Ford $1.25 billion deal drives by; Radio Shack prices; Brightstar brings add-on; funds lose

By Paul Deckelman and Paul A. Harris

New York, April 28 - Ford Motor Credit Co. priced a quickly shopped $1.25 billion offering of eight-year notes on Thursday. The new bonds from auto giant Ford Motor Co.'s loan financing arm were seen later on straddling their par issue price.

All told, more than $1.6 billion of new paper came to market during the session, according to high-yield syndicate sources. Besides the Ford Credit megadeal, pricings were seen from consumer electronics retailer Radio Shack Corp., which brought in an upsized $325 million offering of eight-year notes, and from Brightstar Corp., a provider of products and services to the wireless industry. The latter deal was actually a $100 million add-on to an existing tranche of notes.

On the forward calendar, Ford rival Chrysler Group LLC was heard planning $6 billion of new bond and bank debt, with proceeds slated to repaying loans the carmaker obtained from the U.S. and Canadian governments and from the Province of Ontario.

Price talk emerged on the pending offerings from iPayment Inc. and corporate parent iPayment Holdings Inc. as well as from Xinergy Inc. and Yonkers Racing Corp., any or all of which could price on Friday, according to syndicate sources. They also heard that electronic transaction processor iPayment had done some tinkering with its $525 million two-part deal, raising the size of one tranche while downsizing the other and making some covenant changes.

Wednesday's new bonds from Iasis Healthcare LLC and Iasis Healthcare Corp and from Allison Transmission, Inc., were seen trading above their respective issue prices.

Away from the new deals, Catalyst Paper Corp.'s bonds fell on the company's less-than-stellar financial results for the latest quarter.

Secondary market statistical indicators were steady to firmer, but high yield mutual fund flows - seen as a gauge of overall junk liquidity trends - posted a second week of outflows, although the cash loss was a small one.

Funds lose $4 million

As the session was winding down, market participants familiar with the weekly AMG high-yield mutual fund flow statistics generated by Lipper/FMI said that in the week ended Wednesday, $4 million more left those weekly reporting funds than came into them.

That followed the loss of $186.3 million recorded in the week ended April 20, which in turn had broken a three-week winning streak dating to late March, in which time net inflows had totaled $1.78 billion, according to a Prospect News analysis of the figures.

The latest outflow cut the year-to-date cumulative inflow total to $6.68 billion, down from the peak level for 2011 so far of $6.87 billion seen in the week ended April 13, the analysis said.

Even counting this week's outflow, though, with 17 weeks gone in the year, there have now been 13 inflows recorded against just the four outflows.

Fund-flow patterns began the new year on a roll - cash infusions totaling more than $8 billion were seen over a 14-week stretch from early December of last year up through mid-March, according to the analysis, including the more than $6 billion taken in during the first 10 weeks of this year. Since then, however, fund-flow patterns have been choppy: two weeks of declines in March totaling $1.146 billion, followed by the three weeks of inflows, as noted, and then the outflow over the two most recent weeks.

EPFR $606 million inflow

Another fund-tracking service, Cambridge, Mass.-based EPFR Global, whose methodology differs somewhat from AMG, meantime reported a $606 million inflow in the latest week, the fifth straight gain by the agency's calculations.

That followed a cash addition of $421 million in the week ended April 20. During the week ended April 6, EPFR saw a $1.49 billion cash injection, which it called a record for the time that it has been tracking fund flows.

The latest week's cash infusion lifted the year-to-date net inflow number to $19.39 billion, EPFR said.

The figures over the past two weeks have represented a relatively rare divergence between AMG and EPFR, which calculate their respective fund-flow totals differently, although the two services' numbers usually - though not always - point toward the same trends most weeks. EPFR includes results from some non-U.S. domiciled funds as well as the domestic funds.

Cumulative fund-flow estimates, whether from Lipper/FMI or EPFR, may be revised upward or downward or be rounded off and could include unannounced revisions and adjustments to figures from prior weeks.

