Six deals price; junk closes chaotic week with firm tone; earnings boost Ally, Alpha Natural

By Paul A. Harris and Stephanie N. Rotondo

Phoenix, Nov. 2 - The high-yield bond market was firming Friday, helped in part by a round of decent earnings.

Ally Financial Corp., First Data Corp., Alpha Natural Resources Inc. and CC Media Holdings Inc. - the parent of Clear Channel Communications Inc. - reported on the last trading day of the week. Aside from First Data, each of them showed an improved bottom line. All of them saw the bonds gain as a result, including First Data.

Meanwhile, Energy Future Holdings Corp.'s debt continued to be actively traded. However, the debt ended the day in mixed fashion.

Overall, a trader said volume was "still fairly light," though he noted that he was "starting to see more people in the office," as they attempted to regroup post-Hurricane Sandy.

The high-yield primary market, having seen its week disrupted when Hurricane Sandy forced the closings of the bond and stock markets on Wednesday, appeared to regain lost ground on Friday, sources said.

Given that it was a Friday, activity was indeed robust, with six issuers, each one bringing a single tranche, raising $1.97 billion.

Royal Caribbean upsizes

Royal Caribbean Cruises Ltd. launched and priced an upsized $650 million issue of non-callable 10-year notes (Ba1/BB) at par to yield 5¼%.

The session's biggest deal was upsized from $500 million, and was led by J.P. Morgan, Goldman Sachs, Bank of America Merrill Lynch, Morgan Stanley and RBS. J.P. Morgan will bill and deliver.

The Miami-based cruise company plans to use the proceeds to repay unsecured debt facilities.

Huntsman's eight-year bullet

Huntsman International LLC priced an upsized $400 million issue of non-callable eight-year senior notes (B1/BB-) at par to yield 4 7/8%, at the wide end of 4¾% to 4 7/8% yield talk.

Despite pricing at the wide end, the deal went well, and the company managed to upsize by $100 million, an informed source said, noting that the drive-by deal was announced Friday morning at a size of $300 million.

Bank of America Merrill Lynch, Barclays, Citigroup, Goldman Sachs, HSBC, J.P. Morgan, RBC and Wells Fargo were the joint bookrunners.

The Salt Lake City-based specialty chemicals company plans to use the proceeds, including the upsize amount, to fund a partial redemption of its senior notes due 2016.

Ausdrill at the tight end

Australia's Ausdrill Finance Pty Ltd. priced a $300 million issue of seven-year guaranteed senior notes (Ba3/BB) at par to yield 6 7/8%, at the tight end of price talk that had been set in the 7% area.

Morgan Stanley was the left bookrunner. Deutsche Bank and Standard Chartered Bank were the joint bookrunners.

The Kewdale, Western Australia-based mineral exploration company plans to use the proceeds to repay the term loan portion of its credit facility, with any remaining proceeds to be used for general corporate purposes, including a temporary paydown of its revolver.

Northern Tier sells secureds

Northern Tier Energy LLC priced a $275 million issue of eight-year senior secured notes (B1/BB-) at par to yield 7 1/8%, at the tight end of yield talk that was set in the 7¼% area.

Goldman Sachs, Deutsche Bank and J.P. Morgan managed the quick-to-market debt refinancing issue.

Centene taps 5¾% notes

The Friday session also featured two drive-by add-on deals, both of which priced at the rich end of price talk.

Centene Corp. priced an upsized $175 million add-on to its 5¾% senior notes due June 1, 2017 (Ba2/BB) at 106 on Friday, with a 4.288% yield to maturity.

The deal came at the rich end of the 105.5 to 106 price talk.

Barclays and Wells Fargo were the joint bookrunners for the general corporate purposes deal.

Chaparral taps 7 5/8% notes

Chaparral Energy, Inc. priced a $150 million add-on to its 7 5/8% senior notes due Nov. 15, 2022 (B3/B-) at 104.5 to yield 6.846%, at the rich end of the 104.25 to 104.5 price talk.

Wells Fargo, Credit Agricole, Credit Suisse, J.P. Morgan and RBC were the joint bookrunners for the debt refinancing and general corporate purposes deal.

