Upsized Ally, Aircastle deals price, calendar builds, NII slips again; funds add $433 million

By Paul Deckelman and Paul A. Harris

New York, Dec. 2 - The high-yield primary market turned into the homestretch for 2013 on Monday, opening the final month of the year with a pair of opportunistically timed and quickly shopped offerings that generated some $1.4 billion of new junk-rated, U.S.-dollar-denominated paper.

Lender and on-line banking firm Ally Financial Inc. doubled the size of its three-year issue to $1 billion, pricing that megadeal tight to talk at a very un-junk-like yield inside the 3% marker - but even so still reportedly playing to oversubscribed investor demand. Traders said the new notes stayed around their issue price when they were freed for secondary market dealings.

Aircraft lessor Aircastle Ltd. also upsized its five-year note offering to $400 million, pricing it with a more conventionally junk-like coupon. Those bonds gained a modest amount of altitude when they hit the aftermarket.

Market sources noted several new-deal announcements building up the year-end forward calendar, including one from Aircastle sector peer Fly Leasing Ltd., which is shopping a $250 million deal around to potential investors via a traditional week-long roadshow.

Energy exploration and production operator Ultra Petroleum Corp. offers a more streamlined process for its planned $400 million transaction, which will be marketed to investors via a conference call.

And the sources saw a few even bigger prospective deals on the horizon - $1 billion of eight-year notes from drugmaker Forest Laboratories, Inc. and a $1.69 billion equivalent dollar- and euro-denominated deal from Altice VII Sarl, which operates cable television and wireless networks in Israel.

Traders reported little or no post-holiday activity in deals which had come to market last week before the holiday break, including Bluewater Energy Services BV and Wise Metals Group LLC.

Away from the new or recent deals, traders called Monday's market dull and sleepy, as participants tried to get back into the swing of things after what was for many of them a four-day holiday weekend. There was some continued downside activity in NII Capital Corp.'s bonds, which have recently been under pressure.

Statistical market performance measures were seen mostly easier, after having been mixed on Friday.

Junk players meantime mulled over the latest statistics regarding the flow of cash into or out of high-yield mutual and exchange-traded funds - a key proxy for overall junk liquidity trends. These showed a positive reading for a third consecutive week.

Lipper funds up $433 million

Due to the market close Thursday for the Thanksgiving holiday, those fund-flow statistics generated by AMG Data Services, which normally circulate around Junkbondland on Thursday afternoon, were released on Friday this week - an abbreviated and very lightly attended session, at best.

Market sources familiar with the numbers said that during the week ended this past Wednesday, $433 million more came into those funds than left them.

It was the third consecutive net cash addition to the funds, coming on the heels of the $783 million inflow reported for the previous week, ended Nov. 20, by Arcata, Calif.-based AMG, a unit of the Lipper analytics division of Thomson Reuters Corp.

Inflows over the past three weeks have now totaled $1.435 billion, according to a Prospect News analysis of the figures.

Those three weeks, in turn, are part of a larger, overwhelmingly positive recent trend, according to the analysis. The latest week's inflow was the 11th in the past 12 weeks, dating back to the week ended Sept. 11 - a stretch interrupted by one lonely negative week, ended Nov. 6, when the funds had lost a net of $879 million - their first outflow in two months.

During that 12-week stretch, net inflows have accumulated to the tune of $9.797 billion, according to the analysis.

But the year as a whole so far has been considerably less lopsided, with inflows having now been seen in 31 weeks, against 17 weeks of outflows, according to the Prospect News analysis, For a number of weeks, cumulative fund flows for the year as a whole even turned negative due to a sizable losing streak seen during May and June that included several multi-billion-dollar outflow numbers, prompted by investor worries over whether the Federal Reserve would end its accommodative monetary policy. At one point in late June, the red ink topped the $9 billion mark, according to the analysis.

However, encouraged by recent indications that the central bank would not be trimming its bond-buying policies as quickly as feared due to a still-shaky economy, inflows began to mount up, with the negative number for the year gradually whittled down week by week; eventually the year-to-date fund-flow number swung back into the black, according to the analysis, and has stayed there ever since.

Market sources said that the latest weekly inflow brought the year-to-date total up to an estimated $2.816 billion.

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

The sustained flows of fresh cash into junk - and the mutual funds and ETFs represent but a small, though very observable and quantifiable percentage of the total amount of investor money coming into or leaving the more than $1 trillion junk market - were seen by analysts as a key catalyst behind the high-yield secondary sphere's strong performance last year versus other fixed-income asset classes, and its record active new-deal pace, which ultimately produced some $327 billion of new U.S. dollar-denominated, junk-rated paper from domestic or industrialized-country issuers, according to data compiled by Prospect News.

It was also seen as one of the major drivers behind the robust patterns of primary activity and secondary strength which had continued for much of this year's first half, before turning choppy over the past several months. However, the recent run of consecutive net inflows coincided with the explosive expansion of junk primary activity seen in September, when over $47 billion of new paper priced, according to the Prospect News new-issuance data - the biggest September ever, and the continued healthy pace of scheduled - and particularly, opportunistically timed new deals - during October, November and now continuing into this month as well.