Analysts say the continued flow of fresh cash into junk - and the mutual funds represent but a small, though observable and quantifiable percentage of the total amount of money coming in - fueled the record new deal borrowing binges seen in both 2009 and then in 2010 as well as the robust secondary market seen both years. Both of those trends have been pretty much continuing in 2011 as well.

Ford Credit jams down yield

A trio of issuers, each one bringing a single tranche of bonds, raised $1.65 billion in the high yield primary market on Thursday.

Ford Motor Credit priced Thursday's biggest deal, a $1.25 billion issue of seven-year senior notes (expected ratings Ba2/BB-) at par to yield 5%.

Morgan Stanley & Co., BNP Paribas, Citigroup Global Markets and RBC Capital Markets were the joint bookrunners.

The yield printed on top of price talk that was downwardly revised from earlier talk in the 5 1/8% area.

The book contained $3 billion to $4 billion of orders, according to a trader from a high-yield mutual fund who added that considerable "jamming" took place with regard to the yield.

Initial conversations took place in a 5 1/8% to 5¼% context, the trader explained.

However, before long it was clear that a deal could easily take shape at 5 1/8%.

Not long after that, revised talk of 5% circulated, the trader recounted, and suggested that the issuer walked away from Thursday's deal a little more cheerfully than the buyside did.

RadioShack upsizes

Elsewhere, RadioShack priced an upsized $325 million issue of 6¾% eight-year senior notes (Ba2/BB/BB) 99.234 to yield 6 7/8%.

The yield printed on top of the price talk.

Merrill Lynch, Goldman Sachs & Co., J.P. Morgan Securities LLC and Wells Fargo Securities were the joint bookrunners for the issue, which was upsized from $300 million.

Proceeds will be used for general corporate purposes, including the repurchase of stock.

Brightstar taps 9½% notes

Brightstar priced a $100 million add-on to its 9½% senior notes due Dec. 1, 2016 (B1/BB-) at 105.75 to yield 7.973%.

The reoffer price came in line with price talk of 105.5 to 106.

Jefferies & Co. was the left bookrunner for the quick-to-market deal.

Goldman, Sachs & Co., J.P. Morgan Securities LLC, Barclays Capital Inc. and Credit Suisse (USA) Securities LLC were the joint bookrunners.

Proceeds will be used to refinance debt under the company's ABL revolver, a portion of which was used to fund the acquisition of eSecuritel.

The original $250 million issue priced at par on Nov. 23, 2010. Hence, a mere five months after the original print, Brightstar realized a whopping 1½% of interest savings with the add-on notes.

Talking the deals

Issuers and their dealers set the stage for a big finish to the post-Easter week.

Should terms materialize on all five deals that are expected to price by Friday's close, issuance will top the $1 billion mark for the fourth consecutive day.

iPayment is on deck for Friday.

The company restructured its $525 million two-part notes offering on Thursday, shifting $25 million to the operating company tranche from the holding company tranche.

Price talk also surfaced on Thursday.

iPayment Inc., the operating company, upsized its offering of seven-year senior notes (B3/CCC+) to $400 million from $375 million.

Talk on those notes was set in the 10¼% area.

J.P. Morgan Securities LLC, Merrill Lynch and RBC Capital Markets LLC are the joint bookrunners for the operating company notes. UBS Securities LLC is the co-manager.

Meanwhile, iPayment Holdings, Inc. downsized its notes and warrants offering to $125 million from $150 million.

The notes and warrants units consist of 7.5-year senior payment-in-kind toggle notes (Caa1/CCC+) and 150,000 equity warrants.

The holding company notes are talked at 15%, half cash and half PIK. The warrants are expected to represent 2.5% of the company; discussions on the warrants ranged from 0% to 5%.

J.P. Morgan is the bookrunner for the holding company tranche.

