New bonds help tone; Sprint holds; Harrah's heads higher; QVC doubles deal to $1 billion

By Paul A. Harris and Stephanie N. Rotondo

Portland, Ore., Sept. 22 - The high-yield market was generally strong Tuesday, with new issues remaining the focus.

But away from new issues, "volume was not bad," a trader said.

Sprint Nextel Corp.'s bonds held their ground - or moved up, depending on whom you asked - following news out late Monday that the company had been awarded a military contract. Rumors regarding a potential buyout from Deutsche Telekom also continue to make the rounds, only now with a new spin.

In the gaming sector, Harrah's Entertainment Inc.'s debt got a boost after the company announced a tender offer for four series of notes. The offer, however, is contingent upon the company securing a new term loan.

Financials continue to move up with the market. American International Group Inc.'s notes were seen up in the neighborhood of 4 to 5 points, while CIT Group Inc.'s short paper was up about the same. E*Trade Financial's bonds also continued to gain momentum.

New issues help overall market

The market ended Tuesday trading a bit firmer, traders reported, helped along by recent new issues.

"It's all new issues," said one trader.

The CDX 12 High Yield index improved by "about a point," a market source said, closing at 94 7/8 bid, 95 3/8 offered. The KDP High Yield Index was also stronger at 68.91, with a yield of 8.41%, compared to Monday levels of 68.70, yielding 8.48%.

"The market opened unchanged and I think it was kind of mixed [through the day]," a trader said. "It tried to firm up by the end of the day. I think it's still hanging in there."

As an example, a mutual fund manager said, Energy Future Holdings (TXU Corp.) bonds were at 73½ bid, 74¼ offered at the Tuesday close, compared with 72 bid, 73 offered on Monday.

The technical rally in high-yield continues, the manager said.

"People have cash to put to work, and there is not enough issuance," the buy-sider remarked.

"And people are chasing yield."

QVC doubles to $1 billion

The primary market saw just over $1.2 billion of action on Tuesday.

QVC, Inc. doubled the size of its deal to $1 billion from $500 million, and priced its issue of 7½% 10-year senior secured notes at 98.278 to yield 7¾%.

The yield printed on top of price talk.

Upon the completion of the split-off of the Liberty Media assets, Moody's Investors Service will rate the notes at Ba2. Standard & Poor's will rate them BB+. Fitch will assign its investment-grade BBB- rating to the notes.

Wells Fargo Securities and Barclays Capital Inc. were joint bookrunners.

The original $500 million of proceeds will be used to repay existing term loans.

Soon after pricing, the bonds traded in the context of 1001/2, up more than two points, according to a buyside source.

Traders, meanwhile, saw them at par bid, 101 offered.

North American Energy tight to talk

Meanwhile North American Energy Alliance, LLC & Finance Corp. priced a $205 million issue of 10 7/8% senior secured second-lien notes due June 1, 2016 (Ba3/B+/) at 97.739 to yield 11 3/8%.

The yield printed at the tight end of the 11½% area price talk.

Barclays Capital Inc. and Bank of America Merrill Lynch were joint bookrunners for the Rule 144A for life notes.

Proceeds will be used to refinance the New York-based utility owner-operator's unsecured term loan.

Delta upsizes, restructures

Elsewhere in the primary market, the dealers set the stage for an active mid-week session.

Delta Air Lines, Inc. upsized and restructured its bond deal.

It also set price talk for the $1.25 billion two-part secured notes offer.

The deal is now comprised of $500 million of second-lien notes due March 2015, non-callable for 2.5 years, talked at the 13% area, and $750 million of first-lien notes due Sept. 2015, non-callable for two years, talked at the 9 7/8% area.

Previously the passenger air carrier had been in the market with $500 million to $700 million of first-lien notes.

Pricing is set for Wednesday morning.

J.P. Morgan Securities Inc., Barclays Capital Inc. and UBS Investment Bank are joint bookrunners.

The company downsized its bank deal to $250 million from $500 million.

Proceeds will be used to repay all existing senior corporate credit facilities, with any remaining proceeds to be used for general corporate purposes.

GeoEye price talk

Meanwhile GeoEye, Inc. set price talk for its offering of $350 million senior secured notes due 2015 (B1/B+) at 10¼% to 10½% with 2 to 3 points of original issue discount.

The books close at noon ET on Wednesday. The deal is expected to price Wednesday afternoon.

JP Morgan and Bank of America Merrill Lynch are joint bookrunners

Stream Global starts roadshow

Stream Global Services, Inc. began a roadshow Tuesday for its $200 million offering of five-year senior secured notes (B1).

Goldman Sachs & Co. is the left lead bookrunner. Wells Fargo Securities, RBC Capital Markets and Morgan Stanley are joint bookrunners.

The deal is contingent upon the closing of Stream's combination with eTelecare Global Solutions, Inc. and Stream's new asset-based revolving credit facility.

Proceeds will be used to refinance debt of Stream and eTelecare and for general corporate purposes.

Stream is a Boston-based business-to-business software services provider.

Inverness to tap 7 7/8% paper

Also among upcoming new deals, Inverness Medical Innovations, Inc. plans to price a $100 million add-on to its 7 7/8% senior notes due Feb. 1, 2016 (expected ratings B2/B-) on Wednesday.