Ally brings a billion

The post-Thanksgiving primary market got off the starting line at a purposeful pace on Monday, with two issuers bringing quick-to-market dollar-denominated deals to raise a combined total of $1.4 billion.

Ally Financial priced a $1 billion issue of 2¾% non-callable senior guaranteed notes (B1/B+) at 99.622 to yield 2 7/8%.

The yield printed 12.5 basis points inside the tight end of the 3% to 3 1/8% yield talk.

The deal was trading around par in the secondary market, according to a trader who added that the firmness in the price was notable because Ally's deals have a tendency to "sit there on the break."

Market buzz had demand for the bonds all over the place, the trader added, reporting that one source had the book at 1.5-times the deal size, while another report had it at about three-times the deal size.

Citigroup, Goldman Sachs, JP Morgan and Morgan Stanley were the joint bookrunners for the public offer, which was transacted on the investment grade desks.

The Detroit-based automotive lender plans to use the proceeds for general corporate purposes and the redemption of outstanding debt securities.

Aircastle at the tight end

Aircastle launched and priced an upsized $400 million issue of non-callable five-year senior notes (Ba3/BB+) at par to yield 4 5/8%.

The deal was increased from $300 million. The yield printed at the tight end of yield talk that had been set in the 4¾% area.

Citigroup, Goldman Sachs, JP Morgan and RBC were the joint bookrunners.

The company plans to use the proceeds for general corporate purposes, including the purchase of aviation assets.

Astaldi taps 7 1/8% notes

In the European market Astaldi SpA priced a €100 million add-on to its 7 1/8% senior notes due Dec. 1, 2020 (expected ratings B1/B+/B+) at 102.25 to yield 6.716%.

The reoffer price came rich to the 101.5 to 102 price talk.

BNP, Banca IMI, BBVA, Credit Agricole, Credit Suisse, Deutsche Bank, HSBC, ING, Natixis and UniCredit were the joint bookrunners for the drive-by add-on.

BNP will bill and deliver.

The Rome-based construction group plans to use the proceeds to repay debt, diversify its funding sources, and to extend the maturity profile of its debt.

Deutsche 'saves' Tuesday

Elsewhere in the European market a "save-the-date" memo regarding a potential euro-denominated deal from a German industrial credit went out to investors on Monday, according to market sources.

The event, which is set for Tuesday, will be led by Deutsche Bank.

Altice starts roadshow

Altice began a roadshow on Monday in London for a $1,685,000,000 equivalent dual-currency three-part notes offer.

Altice Financing SA plans to issue $1,285,000,000 equivalent of eight-year senior secured notes in tranches of dollar-denominated and euro-denominated notes. The eight-year secured notes will come with three years of call protection.

Altice Finco SA plans to issue $400 million 10-year senior unsecured notes, which come with five years of call protection.

Joint global coordinator Goldman Sachs International will bill and deliver. Morgan Stanley is also a global coordinator.

Barclays, Credit Agricole CIB and Deutsche Bank are the joint bookrunners.

Proceeds from the Rule 144A for life and Regulation S deal will be used to fund the acquisition of Orange Dominicana SA and Tricom, both of which have operations in the Dominican Republic.

Luxembourg-based Altice operates Hot Mobile, a wireless telecommunications company in Israel, and Israeli cable television company Hot.

Forest to offer $1 billion

Forest Laboratories plans to price a $1 billion offering of non-callable senior notes due 2021.

Joint bookrunner Morgan Stanley & Co. will bill and deliver for the Rule 144A deal. BofA Merrill Lynch is also a joint bookrunner.

The New York-based pharmaceutical company plans to use the proceeds to fund a proposed $400 accelerated share repurchase program, and for general corporate purposes, including potential acquisitions and additional share repurchases.

Ultra sets Tuesday call

Ultra Petroleum plans to participate in a conference call with investors at 11 a.m. ET on Tuesday to discuss its proposed $400 million offering of five-year senior notes, according to market source.

Goldman Sachs & Co., Citigroup Global Markets, Wells Fargo Securities LLC, JP Morgan Securities LLC and CIBC World Markets are the joint bookrunners for the Rule 144A with registration rights and Regulation S offer.

The notes come with two years of call protection.

The Houston-based independent exploration and production company plans to use the proceeds to fund a portion of the purchase price of its recently announced Uinta Basin acquisition.

Fly roadshowing $250 million

Fly Leasing plans to roadshow a $250 million offering of seven-year senior notes through the end of the present week, and price the deal early in the Dec. 9 week, according to an informed source.

Jefferies is the bookrunner for the public offer.

The notes will callable after three years at par plus 75% of the coupon.

The Dublin-based aircraft lessor plans to use the proceeds for general corporate purposes including the future acquisition of aircraft.

New Ally up slightly

In the secondary market, a trader said that Ally Financial's new 2¾% notes due 2017 began trading in a par to 100¼ bid context when the automotive lender and online banking company's sharply upsized megadeal was freed for the aftermarket.

However, he later saw the bonds ease from that level to go home around 99 7/8 bid, 100 1/8 offered, just a little above their 99.622 issue price. A second trader also saw the notes there.