In addition to the new structure and price talk, there were also covenant changes to the holding company notes, sources said.

Meanwhile, Xinergy talked its $200 million offering of eight-year senior secured notes (Caa1/B-) with a yield in the 9½% area on Thursday.

UBS Investment Bank is the left lead bookrunner. Griffiths McBurney Corp. is the joint bookrunner.

Yonkers Racing talked a $100 million fungible add-on to its 11 3/8% senior secured notes due July 15, 2016 (current ratings B1/B+) at 109.25 to 109.50.

Credit Suisse Securities (USA) LLC and Merrill Lynch are the joint bookrunners.

Cumulus Media is also expected to price its $610 million offering of eight-year senior notes (Ba3//) on Friday.

No official price talk was circulated previous to Thursday's close, sources said.

However, the deal is whispered to come with a yield in the low 8% context, according to a bond trader.

J.P. Morgan Securities LLC, UBS Investment Bank, Macquarie Capital and RBC Capital Markets are the joint bookrunners.

Finally, Lee Enterprises is expected to price its $680 million six-year first-lien notes (B3/B) on Friday.

The notes will be priced at par to yield 11%, according to an informed source.

The newspaper publisher shifted $375 million of second-lien debt, which was originally intended to come as a bond, into the loan market.

Credit Suisse Securities (USA) Inc. and Deutsche Bank Securities Inc. are the joint bookrunners.

Ford Credit steals the show

A trader said that the new Ford Credit issue "obviously, was getting a lot of traction."

The $1.25 billion issue of seven-year bonds drove in, seemingly out of nowhere with little or no advance fanfare, to price during the afternoon at par.

A trader said that the drive-by deal was "definitely another opportunistic pricing for them - they've done a good job of that, of getting bonds done at the right level, so these bonds are going nowhere, going home wrapped around issue price."

He quoted the bonds at 99 7/8 bid, 100 1/8.

Another trader said they were at par bid, 100 1/8 "on the inside."

Ford Credit's existing 7% notes due 2013 were meanwhile seen down three-quarters of a point at 108¼ bid.

Another market source, though, pegged the bonds as high as 109 bid on volume of more than $11 million, making it one of the day's busier junk issues.

Parent Ford Motor Co.'s benchmark 7.45% bonds due 2033 continued their recent firming trend, adding on one-quarter point, a trader said, to end at 113¼ bid, 114¼ offered.

New Iasis bonds improved

Traders saw Isasis Healthcare's new 8 3/8% notes due 2019 having firmed smartly when they finally began trading on Thursday.

The Franklin, Tenn.-based hospital operator had priced $850 million of the bonds, down from the originally planned $935 million, late in the session on Wednesday.

A trader said that Iasis "really came too late [Wednesday] night to trade."

On Thursday, he said that the bonds "kind of ground higher all day" to go out trading at 101.

"And remember that one priced at a discount [99.277 to yield 8½%], so that one did really nice."

Allison bonds stay firm

A trader said that the new Allison Transmission "traded well." While acknowledging that "a large part of that was [Wednesday] night after the bonds had priced, there was follow-though trading today."

He saw the bonds around the 101 bid level.

The Indianapolis-based automotive transmission manufacturer had priced its $500 million of 7 1/8% notes due 2019 at par on Wednesday, and they had moved slightly above the 101 level in the aftermarket.

Brown Shoe bonds hang in

A trader said the new Brown Shoe Co. 7¼% notes due 2019 "didn't trade a whole lot," seeing the bonds in a 100-100½ context.

He pointed out that like the Iasis issue, the Brown bonds also came at a discount to par: 99.249 to yield 7¼%. He further cited "a big roll factor" of investors in the St. Louis-based shoe retailer's existing 8¾% notes due 2012 being tendered for with the new deal proceeds.

The trader, noting that both the Brown deal and the Allison transaction had been oversubscribed by potential buyers, opined: "This is not a new trend. However; it's been the way of the world for a while."

