CVR, Aircastle deals price to close out week, firm in trading; ResCap, parent Ally rise

By Paul Deckelman and Paul A. Harris

New York, Dec. 9 - The high-yield primary sphere priced a pair of quickly-shopped deals Friday to close out a moderately active week.

Fuel refiner and marketer CVR Energy Inc. brought a $200 million issue of senior secured notes due 2015, while Aircastle Ltd., which sells and leases jet aircraft to passenger and cargo airlines, landed with a $150 million offering of seven-year paper.

Both deals were structured as add-on tranches to their respective issuers' existing bonds - apparently the latest fad in Junkbondland, accounting for the vast majority of the new deals priced this week. After pricing at a premium to par, both new deals moved up in the aftermarket.

Those deals, generating proceeds of more than $350 million, closed out a better than $3 billion week, which also included the well-received mega-deal from Ford Motor Credit Co. LLC and other offerings from NII Capital Corp., Fidelity National Information Services, Inc. and PHH Corp. - all of them add-on transactions- as well as non-add-on deals from Pacific Rubiales Energy Corp. and NPC International, Inc. Ford credit remained strong in active secondary market dealings, but NII Holdings continued to struggle.

Away from the new-deal spectrum, traders saw Residential Capital LLC's bonds, and those of its corporate parent, Ally Financial, Inc., improved on news reports that legendary investment guru Warren Buffett - whose Berkshire Hathaway Inc. is already a big Ally bondholder - may play a role in mortgage lender ResCap's restructuring.

Statistical measures of junk market performance, which have recently been strong, were closing out mixed for a second consecutive session, although they showed gains on a week-over-week basis.

CVR Energy sells add-on

Friday saw two issuers raise $364 million by tapping existing issues

CVR Energy priced a $200 million add-on to its 9% senior secured notes due April 1, 2015 (Ba2/BB) at 105 to yield 7.261%.

The reoffer price came on top of the price talk.

Deutsche Bank was the left bookrunner for the quick-to-market sale. RBS and Barclays were the joint bookrunners.

The Sugar Land, Texas-based refiner and marketer of transportation fuels plans to use the proceeds to fund the acquisition of Gary-Williams Energy Corp.

The financing commitment was initially for $275 million. Because of a working capital adjustment the company was able to decrease the size of the issue to $200 million.

The original $275 million issue priced at 99.511 to yield 9 1/8% in March 2010, so the issuer realized 186 basis points of interest savings with Friday's print versus the original issue.

The order book was three-times oversubscribed, according to an informed source, who added that the issuer could easily have elected to upsize.

Aircastle taps 9¾% notes

Aircastle priced a $150 million add-on to its 9¾% senior notes due Aug. 1, 2018 (Ba3/BB+) at 102.769.

The yield to worst was 9%, and the yield to maturity was 9.179%.

The reoffer price and the yield to worst came on top of price talk.

Citigroup was the bookrunner.

Proceeds will be used for general corporate purposes including the purchase of aviation assets.

The original $300 million issue priced at 98.645 to yield 10% in July 2010. Hence Aircastle realized 100 bps of interest savings with Friday's deal compared to the original issue.

The add-on deal went well and was oversubscribed, according to an informed source.

$3.33 billion week

With Friday's two add-ons in the tally, the Dec. 5 week closed having seen $3.33 billion of issuance in eight junk-rated, dollar-denominated tranches.

It was the biggest week since the week of Nov. 14 which saw $6.06 billion is 13 tranches, and it extends year-to-date issuance to $255.48 billion.

Although the 2011 issuance total will come in well short of the $292.6 billion all-time annual issuance record set in 2010, 2011 is already in the record books as the second biggest year in market history, in terms of dollar amount of issuance, surpassing 2009's $161.82 billion for that distinction.

Quieter week ahead

The Dec. 12 week gets underway with a trio of deals on the calendar and expected to price.

99¢ Only Stores has been roadshowing a $250 million offering of eight-year senior notes (Caa1/CCC+) which is expected to price during the middle part of the week. RBC is the left bookrunner. BMO and Deutsche Bank are the joint bookrunners.

A. M. Castle & Co. wraps up the roadshow on Monday for a $225 million offering of five-year senior secured notes (B3//) via Jefferies.