The first trader - in a nod to the holiday season - quipped that the new bonds' decidedly un-junk-like sub-3% coupon was "a turkey of a coupon" in the eyes of many junk accounts, although it still attracted enough investor attention to justify a solid upsizing.

Aircastle takes flight

Several traders saw Aircastle's new 4 5/8% notes due 2018 trading a little above their par issue price.

One saw the Stamford, Conn.-based commercial jet aircraft lessor's new issue "right inside" a 100 1/8 to 100 3/8 bid context.

A second pegged those bonds trading at levels between 100¼ and 100½ bid.

Recent deals little seen

A trader said that he had seen no activity in the deals which had priced last week, including Bluewater Energy Services' 10% notes due 2019. The Hoofddorp, Netherlands-based company, which designs, engineers, constructs, installs and delivers floating production, storage and offloading systems and single point mooring systems for use by energy exploration and production companies, was heard by a market source on Wednesday to have priced $400 million of 10% six-year notes, which were not seen in the aftermarket.

He also saw no fresh trading Monday in Wise Metals Group's new 8¾% senior secured notes due 2018.

The Linthicum, Md.-based metals recycling company and producer of sheet aluminum used in the manufacture of soft-drink and beer cans, along with its Wise Alloys Finance Corp. subsidiary, priced $650 million of those notes at par in a scheduled forward calendar deal last Tuesday after the offering was upsized from $625 million originally.

Traders said the new Wise bonds firmed smartly when they reached the aftermarket later Tuesday, quoting them as high as a 102 to 102¾ context, and they held those levels for the rest of the week.

A trader Monday called the bonds unchanged at 102 bid, 102½ offered.

Quiet post-holiday market

One of the traders characterized Monday as "pretty slow and quiet in the morning, until late in the afternoon, when you had the Aircastles and Ally show up. Then you had some trading picking up."

However, he said Monday was mostly about "people coming in and getting back into the loop" after the long holiday weekend, with some market participants back in the office for the first time since last Tuesday.

He said that there were just "bits and pieces" of things trading

NII paper punished again

One such name was NII Holdings Inc.'s several bond issues, which have been under pressure for the last month, ever since the Reston, Va.-based company - which provides Nextel wireless service to several Latin American countries - issued third-quarter results and warned that it will miss its forecast for 2013 profit by 30% due to weaker-than-expected sales and foreign exchange factors.

A trader said that its NII Capital Corp. 10% notes due 2016 were down 2½ points on the day to around the 50½ mark, on volume of about $5 million.

Its 8 7/8% notes due 2019 backtracked by 1½ points to around the 40 level, with over $8 million having traded.

Its 7 5/8% notes due 2021 were down 1¼ points at 39½ bid, on volume of $7.5 million, "if not more," the trader said.

The bonds slid in tandem with the company's Nasdaq-traded shares, which plunged by 23 cents, or 9.06%, to finish at $2.31, although volume of 4.3 million shares was below normal.

The shares fell after Citigroup maintained its "sell" rating on the shares and cut its price target to $2 from $3 previously.

Analyst Lucio Aldworth said in a research note Monday that the company's push-to-talk services "face a tough future with falling mobile pricing among its mass-market competitors, a limited handset portfolio, narrower signal coverage and technological disadvantage."

Rockwood, Reynolds active

Among the day's most actively traded bonds, Reynolds Group Holdings Ltd.'s 5¾% notes due 2020 were seen by a market source to have eased by ¼ point to 102½ bid, on volume of over $11 million. There was no fresh news out on the Auckland, N.Z.-based manufacturer of Reynolds Wrap aluminum foil and other food and beverage packaging materials.

Rockwood Specialties Group, Inc.'s 4 5/8% notes due 2020 were seen unchanged at 103 bid, with over $12 million of the notes having changed hands. There was no fresh news out on the Princeton, N.J.-based maker of specialty chemicals and advanced materials.

And First Data Corp.'s 12 5/8% notes due 2021 gained ½ point to end at 118 bid, on turnover of more than $16 million. No fresh news surfaced on the Atlanta-based processor of credit card and other types of electronic transactions.

Market signs mostly easier

Overall, statistical junk-market performance indicators were mostly easier on Monday.

The Markit Series 21 CDX North American High Yield Index lost 1/32 point to finish at 107 1/16 bid, 107 1/8 offered, its second consecutive loss after having been unchanged for two sessions before that. On Friday, the index dipped by 5/32 point.

The KDP High Yield Daily Index lost 5 basis points on Monday to end at 74.39, its first loss after four straight advances. On Friday, it had gained 5 bps.

Its yield meantime moved up by 2 bps, to 5.64%, its first widening after four straight sessions of having declined, including Friday, when it came in by 3 bps.

However, the widely followed Merrill Lynch High Yield Master II Index was the exception to the rule, posting its seventh straight gain to improve by 0.016%, on top of Friday's 0.023% advance.

The latest gain lifted its year-to-date return to 6.85%, a seventh consecutive new peak level for the year; eclipsing Friday's 6.805% reading, which had been the previous new 2013 zenith.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.