Hugely upsized Clear Channel prices, jumps in trading; $8 billion week lifts year to record

By Paul Deckelman and Paul A. Harris

New York, Dec. 18 - After a week of intense market expectation which included heavy upside trading in its existing bonds, Clear Channel Worldwide Holdings Inc. finally priced a massively upsized $2.5 billion offering of eight-year notes. The Texas media company's new bonds proved to be a hit in the secondary market, trading up smartly on the break.

The huge deal was a fitting conclusion to one of Junkbondland's busiest weeks of the year, which saw $8.285 billion and €270 million of new paper price in the U.S. junk bond market. Those pricings pushed 2009 issuance into record territory, market sources said.

Clear Channel's deal brought the full-year total up to just a hair below $160 billion ($159.945 billion, according to Prospect News data).

That clears the former record of $157.3 billion, set in 2007.

However market participants were saying that Friday's nearly $3 billion session was likely the primary's last hurrah for the year; new-deal activity is expected to go into deep freeze for the remainder of the year, with just two holiday-shortened weeks upcoming, which will see many junk marketeers out of the office on vacation.

Besides the Clear Channel deal, high-yield syndicate sources also reported pricings from a pair of energy-oriented companies - well-driller P2021 Rig. Co., a unit of Vantage Drilling Co., and seismic data services provider Geokinetics Holdings, Inc., the latter an upsized deal. When the new Vantage bonds were freed for secondary activity, they were seen having moved up by several points, but Geokinetics stayed around their issue price - extending the trend seen much of the week with other new deals, such as Thursday's offering from GXS Worldwide Inc. and Wednesday's deal from McJunkin Red Man Corp.

Away from the new-deal arena, secondary activity was seen generally firmer. One leader was surf and swimwear maker Quiksilver Inc., which posted a wider fourth-quarter loss than a year ago - but which still beat Wall Street expectations.

On the downside, Visteon Corp.'s bonds fell badly as the bankrupt automotive parts maker filed its reorganization plan, which gives control of virtually the whole company to its secured bank debt holders, leaving the unsecured creditors, like bondholders, on the outside looking in.

Clear Channel: People were saving

The upsized Clear Channel $2.5 billion transaction was comprised of two tranches, both of which were comprised of eight-year senior notes (B1/B) which priced at par to yield 9¼%.

The offering was increased from an initial $750 million.

The deal was comprised of a $500 million tranche of series A notes. Proceeds from this piece will be used for general corporate purposes, including payment of dividends to shareholders, among them Clear Channel Communications.

The deal also included a $2 billion series B tranche. Those proceeds will be used to repay an intercompany note. Clear Channel Communications advises that it will apply the proceeds to repay credit facilities.

Goldman, Sachs & Co., Citigroup Global Markets Inc., Morgan Stanley & Co. Inc., Credit Suisse Securities (USA) LLC and Deutsche Bank Securities Inc. were joint bookrunners.

The new par-pricing Clear Channel 9¼% notes due 2017 traded as high as 103 Friday afternoon, according to a high-yield mutual fund manager, who added that the deal settled to around 102 bid near the close.

"People knew from the outset that this was going to upsize, and they were apparently saving up for it, because some of the other deals that came this week did not do terribly well," the investor remarked.

A hedge fund manager saw the series A notes at 101¼ bid, 101¾ offered, and the series B notes at 102¼ bid, 102¾ offered.

Geokinetics upsizes

Elsewhere in Friday's primary market, Geokinetics Holdings USA, Inc. priced an upsized $300 million issue of 9¾% five-year senior secured notes (B2/B) at 98.093 to yield 10¼%.

The yield printed at the wide end of the 10% to 10¼% yield talk. The reoffer price came toward the cheap end of the 1 to 2 points of discount talk. The size was raised from $275 million.

RBC Capital Markets Corp. was the lead bookrunner. Bank of America Merrill Lynch was joint bookrunner.

Proceeds will be used to finance the cash portion of the company's acquisition of PGS Onshore and to repay debt.