And Expert Global Solutions, Inc. wraps up a roadshow on Monday for a $300 million offering of eight-year senior notes (Caa1//) via Deutsche Bank, Barclays, J.P. Morgan and RBS.

Apart from those three announced deals, there could be drive-by activity, likely to surface in the form of more add-on transactions, syndicate sources advise.

A large, quick-to-market transaction from a well-known issuer cannot be ruled out, they add.

However the window for launching a full roadshow in the time remaining before the holidays may already be closed, one senior debt capital markets banker said.

All told the Dec. 12 week's issuance could come close or even slightly surpass the past week's $3.33 billion, a syndicate banker said after Friday's close.

CVR, Aircastle head higher

Although several traders initially said that they had not seen a trace of any of the day's new deals in the aftermarket, another trader reported that the new CVR Energy four-year senior secured notes "did really well" when the petroleum products refiner's paper was freed for secondary market dealings.

That $200 million add-on issue moved up to a 106-107 context, versus the 105 bid level at which the bonds had priced.

A trader meantime saw Aircastle's add-on seven-year deal rising to 103¾ bid, 104¼ asked.

The Stamford, Conn.-based aircraft leasing company's $150 million deal had earlier priced at 102.769

New Ford holds firm

The week's signature deal - Ford Motor Credit's massively upsized $1 billion add-on to its existing $1 billion of 5 7/8% senior fixed-rate notes due 2021 - continued to trade above its issue price on Friday, in fairly active dealings.

A trader saw those bonds trading at bid levels between 102 and 1023/4.

That was up from the 101.80 level at which that Monday deal - doubled in size from the $500 million offering announced earlier that same morning the loan-financing arm of Dearborn, Mich.-based automotive giant Ford Motor Co. - had priced to yield 5 5/8%.

A market source pegged Friday's volume at over $15 million - not quite in the same league as the more than $100 million of those bonds seen on both Monday afternoon and on Tuesday, or the $43 million that traded on Wednesday, but still enough to put the new deal fairly high on Friday's high-yield most-actives list.

When the new Ford Credit offering hit the aftermarket, a trader said the pace of Trace activity indicated to him that there was "massive flipping" going on.

A market source said that over $100 million of the new bonds traded both on Monday afternoon and all day on Tuesday, at levels around 102 and better, somewhat above issue, and stayed up there the rest of the week.

Over $15 million of the Ford Credit bonds had traded by mid-afternoon on Friday, still clinging to levels between 102¼ and 1021/2.

NII not gaining ground

While the new Ford Credit notes continued to fly on Friday - at one point, a trader said that they had approached the 103 bid level, before coming down from that zenith - Monday's other large deal, from NII Capital Corp., continued to struggle.

A trader said on Friday that the bonds fell to 97 bid, 98 offered, before coming a little off those lows to end at 97½ bid, 98 offered.

NII Capital - a unit of Reston, Va.-based NII Holdings Inc., the now-independent former international arm of Sprint Nextel Corp., providing wireless service to markets in Latin America - on Monday priced a quickly marketed add-on to an existing tranche of bonds, in this case, NII's $750 million of 7 5/8% notes due 2021, which priced at par back in March.

The add-on was increased to $700 million from the originally announced $500 million size, and priced at 98.5 to yield 7.852%.

While those new bonds initially firmed in Monday's aftermarket to the 991/2-par range, those quick gains faded as the week worse on, bringing them to the levels below 98 at which they ended the week.

Pizza deal stays hot

Thursday's $190 million issue from NPC International, an Overland Park, Kan.-based operator of over 1,100 Pizza Hut restaurants in the United States, continued to hold some of its initial aftermarket gains on Friday.

That forward calendar offering of 10½% notes due 2019 priced at par, and then the bonds got as good as 100¾ bid, 101¾ offered when they were freed to trade.

In Friday's action, a trader quoted them at 100½ bid, 101 offered.

Other recent deals a no show

Traders said the other deals priced earlier in the week - from Pacific Rubiales Energy Corp., Fidelity National Information Services and PHH Corp. - were not seen in Friday's secondary dealings.

Market quietly firmer

Away from the new-deal arena, traders said nothing was setting the market on fire.

"Our junk market was a little better today, said one trader, who estimated it up by around ¼ point.