Secondary seen steady

Away from the new issue realm, a trader saw the CDX North American Series 16 HY index up a quarter of a point on Thursday to end at 103 bid, 103 1/8 offered, after having gained three-sixteenths of a point on Wednesday.

The KDP High Yield Daily Index meantime was unchanged on Thursday to close at an even 76, after having gained 6 bps on Wednesday. Its yield tightened by 1 bp for a second session, this time to 6.5%.

The Merrill Lynch High Yield Master II Index rose for a seventh consecutive session on Thursday by 0.084%, on top of the 0.03% gain seen on Wednesday. That lifted its year-to-date return to 5.304%, a new peak level for the year, from 5.216% on Wednesday, the previous zenith.

A trader described Thursday's session as "reasonably hectic. I think part new issue, but there seems to be a lot of the same names trading a lot."

A second trader, however, said that while the market opened up on a firm note, "it kind of went to sleep pretty quick.

"It died going into lunch, then people were gearing up for the new issues."

But he said: "Generally, it felt better today than recently."

"It's a little higher, a little better," yet another trader said. "We've walked back into another firm high-yield market."

The first trader agreed that the junk market "has been really resilient. [Wednesday] morning it felt like it wanted to go lower, but that didn't last very long, and today, we've definitely seen a better bias towards buying paper."

He said that the junk market on Wednesday had "paused a little bit" ahead of Federal Reserve Chairman Ben Bernanke's first-ever news conference, "no doubt waiting for him," but the Fed boss' remarks were generally seen in the junk and distressed-debt precincts as anticlimactic.

With that now out of the way, "it's strong today. People are looking to put on paper. The continuance of a pretty robust new issue market is certainly not scaring anybody off, and it feels to me like we'll run a little bit longer into the summer this year before it slows down because there's still money to be put to work."

Catalyst gets creamed

A trader said that Catalyst Paper's 7 3/8% notes due 2014 "were trading a lot," plunging 5 points on the day to 69 bid. Volume was heavy at over $27 million almost right at the top of the most-actives list.

He meantime saw its 11% senior secured notes due 2016 down 1 point at 99 bid, par offered.

He attributed the slide in the subordinated bonds and the easing in the secureds to the Richmond, B.C.-based paper manufacturer's release of disappointing quarterly numbers.

"I don't know what they were expecting," he said, "but it looks like it was bad."

The bonds fell even though the company actually reported less red ink in the quarter than it had a year ago. In the first quarter ended March 31, Catalyst posted a net loss of C$12.9 million, or 3 Canadian cents per share, on sales $303.6 million. In contrast, a year earlier, the company had a C$44.1 million net loss, or 12 Canadian cents per share, on sales of $273.3 million.

However, while improving from a year ago, Catalyst's numbers deteriorated on a sequential basis from last year's fourth quarter, which had seen a net profit of C$9.6 million, or 2 Canadian cents per share. Sales also fell in the latest quarter from fourth-quarter levels of $333.6 million. The company attributed the sequential slide to a leveling off in paper demand, foreign exchange fluctuations and increased costs.

Catalyst "saw a lot of activity," another trader said, quoting the bonds as having retreated to around 69 bid from 73½ bid, 74 offered on Wednesday, which he called "a nice drop, on the back of their numbers."

A trader meantime saw Catalyst sector peer NewPage's bonds "still real active," though there was no fresh news out on the Miamisburg, Ohio-based coated-paper manufacturer that would explain the continued busy activity of its bonds. He estimated that between $40 million and $50 million of the NewPage bonds were traded Thursday, "or maybe a little more."

He saw "good-sized trading" in the 10% subordinated notes due 2012 around 541/2-55.

The company's 11 3/8% senior secured notes due 2014 fell below the par level at 99½ bid.