Vantage Drilling prices on top of talk

Meanwhile P2021 Rig Co., a financing unit of Vantage Drilling Co., priced a restructured $135 million issue of 13½% four-year senior secured notes at 97.00 to yield 14.655%, on Friday.

Both the coupon and the issue price came in on top of talk.

Jefferies & Co. ran the books for the non-rated issue.

Proceeds will be used to fund the completion of the acquisition of Topaz Driller.

The notes traded Friday after noon at par bid, par ¾ offered, according to a source close to the deal.

Finis, or nearly so

The lion sleeps after a big kill.

That axiom somewhat characterizes the mood among high-yield players, as the record-setting year of 2009 figures to wind to a quiet close.

Most market sources who spoke to Prospect News during the Dec. 14 week professed no visibility on new issue business before the beginning of 2010.

"People are going to take a well-deserved breather," said an investment banker.

That sentiment seems to be almost universally embraced by market sources on both the buy-side and the sell-side.

However, there could be a surprise or two, in the week ahead, one or two market-watchers said.

Birch Communications, Inc. remains in the market with its $100 million offering of six-year senior secured notes (B3/CCC+), via Knight Libertas Capital Group.

That deal could price before the end of the year, an informed source said.

In any case, the week ahead will be slow, if not totally dead.

January, however, will begin rolling quickly, according to an investor who was told that Bank of America Merrill Lynch alone has visibility on at least 16 deals.

Clear Channel climbs in secondary

A trader said that "the big news" of the day in the secondary market, as it was in the primary arena, was the Clear Channel deal.

After having priced, he said, the 9¼% notes due 2017 got as high as 1031/2, before moving back down to 102¼ bid, 102¾ - still well up from their par issue price.

At another desk, a trader saw the $500 million A tranche having firmed to 101 bid, 102 offered, while the greatly upsized $2 billion B tranche was trading a point better than that at 102 bid, 103 offered.

The first trader said that the San Antonio-based broadcaster and outdoor advertising company's new deal was "a little more active than most of the recent new issues," owing at least in part to its huge size, which encourages investors to get into the very liquid bond.

He also noted the fact that Clear Channel's existing bonds, like the 10¾% senior cash-pay notes due 2016 and the 11% PIK toggle notes due 2016, had moved up sharply over the previous sessions on news of the coming deal, in very active trading.

"It looks like it's a decent company. That's why it's trading so well."

At another shop, a trader said he had seen just "a couple of trades" in the 10¾% notes, on "not a lot of volume." He pegged the bonds around 80 bid, which he said was unchanged on the session. "All of the posturing had been done beforehand."

He also saw the 11s hovering at 74-75, unchanged on "not much trading."

A market source at another desk saw Clear Channel's 4½% notes due 2010 up slightly at par, although its 5½% notes due 2014 were down slightly at 66. Clear Channel's 7¼% bonds due 2027 rose 2 points to 45 bid.

New energy bonds move into secondary

A trader saw one of the day's other two new deals, for Geokinetics, hovering right around their issue price.

The Houston-based provider of seismic data to the energy industry priced its $300 million of 9¾% notes at 98.093 and when the bonds got to the secondary realm, he saw the paper at 98 bid, 98¼ offered.

"I guess they didn't really go too far after the pricing, a little over 98. It didn't really run up a lot."

He said he had heard the bonds had gotten as good as 98 5/8, "right out of the box - but that didn't last long."

Vantage seemed to do better in the aftermarket; he saw its $135 million of 13½% senior secured notes due 2013 "open up wide," at 99 to 102, but then came back in to 99½ bid, 100½ offered.

"I don't think there's trading in that one," he said.

Other news deals hang around issue, when they trade

The trader said that GXS Worldwide's 9¾% senior secured notes due 2015 were trading at 97¾ bid, 98 offered, not too far from the 97.948 level at which the Gaithersburg, Md.-based e-commerce company had priced its $785 million of bonds on Thursday, upsized from the originally announced $750 million.

"They had traded up at [ninety-]eight, but it left them a seller. They didn't move much. They were kind of stuck around issue.