"But there was nothing too dramatic happening."

Indicators stay mixed

Statistical measures of junk market performance - which turned mixed on Thursday, breaking a six-session winning streak - remained mixed on Friday. However, they showed gains on a week-over-week basis.

A trader saw the CDX North American series 17 High Yield index gain 11/16 point on Friday to end at 92 3/16 bid, 92 7/16 offered, a sharp comeback after having plunged by 1½ points on Thursday. The index ended the week above its closing level of the previous Friday, Dec. 2, when it read 91 7/8 bid, 92 3/8 offered.

The KDP High Yield Daily index was up by 2 basis points Friday, finishing at 71.81, after having been down by 5 bps on Thursday.

Its yield declined by 2 bps, to 7.68%, after having risen by 1 bp on Thursday.

The closing levels compared favorably with the previous week's 71.43 index reading and 7.79% yield.

But the widely followed Merrill Lynch High Yield Master II Index bucked somewhat positive general trend and fell for the first time in eight sessions on Friday.]

Its 0.081% loss on Friday was in contrast to Thursday's 0.046% gain.

That loss lowered the index's year-to-date return to 3.298% from 3.382% on Thursday.

The index also had a one-week gain of 0.664%, as it rose from the prior Friday, when the year-to-date return stood at 2.617%.

Year-to-date returns remain below the recent peak level of 4.28%, recorded on Oct. 28, and are well below its high-water mark for the year of 6.362%, which was set on July 26.

However, they are still well up from its 2011 low-point, a 3.998% deficit recorded Oct. 4.

ResCap rises on possible Buffett role

Among specific names, a trader said that "for whatever reason," there was "heavy volume" in Residential Capital's 9 5/8% notes due 2015, which he called up 5 points on the session to around 70½ bid.

"There was good size, big trades" in the credit he said, with the activity starting in the morning.

He said that the other issues from the Minneapolis-based residential lender - a unit of Ally Financial Inc. - were not moving around. He checked three other of the company's bonds and saw "no volume in them," calling them "tiny issues," with only the 9 5/8s, at $2 billion in size, "significant."

Another trader said that investors were reacting to news that billionaire investor Warren Buffett's Berkshire Hathaway - already a large creditor of ResCap's parent, Ally Financial Inc. - could play a bigger role in the mortgage unit's restructuring effort.

In a report published by Bloomberg, "people familiar with the talks" said that advisors to Ally and ResCap - as well as to the U.S. Treasury Department, which owns a 74% stake in Ally - have indicated Buffett could be approached to take an equity stake in the struggling off-shoot. There is talk of putting ResCap into a prepackaged bankruptcy.

Advisors have also reportedly been scouting for potential bidders for the unit.

Detroit-based parent Ally's 8% notes due 2020 meantime gained 1½ points to end at 101½ bid.

Hawker Beechcraft hit hard

Elsewhere, Hawker Beechcraft Acquisition Co. was "a name that had a hard time today," a trader said, seeing the Wichita, Kan.-based business jet manufacturer's 8 7/8% notes due 2015 trading down around 10 points at 19 bid, 19¼ offered, after having been as low as a "mid-teens" context, but on not much volume - he saw only one sizable trade.

The company's other bonds were busier, with the 9¾% notes due 2017 off by 8 points, ending at 10-101/4. About $5 million of the bonds changed hands by mid-afternoon.

Hawker's 8½% notes due 2015 closed at 17 bid, 17½ offered, down 7 points, a trader said, while at another desk, the bonds were seen at around the 19 level, down nearly 5 points, on $6 million of turnover.

Traders said that debt has been under pressure all week as investors worry about a looming loan covenant breach.

The planemaker - which is partly owned by Goldman Sachs Group Inc. - is close to breaching a covenant on its loans that requires the company to grow its cash flow. A weakening economy has hurt demand for its products, which has in turn made it difficult to increase cash flow.

Though the current price of the debt indicates that the market sees a restructuring happening in the near future, the company has yet to hire advisors to consult on such an effort.

As of Sept. 30, Hawker had $2.14 billion in outstanding debt, including $630.6 million of unsecured notes and $1.4 billion of term loans maturing in 2014.

Stephanie N. Rotondo contributed to this report

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