Storming back

In spite of the mid-week disruption to market activity caused by Hurricane Sandy, which devastated much of New Jersey and New York City, and caused widespread damage along the Eastern Seaboard, the primary market still managed to put up decent numbers for the October-November crossover week.

Issuers brought a combined 10 tranches of junk-rated, dollar-denominated notes, raising a total of $3.82 billion, as the new issue market hurtles deeper and deeper into record territory.

The $300 billion yearly issuance mark, never reached before in the high-yield market, has now become something of a fading memory.

Year-to-date issuance to Friday's close came to $307 billion in 635 tranches.

The previous record dollar amount of yearly issuance was $292 billion, which came in 2010.

However the number of deals of 2012 has yet to eclipse that of 2010, which still holds the record at 654 tranches.

Clear Channel plans giant deal

Only one deal was announced on Friday, however it was a mammoth one.

Clear Channel Outdoor Holdings disclosed plans to price $2,725,000,000 of high-yield notes during the Nov. 5 week.

The deal, which is expected to price on Monday or Tuesday, features $735,750,000 million of series A senior notes due 2022 and $1,989,250,000 of series B senior notes due 2022.

Goldman Sachs, Citigroup, Morgan Stanley, Credit Suisse, Deutsche Bank and Wells Fargo are the underwriters for the debt refinancing.

The Clear Channel deal was "pretty well telegraphed," said a trader who was speaking on the telephone shortly after news of the offer began to circulate.

Initial discussions are taking place in a yield context of 6% to 6½%, and the deal size is unlikely to grow, the trader added.

$6 billion calendar

In a market that has been dominated by drive-by deals ever since the Labor Day hiatus, the first full week of November gets underway with a substantial active calendar: $6.22 billion.

In the week ahead, three issuers are in the market with announced deals that are north of the $1 billion mark.

In addition to the above-mentioned Clear Channel deal, Vivint, Inc. has a $1,305,000,000 two-part deal, issuing via 313 Group, Inc., which is to be merged with and into APX Group, Inc.

Bank of America Merrill Lynch, Citigroup, Deutsche Bank, Morgan Stanley, Credit Suisse, Macquarie and Goldman Sachs are the joint bookrunners.

Also in the week ahead, Sweden's Perstorp Holdings AB is set to price $1.09 billion of senior secured notes in three tranches.

J.P. Morgan and Goldman Sachs are the joint physical bookrunners.

The deal includes $660 million of first-lien notes which are being offered in euros as well as dollars.

The euro new issue market has pretty much been resting on its oars recently, sources say.

One London-based senior debt capital markets banker, pointing out that there really isn't all that much of 2012 left to play out, said that euro-denominated issuance in the run-up to 2013 is unlikely to be phenomenal.

However, the source added, the market does expect to hear the announcement of a €500 million offering from the health care sector, early on Monday morning.

Look for JP Morgan to run that deal, the banker added.

Market ends upbeat

Despite the ravaging of Hurricane Sandy during the week, the junk market managed to end the week on a high note.

The KDP High Yield Index rose to 74.31, with a 6.08% yield. On Thursday, the reading was 74.29, with the same yield.

Ally firms on earnings

A trader said there was "not huge volume in Ally Financial's 8.3% notes due 2015 following the release of the bank's third quarter results.

Still, the bonds were fractionally higher at 112 3/8.

Ally's 8.125% fixed-to-floating rate trust preferreds (NYSE: ALLYPA), however, were quite active Friday, with over 2 million shares changing hands.

The preferreds ended the day up 30 cents, or 1.15%, to $26.45.

For the quarter, Ally reported net income of $384 million, versus a net loss of $898 million the quarter before and a loss of $210 million for the third quarter of 2011.

"Results for the quarter were driven by continued strong and stable performance in the global automotive services business, resulting from earning asset growth from a more profitable origination mix, despite intensifying competition for auto finance assets," the company said in a press release. "Performance was also impacted by strong gain on sale revenue and favorable mortgage servicing rights activity, net of hedge, in mortgage operations."

Cash and equivalents were ample at $17.2 billion as of Sept. 30, compared to $16.1 billion as of June 30.

