Sprint, Dish bonds climb after T-Mobile deal demise; new ILFC issue firms; primary falls quiet

By Paul Deckelman and Paul A. Harris

New York, Dec. 20 - Now that AT&T Inc.'s plan to buy smaller wireless competitor T-Mobile USA is officially as dead as a rotary-dial phone, high-yield issues with investor interest in that merger deal were all seen higher on Tuesday.

Chief among them was Sprint Nextel Corp., AT&T's considerably smaller rival, which had opposed the proposed merger on anti-competitiveness grounds, since a bigger AT&T would have even more of an advantage over No. 3 industry player Sprint.

Sprint's 49%-owned Clearwire Corp. affiliate gained, since the wireless broadband operator is now seen as a possible seller of spectrum space it holds to AT&T.

Another gainer for pretty much the same reason was Dish DBS Corp., which is poised to buy a big chunk of spectrum and could either sell that to AT&T - or sell the whole company if the price is right.

Away from that story, traders saw a mostly firm high-yield market as Junkbondland took its cue from a stock surge triggered by favorable housing data and renewed optimism about Europe's debt problems.

Among the gainers were the new split-rated bonds priced on Monday by International Lease Finance Corp.

After having meandered around at levels at or just below their par pricing level in Monday's aftermarket, the American International Group aircraft leasing unit's new issue was seen gaining a little altitude on Tuesday.

The high-yield primary market remained completely silent as the pre-holiday wind-down of activity continued.

The active forward calendar finished the session bereft of business for the remainder of the year.

Although the CDX 17 HY index shot up 1½ points on the session, an anticipated small add-on deal - a drive-by deal said to be awaiting a rallying market - failed to materialize.

This deal, or another small drive-by transaction, could still come during the run-up to Christmas, a syndicate banker said.

However, the buyside audience necessary for sizable transactions is believed to have folded up tents for 2011, the banker added.

International Lease climbs

A trader said,"AIG [referring to International Lease Finance's corporate parent] was fairly active today."

He saw the Los Angeles-based aircraft leasing company's 8 5/8% notes due 2022 starting out in the morning trading around 1001/4-100 3/8 bid, finally going out with bid levels between 100 3/8 and 100 5/8.

"A good amount traded," said another trader, who pegged the new bonds up about a half-point at 100½ bid.

Yet another trader said the bonds, centered around 1001/2, were up either a half-point from where they had priced or a full point, relative to where they were trading Monday in initial aftermarket dealings.

The company priced $650 million of the bonds - upsized from an originally expected $500 million - at par on Monday, and they traded between 99½ and par in the aftermarket.

Ford firms a little

Among other recently priced issues, a market source saw the new Ford Motor Credit Co LLC 5 7/8% notes due 2021 trading as high as 104 on Tuesday, up from the 102¼ to 102½ context where those bonds ended on Monday.

It was the second consecutive session that the bonds made a push up to 104, although as was the case on Monday, they fell back later on.

The bonds were seen going home at just under 103 bid, while the final round-lot trade printed at 1023/4, still up about a half-point from Monday's round-lot finish.

Activity was restrained, with only about $3 million seen trading hands.

Ford Credit - the loan-financing arm of Dearborn, Mich.-based automotive giant Ford Motor Co. - had priced its $1 billion drive-by transaction on Dec. 5 at 101.80 to yield 5 5/8%, versus the 5 7/8% yield at which the original $1 billion tranche of those bonds had priced back in August.

After pricing, the new bonds quickly shot above 102 bid and have mostly stayed in that vicinity. Heavy initial dealings of over $100 million each of the first several days the bonds traded have given way to more normal-sized trading activity.

New NII also busy

The other sizable deal that came to market the same day as Ford Credit - NII Capital Corp.'s 7 5/8% notes due 2021 - saw some brisk trading volume-wise on Tuesday, with well over $10 million traded, about $7 million in big round-lot trades.

Those bonds were seen finishing around 98 7/8 bid, from 98 5/8 on Monday.

NII Capital - a unit of Reston, Va.-based NII Holdings Inc., the now-independent former international arm of Sprint Nextel Corp. - came to market on Dec. 5 with its fully fungible $700 million add-on to the existing $750 million of bonds that had priced at par back in March.

The new bonds - upsized from an originally announced $500 million - priced at 98.5 to yield 7.852%, actually wide of the original tranche's 7.625% yield.

While those new bonds initially firmed after pricing, those quick gains faded later on in the Dec. 5 week, dropping at some points to bid levels below 98, before managing to come back up to current levels.

Sprint runs up

With the news now official that AT&T will not be buying smaller wireless carrier T-Mobile for $39 billion, choosing instead to pay a $4 billion breakup fee to the German-owned T-Mobile rather than go though a likely bruising court battle with the government, Sprint Nextel was one of the big gainers among junk issues.