Jefferies & Co., Goldman Sachs & Co. and Wells Fargo Securities are joint bookrunners.

Proceeds will be used to help fund the acquisition of Free & Clear.

The prospective issuer is a Waltham, Mass.-based provider of consumer and professional medical diagnostic products and services.

The original $150 million issue priced Aug. 6, 2009 at 98.144 to yield 8¼%.

Big rally - for almost everybody

The technical rally in junk - a lot of cash chasing a limited amount of bonds, with investors focusing on the primary market in order to get decent size - continues to push prices higher, sources said on Tuesday.

As a result, nearly all of the recently priced issuers are trading higher, they add.

One example is the recent crossover deal from Zions Bancorp.

Zions' new 7¾% notes due 2014 (B2/BBB-/BBB) were seen Tuesday morning at 90 bid, 91 offered. The Utah-based bank company priced $450 million of the debt at 86.888 last Friday to yield 11¼%.

Later in the day, though, they eased a little to 89½ bid, 90 offered, still well ahead of their original price

However not all the recently priced deals have traded higher in the secondary market.

Sources pointed to two such exceptions on Tuesday.

The new Ford Motor Credit 8.7% senior unsecured notes due 2014 (Caa1/CCC+/) were at 98 1/8 bid, 98 5/8 offered, Monday morning, versus the 98.805 issue price.

The finance company priced $1 billion last Wednesday at 98.805 to yield 9%.

The other exception, sources say, are the new MGM Mirage 11 3/8% notes due March 2018, seen at 96½ bid, 97 offered on Tuesday morning. They priced last Thursday at 97.396, in a $475 million deal.

Sprint holding in there

In the secondary, Sprint Nextel's bonds finished the day unchanged to "marginally better," according to a trader.

The trader saw about $10 million of the 8 3/8% notes due 2012 trade around 1031/2. Another trader said the paper was "all over the lot," also placing the notes around the 103 mark.

"It's kind of unchanged," the second trader said. "That's where they were trading yesterday."

At another desk, the 6% notes due 2016 were seen gaining just over a point to 89¼ bid.

Late Monday, the United States Navy announced that it had awarded Sprint - and two other wireless providers - a $60 million contract for nationwide cell phone service.

Also, rumors continue to circulate about whether or not T-Mobile parent Deutsche Telekom will buy the company.

The newest buzz is that Deutsche Telekom is instead looking at gaining access to airwaves controlled by Clearwire and MetroPCS. Sprint is also said to be possibly looking at Clearwire, as picking up the company would be easier than adding a new network to its system.

Sprint Nextel is an Overland Park, Kan.-based wireless telecommunications provider.

Harrah's heads higher

Harrah's Entertainment's debt traded actively and "significantly better," according to a trader, following news of a tender offer.

The trader saw the 5¾% notes due 2017 trade up to around the 61 level, on $15 million traded. The 10¾% notes due 2016 meanwhile traded around 84, with $20 million changing hands.

"I believe I traded that at 12," the trader quipped, speaking to the name's run up.

Another market source called the 5¾% notes up just over 6 points at 61 bid, while another source quoted the issue at 60 bid, 61 offered.

Harrah's announced it had begun a $175 million tender offer for four series of notes, the 5½% senior notes due 2010, 7 7/8% senior subordinated notes due 2010, 8% senior notes due 2011 and 8 1/8% senior subordinated notes due 2011.

Should the tendered notes go over the $175 million maximum limit, the notes will be repurchased on a pro rata basis.

For each $1,000 principal amount tendered, Harrah's will pay $997.50 for the 5½% notes, $980.00 for the 7 7/8% notes, $960.00 for the 8% notes and $955.00 for the 8 1/8% notes.

The offer expires on Oct. 21 at midnight ET.

In conjunction with the exchange, Harrah's is looking to secure a new $750 million term loan under its senior secured credit facility. The tender is contingent upon receiving the new loan.

Harrah's is a Las Vegas-based casino operator.

Financials gain momentum

The financial arena continues to gain steam, as trader reported American International Group, CIT Group and E*Trade Financial all ended the day higher.

A trader called AIG's 8.175% notes due 2058 up "4 to 5 points" around 60.

He also saw CIT's "real short paper" - the 4¼% notes due February 2010 - moving actively, with about $20 million changing hands. He said the bonds opened around 701/2, then traded up to 72, then 74, and so on, until the end of the day when the bonds closed around 76. He noted that the issue hit a high of 78 before coming back down to its closing level.

Another market source pegged the notes at 75.5 bid.

Also, E*Trade's 12½% notes due 2017 "continues to move up," seeing the bonds end at 107½ bid, 108 offered.

"So that name continues to fare well," he said.

Broad market mostly firm

In the broader market, DirecTV Holdings LLC's 7 5/8% notes due 2016 closed steady at 1071/2, a trader said, on $20 million traded.

Blockbuster Inc.'s 9% notes due 2012 continue to lose ground, another trader remarked, quoting the issue at 67 bid, 68 offered.

In the autosphere, General Motors Corp.'s benchmark 8 3/8% notes due 2033 held steady at 15½ bid, 16½ offered, while Ford Motor Co.'s 7.45% notes due 2031 improved by about a point to 82 bid, 84 offered.

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