Alcatel-Lucent add-on, Hot Topic price; aftermarket quiet; Clear Channel climbs on swap news

By Paul Deckelman and Paul A. Harris

New York, Nov. 25 - The high-yield primary market opened the holiday-shortened Thanksgiving week on a relatively quiet note on Monday with just two smallish drive-by offerings pricing to generate a modest $358 million of new dollar-denominated, fully junk-rated paper.

Alcatel-Lucent USA, Inc., which had just tapped the junk market for $750 million earlier this month, paid a return visit, as the Franco-American telecommunications equipment manufacturer did a $250 million add-on to that issue.

Hot Topic, Inc., a specialty apparel retailer, did an upsized $110 million of 5.5-year senior PIK toggle notes.

Traders saw little initial aftermarket activity in the Alcatel-Lucent notes and none in Hot Topic.

They also did not see very much going in the way of trading in recently priced deals, although there were some levels heard in names, such as Brand Energy & Infrastructure Services, Inc., LifePoint Hospitals, Inc. and Calumet Specialty Product Partners, LP.

But they saw a generally quiet market and said it will likely get quieter still as the week continues ahead of Thanksgiving and the start of the Chanukah holiday.

Away from the new deals, there was some activity seen in the bonds of Clear Channel Communications Inc., spurred by the news that the big broadcasting and outdoor advertising company is making some moves to improve its maturity profile, including launching an exchange offer for two series of its outstanding notes - both of which moved solidly higher on that announcement - as well as seeking to extend some of its bank loan debt.

Overall, traders said that statistical market-performance indicators were higher across the board, breaking a string of five straight sessions before that in which those indicators were mixed, with one or another being down on the day and the rest showing strength.

Alcatel-Lucent taps 6¾% notes

Alcatel-Lucent USA priced a $250 million add-on to its 6¾% senior notes due Nov. 15, 2020 (B3/CCC+) at par to yield 6¾%, on top of price talk.

Bookrunner Citigroup will bill and deliver for the bank debt refinancing.

The original $750 million issue priced at par on Nov. 7, 2013.

Hot Topic upsizes

Hot Topic, issuing via HT Intermediate Holdings Corp., priced an upsized $110 million issue of 12%/12¾% senior PIK toggle notes (Caa2/CCC+) at 98.00 to yield 12.521%.

The deal was upsized from $100 million.

BofA Merrill Lynch ran the books for the dividend deal.

Rast & Tank price talk

Looking toward the Tuesday session, Germany-based Tank & Rast GmbH Motorway talked its €460 million offering of seven-year senior second-lien notes to yield 7% to 7¼%.

Global coordinator Deutsche Bank will bill and deliver. Barclays is also a global coordinator.

Commerzbank, Credit Suisse, ING, Nomura, RBC and UniCredit are joint bookrunners.

Proceeds will be used to refinance debt incurred in the acquisition of the company by an infrastructure investment vehicle owned by Deutsche Bank from Terra Firma Capital Partners in 2007.

Little Lucent trading seen

In the secondary realm, traders saw little in the way of aftermarket dealings in either of the day's new issues.

Both of those quickly shopped offerings came to market very late in the day, which seems to have become the new norm for most Junkbondland deals, several traders said.

One trader saw Alacatel-Lucent's 6¾% notes due 2020 offered at 1011/4, but saw no bid levels, while several others saw nothing at all in that particular credit.

The existing 6¾% bonds issued prior to the add-on were said by one market source to have last traded in size around the middle of last week, at 101½ bid.

The company's existing 6.45% notes due 2029 were seen off about ½ of a point, at just over 86¼ bid, though on volume of only about $2 million.

Pacific Rubiales quiet

Although the day's Trace junk market activity listings contained several entries for Pacific Rubiales Energy Corp.'s different bonds - with the company pricing a $300 million add-on to its existing 7¼% notes due 2021 - a trader said that "it was pretty much all [emerging market]," with little interest shown in that deal by regular junk market accounts.

The Toronto-based oil and gas exploration and production company, which operates mostly in Colombia, came to market with a quickly shopped add-on to $712.2 million of existing paper, pricing those additional notes at 105 to yield 6¼%.

Before that pricing, a market source quoted the existing bonds at the 106 bid mark on mid-afternoon dealings of over $9 million.

The company's 5 3/8% notes due 2019 were even more active, with nearly $27 million having traded by mid-afternoon, around the 100 3/8 bid mark.

Recent deals quiet

A trader opined that he "didn't see much re-trading of anything" among the deals, which came to the junk market last week, such as Brand Energy, LifePoint Hospitals or Calumet Specialty Products.

However, at another desk, a trader said that Brand's 8½% notes due 2021 were seen having firmed smartly to around 101¾ bid, 102½ offered.

On Friday, the Atlanta-based provider of specialized industrial services to the energy and infrastructure sectors - currently in the midst of being acquired in a leveraged buyout transaction by Clayton, Dubilier & Rice - priced $500 million of those notes at par as a scheduled forward calendar offering, after it was downsized from $550 million originally.

