint Corp., which used to provide Nextel service to customers in the United States before dropping that platform and migrating them over to its own network.

A junk trader meantime cited statements attributed to management at Spanish telecommunications operator Telefonica SA - which has extensive Latin American operations and which will let NII use its 3G networks in Mexico and Brazil to reach its customers - indicating that it might be looking to make acquisitions among smaller players in the Mexican wireless business, possibly including NII.

Market indicators turn mixed

Statistical junk-market performance indicators turned mixed on Tuesday after having been lower across the board during the two previous sessions.

The Markit Series 21 CDX North American High Yield index rose by 11/32 point on Tuesday to close at 106 1/8 bid, 106¼ offered, after having fallen over the previous two sessions, including Monday, when it declined by 9/16 point.

The KDP High Yield Daily index, though, posted its third consecutive loss, retreating by 6 basis points to close at 74.34. That followed Monday's 8 bps downturn.

Its yield increased by 2 bps to 5.63%, its third straight rise, on top of Monday's 3 bp gain.

And the widely followed Merrill Lynch High Yield Master II index eased by 0.115%, its third straight decline. On Monday, it had edged downward by 0.006%.

The latest loss dropped its year-to-date return to 0.618%, down from Monday's 0.733% and down still further from the 1.185% it had reached on Jan. 22, its high point of the year so far.

The index's yield to worst rose to 5.735% - its new peak level for 2014 so far - from 5.685%, its previous zenith, reached on Monday. Those levels remained well above the low yield for the year, 5.386% on Jan.22.

Its spread to worst widened out to 444 bps over comparable Treasuries - the new wide point for the year - from Monday's 441 bps, the previous wide spread. Those levels remained well above the tight spread for the year, 398 bps, on Jan. 22.

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