Another trader saw the latter bonds at 99¼ bid, up a quarter-point on the day, although he thought that they "weren't very active today."

OPTI bounce continues

OPTI Canada's bonds, a trader said, were "surprisingly resilient after bad numbers [Wednesday]. He said there was "a lot of paper trading in the subs [i.e., the company's subordinated issues], but not so much the seniors, which are both still north of 101."

He saw those subordinated bonds - the 7 7/8% notes and 8¼% notes, both due in 2014 - trading in a 531/2-54 context.

He estimated that between $60 million and $70 million bonds traded across OPTI's capital structure on Thursday, terming that "pretty good, considering that the price hasn't moved significantly, which kind of surprised me."

OPTI, a second trader said, "was the big one," seeing the 2014 bonds around 54 bid, a 2-point gain on the day, in contrast to Wednesday, when the bonds slid from the mid-50s down to around 48½ bid in busy dealings, but then came off those lows to end around 52 bid, down around a deuce.

OPTI Canada "pretty much stabilized" on Wednesday, with the bonds moving back up to around the levels they'd held before the company's release of numbers on Wednesday.

The Calgary, Alta.-based oil sands energy producer 's subordinated bonds gyrated wildly at lower levels on Wednesday after OPTI reported its fiscal first-quarter earnings - and although it showed a smaller first-quarter loss versus a year ago (C$27 million, or 9 Canadian cents per share, versus C$41 million in the year-earlier period), it also warned that it likely will not meet its 2011 previously announced production goal of 38,000 to 45,000 barrels of bitumen crude oil per day.

The first trader said, "It's not only a case that they did not meet their [output] targets - for more than a year, they have continuously, on every one of their conference calls, been forced to reduce, or give a reason why they haven't hit their targets.

"Once or twice? OK. Seven or eight times? You start to have to question everything that they do or say."

He further opined that the OPTI subordinated bonds "should actually be trading lower. The fact that they're almost back to where they were the day before is a testament to two things: one, I think there are some pretty large blocks [of bonds] held in a few places that are trying very hard to keep it, with the expectation of [eventually] owning the company; they're going to end up with equity, but that's what they want. This is a 'loan-to-own' kind of a situation."

He said that "there are a lot of people that think that while the oil sands have a value, [OPTI's] ability to extract it is not very strong and that there are better technologies."

The other factor, he continued, "is probably counter-intuitive, but as gas and oil prices rise even more, there are other sources that will be able to kick in because it's affordable to do. Clearly, OPTI is not the best operator in the space, and they've struggled, so I think these [bonds] will kind of drift around here, but it wouldn't surprise me for it to be in the 40s two months from now."

At the same time, he said, the senior secured bonds "are fine to a certain extent," particularly the 9% notes due 2012 currently trading around 101½ bid, 102 offered, while the 9¾% notes due 2013 were at 101 bid, 101½ offered.

Caesars seen busy

A trader said that there was "a lot of Harrah's action today," using the older and more familiar name for the Las Vegas-based gaming giant now known as Caesars Entertainment Corp.

The company's 10% notes due 2018 were seen down by one-half point at 93 bid. Over $12 million of the notes changed hands, putting it high on the most-actives list for the day.

Gaming industry watchers were meantime discussing Caesars CEO Gary Loveman's opinion piece published earlier in the week on CNNmoney.com that recently announced federal indictments against PokerStars, Full Tilt Poker and Absolute Poker - the three largest on-line poker companies - won't dissuade the millions of Americans who want to play online poker.

He called for the U.S. to "seize the moment to legalize online poker, permit a safe and legitimate industry in the U.S., and bring these jobs and revenues home."

Community Health firmer

A trader said that Community Health Systems Inc.'s 8 7/8% senior secured notes due 2015 were "up a little bit more today," seeing the bonds in a range of 102-102¼ bid, with between $20 million and $30 million of the bonds having traded, putting them high up on Junkbondland's most actives list.

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