The bonds priced too late in Friday's session for any kind of an aftermarket at that time.

Elsewhere, a trader quoted LifePoint's 5½% notes due 2021 up 1/8 point at 100½ bid, 100¾ offered, while a second pegged the bonds at 100 3/8 bid, 100 7/8 offered.

The Brentwood, Tenn.-based hospital operator priced its $700 million offering - upsized from an originally announced $500 million - at par in a drive-by deal on Thursday.

The bonds appeared too late in the day on Thursday for any kind of trading. But on Friday, they had firmed a little, to around a 100 3/8 to 100 5/8 bid context.

Calumet Specialty Product Partners, LP, an Indianapolis-based maker of specialty hydrocarbon and fuel products, along with its Calumet Finance Corp. subsidiary, did a $350 million tranche of 7 5/8% notes due 2022 as a same-day transaction on Thursday.

The bonds priced at 98.494 to yield 7 7/8%, after the deal was upsized from an originally announced $225 million. They traded at 101¼ bid, 101½ offered when they were freed for aftermarket dealings on Friday and were quoted on Monday around 101 bid, 101¾ offered.

Kratos slides as deal spiked

Elsewhere in primary-related secondary market activity, a trader saw "some trades on Trace" in Kratos Defense & Security Solutions, Inc. in the wake of the San Diego-based high-tech defense contractor's decision to not proceed with its planned $675 million offering of senior secured second-lien notes, citing market conditions.

He saw the company's existing 10% notes due 2017 trading in a 108¼ to 108 3/8 bid range.

At another desk, a trader said that 108-plus trading range represented a loss of over 1 point from the levels above 109 bid at which those Kratos bonds had traded at the end of last week, when the prospective new deal had not yet been pulled.

He said that about $10 million of the notes traded at those lower levels on Monday.

Quiet week seen

One of the traders said that while Monday's session was dull, Tuesday and especially Wednesday are expected to be even duller in the run-up to the Thanksgiving holiday weekend.

Fixed-income markets in the United States will be completely closed on Thursday, and the Securities Industry and Financial Markets Association are also recommending an early close at 2 p.m. ET on Friday.

But the trader said that his guess is that "guys will leave early [Tuesday] to travel for the start of Chanukah, as well as Thanksgiving." The eight-day Jewish festival starts on Wednesday evening.

"So as soon as the deals are priced [Tuesday]," he predicted, "they'll be gone."

Clear Channel climbs

Away from the new-deal arena, traders saw better levels in fairly active trading for Clear Channel Communications bonds on the news that the San Antonio, Texas-based media company plans to offer holders of two series of its notes new longer-maturity but higher-coupon notes for their existing paper.

That caused big gains, especially in the two series of bonds the company is looking to replace: its 10¾% cash-pay notes due 2016 and its 11%/11¾% senior toggle notes due 2016.

A market source saw the 10¾% notes having traded up to 100½ bid by the close, a gain of some 3¼ points over previous levels, on volume of over $22 million, making it one of the most actively traded junk issues of the day.

The toggle notes got as good as 101 bid, a 23/4-point gain, with over $10 million of those bonds traded.

Other issues not directly involved in the exchange offer were also mostly firmer, though with smaller gains and more modest trading volumes, such as the 6½% notes due 2022, which gained 3/8 point on the session to end at 103 5/8, on over $3 million of volume.

Clear Channel announced plans to offer the holders of its $448.128 million of outstanding 10¾% 2016 notes and $340 million of outstanding 11%/11¾% 2016 paper new bonds due 2021 that will accrue interest at the rate of 12% per year in cash and 2% per year in kind.

Holders who tender their existing notes to the company by the early tender deadline of 5 p.m. ET on Dec. 9 stand to receive $1,100 principal amount of new notes and $20.00 of cash. Holders who tender after the early tender date but by the offer expiration on Dec. 23 will receive $1,050 principal amount of new notes and $20.00 of cash.

Besides the exchange offer aimed at taking out its 2016 bonds, the company also announced that it had launched an extension of $1 billion of its term loan B and C debt due January 2016 to July 2019. The new extended term loans will have the same security and guarantee package as the company's outstanding term loans B, C and D.

Market signs turn north

Overall, statistical junk-market performance indicators rose across the board on Monday, after having been mixed for five sessions in a row before that.

The Markit Series 21 CDX North American High Yield index gained 5/32 of a point on Monday to end at 107 3/16 bid, 107 5/16 offered, its third consecutive advance. It had been up by 5/16 of a point on Friday.

The KDP High Yield Daily index broke out of a three-session slump, gaining 7 basis points to close at 74.31, versus Friday's 4-bps loss. Its yield meantime came in by 2 bps to finish at 5.70%, after having been unchanged for two sessions before that.

And the widely followed Merrill Lynch High Yield Master II index put up its second straight gain, improving by 0.172% on top of Friday's 0.103% rise.

The latest gain lifted its year-to-date return to 6.617%, a second consecutive new peak level for the year. Friday's 6.433% reading had been the previous new 2013 zenith.

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