A trader said that Sprint paper was up anywhere from 1 to 2 points, although he noted that most of the market was also up, so it was difficult to judge how much of that was due to the news.

He saw the Overland Park, Kan.-based No. 3 U.S. wireless carrier's 6 7/8% notes due 2013 up 3/8 point, at 99 7/8 bid, while its 6 7/8% notes due 2028 were up by around 1½ points, trading at 70½ bid.

A second trader agreed that Sprint paper was "up 1 to 2 points, across the board."

Yet another trader said that 2028s were up between 1 point and 1½ points. He said that he saw "a lot of trades" go off between 70 and 71 versus Monday's late levels of 68¾ bid.

"The bulk of the trades were around 70, up 1 to 1½ points."

"The long sprint was right up there with the volume leaders," he said, with over $15 million having been traded.

Sprint's 6 7/8% notes due 2013 were at 98½ bid, up 1½ points.

Sprint had vehemently opposed the efforts of No. 2 industry player AT&T to buy T- Mobile, now the No. 4 U.S. wireless firm, in hopes of being able to leapfrog the current industry leader, Verizon Wireless.

Sprint, already far back of both Verizon and AT&T in terms of subscribers and revenues, feared that letting the one-time "Ma Bell" buy T-Mobile would put it at an even greater competitive disadvantage.

Federal authorities agreed as both the Justice Department and the Federal Communications Commission filed objections on antitrust grounds that threatened to derail the whole deal, ultimately causing AT&T to forget about doing its transaction.

Clearwire, Dish do better

Two other junk issuers seen possibly benefitting from the end of AT&T's efforts to buy T-Mobile were Clearwire and Dish DBS.

Both are seen as potential sellers of communications spectrum space to AT&T, which needs more cyberspace space and which, in fact, was hoping to pick up a big chunk of it with the acquisition of T-Mobile.

Clearwire, a Bellevue, Wash.-based wireless broadband company 49% owned by Sprint and currently in partnership with Sprint to develop the next generation of advanced LTE networks, has large amounts of communications spectrum it is currently not using and could theoretically sell some or all of it to AT&T to generate the cash it needs for its buildout.

A trader said that Clearwire's 12% first-lien notes due 2015 were up 1 to 2 points, going home at 94 bid, 95 offered.

He saw Englewood, Colo.-based satellite broadcaster Dish also better "by a half-point to 1½ points, depending on the issue. People are talking about it, no question; it was on CNBC this morning," where there was some discussion over whether Dish might sell spectrum it plans to buy - or even sell the whole company - to AT&T, which, unlike some other of its communications rivals, does not own or have an arrangement with a TV content provider.

Another trader saw Dish's 6¾% notes due 2021 up by 1¾ points on the day, at 106¼ bid. He said that $25 million changed hands, making it the busiest junk issue of the day.

He said the company's other bonds were all up by a quarter-point to 1 full point, though on average volume of just $3 million to $5 million.

Indicators turn better

A trader said that with the start of the eight-day Chanukah holiday on Tuesday night and with Friday's abbreviated pre-Christmas session expected to be only lightly attended, "we're now going to be seeing more people heading for the airports - and fewer on the trading desks" as things continue winding down, apart from actively-traded bonds having news out on them, like Sprint and the others involved with AT&T.

"It's getting pretty quiet, pretty quickly," another trader said.

Statistical measures of junk market performance - mixed over the previous several sessions - turned decidedly northward on Tuesday.

A trader said that "once [Italy] had their bond auction" - even though recently installed Prime Minister Mario Monti's government had to pay the most in 14 years to sell five-year bonds - "after that, everything kind of rallied from there."

A trader saw the CDX North American series 17 High Yield index up by 1½ points on Tuesday, ending at 91 5/8 bid, 91 7/8 offered, after having eased by½ point on Monday.

The KDP High Yield Daily index gained 12 basis points on Tuesday to close at 71.76, on top of Monday's 3 bps improvement. Its yield came in by 5 bps on Tuesday, to 7.67%, after having edged down by 1 bp on Monday.

And the widely followed Merrill Lynch High Yield Master II Index posted a fourth consecutive rise, as its 0.137% gain followed Monday's 0.111 rise.

The latest gain lifted the index's year-to-date return to 3.515% versus Monday's 3.374%.

Year-to-date returns meanwhile remain below the recent peak level of 4.28% recorded on Oct. 28 and are well below the index's 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.

Traders said that the junk market seemed to take its cue from greatly improved stocks. The bellwether Dow Jones Industrial Average, which had lost 100 points on Monday, jumped by 337.32 points, or 2.87%, on Tuesday - one of its biggest gains of the year - to end at 12,103.58.

A junk trader opined, "We didn't sell off as much as you would have thought [on Monday] when stocks were down, and we did not rally today as much as you might have thought with stocks up."

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