First Data widens loss

Through First Data's quarterly results were disappointing, the company's 12 5/8% notes due 2021 benefitted from the positive market tone, according to a trader.

The debt closed the session around 105, up ½ point.

For the third quarter, the Atlanta-based credit card payment processor posted a net loss of $212 million. That compared to a net loss of $53.9 million the year before.

The wider loss was blamed on declines in derivative investments.

Revenues for the period ending Sept. 30 dropped to $2.67 billion from $2.73 billion. However, transaction and processing fees gained 6% to $977.4 million.

Alpha Natural rises

Production cuts imposed at Alpha Natural Resources' mines helped the Bristol, Va.-based coal producer improve its bottom line in the third quarter.

That in turn gave the company's bonds a boost, according to traders.

One trader said the 9¾% notes due 2018 - a recent new issue - was the most active of the capital structure. He called the bonds up 1¾ points at 1033/4.

The 6¼% notes due 2021 were meantime 1¼ points better at 891/2.

Another trader said the debt was "better after the numbers," calling it up 1½ to 2 points on the day. He pegged the 9¾% notes at 103½ bid, 104 offered.

Another market source deemed the 6¼% notes up 1¼ points at 89½ bid.

Alpha Natural reported a net loss of $46 million, or 21 cents per share, for the third quarter, versus income of $63 million, or 28 cents per share, the year before.

Still, that was much better than the $2.23 billion loss seen in the second quarter of 2012.

Revenues came to $1.45 billion, down from $1.99 billion in 2011.

"Market conditions for both metallurgical and thermal coal have been challenging throughout much of 2012, and continued in the third quarter," said Kevin Crutchfield, Alpha's chairman and chief executive, in the earnings release. "In the face of these market headwinds, Alpha has taken swift and decisive actions to right-size our operational footprint and our cost structure."

One such action was reducing production by 16 million tons annually. When combined, production cuts and other restructuring actions are expected to generate $150 million in annual overhead savings.

Clear Channel pushes higher

Clear Channel Communications was on the rise Friday, after the San Antonio-based multimedia company reported increased revenues for its third quarter.

A trader placed the 10¾% and 11% LBO bonds due 2016 around 75 and called the 9% notes due 2021 a point firmer at 88½ bid, 89 offered.

Revenues increased to 41.59 billion from $1.58 billion. Across the CC Media Holdings Inc. span, the international outdoor advertising unit was the only one to see a decline in revenue.

The revenue gain was due in part to political advertising.

Net loss narrowed to $50.56 million from $74.05 million.

All quiet on the Edison front

Traders said that activity in Edison International Inc.'s debt was basically nil, despite the company's dismal earnings posted after the market closed on Thursday.

"There's no real volume," a trader said, calling the debt generally mixed.

"I didn't see a lot of trading in it, despite all the stuff that was going on out there," said another trader.

For the quarter, the Rosemead, Calif.-based utility provider posted overall earnings of $190 million, or 58 cents per share, versus $426 million, or $1.31 per share, the year before.

The parent company attributed the decline in earnings to "losses at Edison Mission Group and to a delay in the California Public Utilities Commission final decision on Southern California Edison's 2012 General Rate Case."

For its part, Edison Mission saw a core loss of 28 cents per share, which compared to earnings of a nickel per share for the third quarter of 2011. The swing to a loss was attributed in part to reduced generation and higher fuel prices.

The rumor mill has been chattering for months that Edison International might look to put the Edison Mission unit into bankruptcy, given its $3.7 billion in unsecured debt.

TXU still busy

Energy Future Holdings' bonds remained active on Friday although they closed at mixed levels by the end of business.

A trader said the 10% notes due December 2020 were down slightly around 107, but the 10% notes due January 2020 were up, trading around 104.

He also saw the 6.55% notes due 2034 falling nearly a point to 361/2.

A second trader saw the 11¾% notes due 2022 going out around 95, though he noted that the paper had been lower earlier in the day.

He also said the 6.55% notes were on the weaker side, though they "rebounded a little bit from their lows."

He quoted the issue at 36 bid, 37 offered.

Energy Future, also known as TXU, saw its bonds decline massively on Wednesday following the release of the company's quarterly results.

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