ILFC sells split-rated deal to high demand; volume drops; bank paper widens; Best Buy firms

By Andrea Heisinger and Cristal Cody

New York, Dec. 19 - International Lease Finance Corp. did a trade by mid-afternoon and that was the sum of new deals in Monday's high-grade debt market.

The aircraft leasing arm of American International Group Inc. priced an upsized $650 million of 10-year paper at the tight end of price talk. The notes priced wider than their last sale of a 10-year maturity, which yielded 8.375%.

A trader on the junk side of the market said early in the day that pricing looked "50 [basis points] too rich" and that there seemed to be little new-issue discount. The trader added that they are trying to price this flat-spread versus the company's benchmark six-year bond.

Retail accounts were possibly getting involved with the deal by late morning, the trader said, meaning that it could price 50 to 100 bps better than it normally might.

There was about $1.5 billion on the books for the trade, a source who worked on the sale said.

The majority of the accounts were high yield, but "there were some high-grade players in there," she said.

There wasn't a "will not grow" provision, and after the syndicates managed to get talk down to 8.625%, the company agreed to upsize by $150 million.

This sale could be the only one for the week "unless someone sneaks something in tomorrow," a market source said.

The primary market is "going to be really quiet" for the remainder of the week, the source said.

"After tomorrow it's going to be brutal," a syndicate source said. "Everyone's just cleaning things up before the holidays."

Overall trading volume slipped 15% to about $6.5 billion on Monday.

"I don't expect that will change much for the rest of the year," one trader said.

International Lease Finance's new notes were active with interest all day, traders said.

Bank and financial paper ended 10 basis points to 15 bps wider on Monday.

"It was pretty flat most of the day and toward the end of the day, it leaked a bit wider," a trader said.

Bank of America Corp.'s benchmark 10-year notes widened 15 bps.

Investment-grade bank and brokerage credit default swaps costs rose, indicating less investor confidence in financials.

Bank paper CDS costs traded 5 bps to 25 bps higher, and brokerage company paper CDS costs rose 15 bps to 20 bps.

Other bond sectors such as telecommunications were unchanged on the day.

"We traded a little bit better this morning, 2 to 3 basis points better, but continued on light volumes all day," a trader said.

Best Buy Co., Inc.'s bonds traded 5 bps to 10 bps better on Monday, a source said.

Investment-grade bonds overall traded unchanged to weaker on the day. The Markit CDX Series 17 North American investment-grade index eased 1 bp to a spread of 132 bps.

Treasuries rallied as the financial crisis in Europe continued. The yield on the 10-year note fell 4 bps to 1.81%. The 30-year bond yield dropped to 2.79% from 2.85%.

ILFC's upsized trade

International Lease Finance sold an upsized $650 million of 8.625% 10-year senior notes (B1/BBB-/BB) at par to yield 8.623%, according to an FWP with the Securities and Exchange Commission and an informed source.

The notes sold at the tight end of guidance in the 8.625% to 8.75% range and revised talk in the 8.625% range. The deal size was increased from $500 million.

The upsized $650 million deal played to about $1.5 billion orders, the majority of which were high-yield accounts, although there were some high-grade players in the deal, according to a syndicate source.

With no provision against upsizing, the company increased to $650 million from $500 million when it secured the 8 5/8% rate, the source added.

Active bookrunners were Citigroup Global Markets Inc., Deutsche Bank Securities Inc., Goldman Sachs & Co. and Morgan Stanley & Co. LLC.

The proceeds will be used for general corporate purposes, including debt repayment and aircraft purchase.

International Lease was last in the market with a $2.25 billion deal in two tranches on May 19. The company's last sale of 10-year debt on Dec. 2, 2010 totaled $1 billion and priced to yield 8.375%.

Secondary trading was heavy in the new 8.625% notes due 2021, which traded at 99.75 bid, par offered, a trader said.

The split-rated deal had the novel aspect of actually sporting one single-B rating in the form of the B1 from Moody's, another trader from the crossover space observed.

There was very little new-issue concession in the 8 5/8% coupon, added the trader who saw the deal trading around par bid, shortly after the terms rolled out.

"It's pretty active around par, but I have the feeling we're going to see better sellers," the trader added.

The source added that there seemed to be a high amount of flipping on the break.

The company is based in Los Angeles.

Bank of America weaker

Bank of America's 5% notes due 2021 widened 15 bps to 500 bps bid, 485 bps offered on Monday, according to a trader.

Bank of America priced the notes on May 10 at 185 bps over Treasuries.

The financial services company is based in Charlotte, N.C.

Best Buy better

Best Buy's 5.5% senior notes due 2021 firmed to 425 bps bid, 415 bps offered, a trader said Monday.

The notes were quoted on Friday at 435 bps bid, 425 bps offered, the trader said.

The notes priced on March 8 at a spread of 200 bps over Treasuries.

The electronics and entertainment retailer is based in Richfield, Minn.

Paul Deckelman and Paul A. Harris contributed to this review

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