He saw no new dealings in Trims Corp.'s $250 million of 9¾% senior secured notes due 2017; the Bloomfield Hills, Mich.-based diversified manufacturer's $250 million issue had priced Thursday at 97.992 to yield 10.125.

And United Maritime Group LLC/United Maritime Group Finance Corp.'s restructured $200 million of 11¾% senior secured notes due 2015 were likewise unseen on Friday. The Tampa, Fla.-based dry-bulk cargo shipping company's bonds had priced at par.

A trader saw McJunkin Red Man's 9½% senior secured notes due 2016 "a little active out of the box, at 97 3/8 bid, 97¾ offered. The Tulsa, Okla.-based maker of pipes and valves had priced its $1 billion deal on Wednesday at 97.533 to yield 10%.

Commenting on the overall lack of market interest in many of the new deals, the trader declared that "other than Clear Channel, I think we're running into an end-of-the-year wall here" with the new paper, "either with just the sheer volume of deals, or the fact that a lot of people are starting to close their books for the year, so these things aren't running very much."

Market indicators ease slightly

Back 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 Friday at 98 bid, 98½ offered, after having lost ¼ point on Thursday. The widely followed index thus moved up solidly on the week from its level the previous Friday, Dec. 11, of 95 7/8 bid, 96 7/8 offered.

The KDP High Yield Daily Index meanwhile was unchanged Friday at 70.81, after having fallen by 4 basis points on Thursday. Its yield was likewise steady at 8.18%, after having risen by 1 bp the previous session. The index thus showed improvement on the week from the previous Friday's reading of 70.49 and its yield of 8.33%

In the broader market, advancing issues again led decliners on Friday, for a 14h straight session - but as was the case on Thursday, their advantage was only a relative handful of issues - several dozen out of the more than 1,300 credits tracked.

Overall market activity, as measured by dollar-volume, slid 29% from Thursday's pace.

Quiksilver rides the wave

Among specific issues, a trader said that Quicksilver's 6 7/8% notes due 2015 "moved up pretty well" after the Huntington Beach, Calif.-based maker of swimwear and surfing apparel and accessories reported not unfavorable quarterly numbers.

He saw those bonds jump to 80 bid from prior levels at 76 bid, 78 offered. "I guess [investors like their numbers," although he himself "did not think they were that impressive."

The company had a net loss of $1.7 million, or 1 cent per share, versus with a $100,000 loss - also one cent per share, because of a statistical quirk - a year ago. However, excluding special items, it earned 2 cents a share - while analysts had been expecting a nickel per share loss.

The company's New York Stock Exchange-traded shares jumped 17%, on more than three times its normal volume, post-numbers.

Visteon is vanquished

On the downside, Visteon's bonds lost ground during the final trading day of the week, as the company filed its reorganization plan that effectively freezes out unsecured bondholders.

A trader saw a 19 bid for the 7% notes due 2014, adding that the issue "traded a few times around 20."

He also saw the 12¼% notes due 2016 at about 36 bid, 37 offered.

Another market source said the bonds dropped 7 to 8 points, pegging the 8¼% notes due 2010, as well as the 7% notes, at 20 bid, 21 offered.

As part of Visteon's plan to exit bankruptcy protections, the Van Buren Township, Mich.-based automotive parts supplier is asking Pension Benefit Guaranty Corp. to take over three of its pension plans. In return, Visteon will give PBGC a 3.8% equity interest in the new reorganized company.

Visteon is claiming that covering the pensions themselves would not be prudent for the company's survival. If Visteon kept the pensions, the company would have to contribute $260 million to fund the plans through 2015. And, in that same scenario, PBGC would then have a $460 million claim against Visteon, of which it would only receive about 12%, the company said.

Also according to the proposed reorganization plan, Visteon's lenders - which are owed about $1.6 billion - will receive the remaining 96.7% of equity. Unsecured creditors holding about $1.2 billion in claims will receive nothing.

-Stephanie N. Rotondo contributed to this report

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