CIT soars as bondholders ride to the rescue; SBA, Sappi slate deals; Prospect Medical sets talk

By Paul Deckelman and Paul A. Harris

New York, July 20 - With time running out and CIT Group Inc. facing mounting liquidity pressures, the troubled New York-based lender's bondholders stepped in on Monday where the federal government apparently feared to tread, agreeing to provide the company with some $3 billion of funding, buying CIT time while it attempt to restructure its finances out of court - including a newly announced tender offer for one of its most actively traded bonds. Those bonds, and much of the rest of the company's capital structure, were up solidly -- some issues by more than 10 points.

CIT was clearly the dominant name once again in Junkbondland, for the eighth consecutive session, dating back to a week ago this past Thursday, although its activity level was a little reduced from the tumultuous trading seen on Thursday and Friday

Elsewhere, the recently priced Virgin Media Finance plc bonds continued to trade well above the level at which the New York-based U.K. broadband provider's add-on issue had priced last Thursday.

In the new-deal arena, SBA Telecommunications, Inc. announced plans for a $500 million two-part bond issue. Later in the day market participants heard price talk on the issue.

Price talk was also heard on Prospect Medical Holdings Inc.'s upcoming issue of five-year senior secured notes.

Two other deals joined the forward calendar - for South African paper maker Sappi Ltd., and for Global Aviation Holdings, Inc. Sappi was heard readying a dual-currency offering of senior secured notes for pricing later in the week, while Global Aviation was taking its prospective deal on the road.

Market indicators on top again

Overall in the market, the CDX Series 12 High Yield index - which had been up ¼ point on Friday, pushed up another full point on Monday, a trader said, to 85¾ bid, 86¼ offered.

Cash bonds traded higher by ½ to 1 point on Monday, according to a high-yield syndicate official.

The KDP High Yield Daily Index, which had jumped 37 basis points on Friday, advanced by another 29 bps on Monday to end at 63.55, while its yield narrowed by 7 bps, to 10.33%.

In the broader market, advancing issues - which had jumped out ahead of the declining issues on Friday, maintained a seven-to-four edge over them on Monday.

Overall market activity, measured by dollar-volume totals, dropped 35% from Friday's level.

Apart from CIT, a trader said, "it was really sort of boring."

A trader said that at his shop, "I don't think we were even doing much other than just watching CIT. Everybody was waiting to see what was going to come out."

"I think the combination of it being the summer, and a Monday and the fact that CITs were pretty active, it was definitely the biggest name around today."

CIT, yet another trader agreed, "was definitely overshadowing the rest of the market."

That having been said, he characterized junk as having "a very firm overall tone." He cited investor relief that the potentially very messy and ugly CIT situation appeared to have been resolved, as well as "the comfort provided by the stock market's move up" - the bellwether Dow Jones Industrial Average rose 104.21 points, or 1.19% on Monday, to end at 8,848.15. The broader Standard & Poor's 500 and Nasdaq composite indexes were each up more than a full percentage point.

These factors, he said, resulted in "more confidence in the [junk] market. There was very little selling. We were seeing better buyers around."

CIT soars on bondholder deal

A trader said that "like a broken record," the big story of the day was, once again, CIT Group, its eighth consecutive session as the dominant trading name. He quipped "you know the drill - just pick out the numbers from last week. The bonds have been everywhere."

Another trader said that he imagines that "for a few days [more] probably, it's going to be the big story."

The bonds jumped in busy dealings on the news that the troubled company's bondholders had agreed to proved the company with $3 billion of new financing to stave off the liquidity crunch which the company had been facing (see related story elsewhere in this issue), although the $99 million volume on its busiest issue, the floating-rate notes slated to come due on Aug. 17, was only about two-thirds of the turnover in that issue seen on Friday. Volume was also down on other CIT issues, although they still mostly dominated the various Most Actives lists. The company also announced a tender offer for its $1 billion of the August floaters.

A trader saw the August floaters as one again the most active issue - and in fact, actively trading well above the 82.5 level at which the company has proposed taking those notes out via its tender offer.

He saw the bonds going out at 87½ bid, up from 70½ at the close on Friday, with $99 million traded.

He also saw its 6.10% bonds due 2067 as the second-most active CIT issue, with $29 million traded. He saw the price about doubling to 14½ bid from 7 3/8 previously.

And he saw its 4¼% notes due 2010 at 74½ bid, well up from Friday's close at 60, on $20 million traded.

The first trader saw the company's 6 7/8% notes slated to come due on Nov. 1 as having opened at "70 and change," then pushing up to the 80s, and finally going out around the mid-70s, "so they're still up 10 or 13 points from Friday."

There was, he said, "a lot of volume trading in the name."

There was also "pretty active trading" in some of the company's floating-rate notes, particularly the August floaters. He saw the bonds at 86-88, after starting the day at 83-95, and at one point pushing as high as 90 before coming off that peak level. "There was just a lot of activity," he said.

The second trader saw the August floaters as the most active, "for obvious reasons - they're going to be impacted the most by any sort of major decision" about the company's finances.

He saw the bonds around 871/2-88½ at the end of the day, which he said was up from the lower 70s on Friday.

"Obviously, they were all over the place on Friday," he said, "anywhere between 60 and 72, and then today, obviously, on the news that they are going to get the funding from the creditors, they were in the high 80s - 87-88. So they're up about 16 points."

Another active issue, he said, was the 6.10s. Those bonds, he said, were trading around "141/2, 15, 16" - versus 7-8 on Friday. He estimated that they had closed around a 14-15 context on Monday, up around 6 points.

The third most active issue, he said, was CIT's 41/4s, which had moved up to around a 721/2-74½ context on Monday, up from the high 50s on Friday, "up around 17 points, it looks like."

He also saw "a few trades" in the 5.20% notes due 2010. He saw those bonds go from a range between the high 50s and the low 60s at the close on Friday to around 65-66 on Monday.

CIT's NYSE-traded shares meantime soared by 78.57%, or 55 cents, in Monday's dealings, closing at $1.25. At one point, the shares had advanced as far as $1.44, or more than double Friday's close of $0.70, before coming off that peak to close where they did. Volume of 351 million shares was more than eight times the usual turnover.

Busy issues trading up

Away from CIT, a trader said, the busiest issue was the perennial busiest bond, Freeport-McMoRan Copper & Gold Inc.'s ubiquitous 8 3/8% notes due 2017.

He saw some $29 million of the Phoenix-based metals mining company's bonds change hands, rising slightly to 104 bid from 103¾ on Friday.

Another gainer on decent volume was Federal Way, Wash.-based forest products producer Weyerhaeuser Co., whose 6¾% notes due 2012 firmed to 102 bid from 1003/4, with over $15 million of the bonds traded.

Rite Aid rallies

A trader saw Rite Aid Corp.'s bonds "a little active" on the day, quoting the Camp Hill, Pa.-based drugstore chain operator's 9 3/8% notes due 2015 at 65 bid, 66 offered, up from 64 bid, 65 offered, calling the gain "only a point, but on a decent amount of trading."

He also saw Rite Aid's 9½% notes due 2017 "kind of busy, too" in rising to 66 bid, "up only a point, but active,"

He said that he had seen no fresh news out that might explain the rise.

Virgin holds gains

A trader saw the new Virgin Media Finance 9½% notes due 2016 trading at par at the opening, moving up to 100½ bid, 101½ offered. "It wasn't incredibly active, but everything, obviously, is better with the market."

It priced the $600 million add-on to its '16s - upsized from the original $300 million - on Thursday at 98.662 to yield 9¾%

The company's existing bonds were seen having firmed to 101¼ bid, up a point from Friday's level, on $10 million traded.

Strong demand for SBA $500 million

Although no deals were priced, there was new issue market news out of Europe as well as the United States.

SBA Telecommunications plans to price $500 million of senior notes (Ba2/expected BB) Tuesday morning.

The deal is playing to strong demand, according to a market source.

The wireless towers company plans to sell seven-year notes, which it has talked at the 8¼% area, and 10-year notes, which it has talked at the 8½% area.

Both tranches are expected to come at discounts of 1.5 to 2.5 points.

Tranche sizes remain to be determined. However S&P, in assigning its BB rating to the notes, specified tranche sizes of $250 million apiece.

Barclays Capital is the left lead bookrunner. Deutsche Bank Securities, JP Morgan, Citigroup, RBS Securities, TD Securities and Wells Fargo Securities are joint bookrunners.

Proceeds will be used to repay the 2005 CMBS certificates issued by a subsidiary, to repurchase prior to maturity or repay at maturity SBA's outstanding 0.375% senior convertible notes due 2010 and repay a portion of its Optasite credit facility.

Concurrently with the closing of the offering, the company intends to use cash on hand to repay the remainder of the Optasite credit facility, and repay SBA's senior credit facility.

Sappi to bring $500 million equivalent

Meanwhile Sappi, issuing through PE Paper Escrow GmbH, will hold a Tuesday investor call for its $500 million equivalent offering of five-year senior secured notes (expected ratings Ba2/BB).

The issue will come in tranches of dollar- and euro-denominated notes.

The deal is expected to price this week.

JP Morgan, Calyon Securities, Citigroup, HSBC and RBS Securities are joint bookrunners.

The Johannesburg, South Africa, coated paper producer will also put in place a new €650 million credit facility.

Proceeds will be used to pay off near-term debt maturities.

The issuing entity is an Austria-based special purpose vehicle.

Global Aviation to come via Jefferies

Global Aviation Holdings will start a roadshow on Wednesday for its $165 million offering of senior secured first-lien notes due 2013 (expected Ba3/confirmed BB-).

The roadshow is scheduled to conclude on July 31.

Jefferies & Co. is leading the debt refinancing deal from the Peachtree City, Ga.-based passenger and cargo air carrier, which is also in the market with a $64.1 million second-lien loan.

Prospect Medical sets talk

News surfaced Monday on one deal that has been traveling on an investor roadshow.

Prospect Medical Holdings set price talk for its $160 million offering of five-year senior secured first-lien notes (B3/B) at the 14¼% area.

The notes are expected to price with approximately 4 points of original issue discount.

Books close at 2 p.m. ET on Tuesday. Pricing is expected Tuesday or Wednesday.

RBC Capital Markets is left bookrunner for the Los Angeles-based company's debt refinancing deal.

© 2015 Prospect News.
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