Restructured, upsized Tribune megadeal prices; new Radian notes trade actively; Bombardier off

By Paul Deckelman

New York, June 17 – The high-yield primary sphere saw its first megadeal-sized offering in almost two weeks on Wednesday, as Tribune Media Co. was heard by syndicate sources to have brought an upsized and restructured $1.1 billion seven-year note issue to market.

The television broadcasting and digital media company’s big deal was the first offering of $1 billion or more since transportation logistics operator XPO Logistics Inc. got a $1.6 billion transaction done – also a seven-year piece of paper – back on June 4.

The new Tribune Media deal came to market too late in the session for any kind of real aftermarket dealings, traders said.

They meantime saw considerable activity in the new five-year notes that mortgage insurance provider Radian Group Inc. had priced on Tuesday. Those bonds were seen having mostly stayed around their par issue price.

The trials and tribulations before Tribune finally came to market – including a restructuring that jettisoned a planned 10-year note issue as part of the deal – were the only real news emerging from the primary, at least the dollar-denominated portion of it.

Out of Europe came news that Worldwide Flight Services Inc., a France-based international cargo and baggage handler, is shopping a €225 million issue of seven-year notes in support of the pending acquisition of the company by Pentium Equity LLC from LBO France.

Back in the dollar arena, traders said that what was considered to be a mildly dovish statement coming out of the Federal Reserve’s two-day policy meeting, holding interest rates steady at zero for now, helped give a little bit of a bid to the market after some early hesitation.

Harland Clarke Holdings Corp.’s bonds firmed smartly in busy dealings.

However, Bombardier Inc.’s notes lost altitude as the plane maker’s efforts to sell its newest model at the Paris Air Show hit some turbulence.

Statistical indicators of junk market performance were mixed for a second straight session on Wednesday; they had turned mixed on Tuesday after having been lower across the board for two consecutive sessions before that.

Restructured Tribune prices

There was just one pricing seen during the session – but it was a big one.

Tribune Media Co., a Chicago-based television broadcasting and digital media company, brought an upsized and restructured $1.1 billion offering of senior notes due 2022 (B2/BB-) to market, high-yield syndicate sources said.

They said that the notes priced at par to yield 5 7/8%, the mid-point of price talk envisioning a yield between 5¾% and 6%.

The offering had been announced last week as a prospective $1 billion two-part transaction that would have consisted of a tranche of seven-year notes carrying three years of call protection and a tranche of 10-year notes with five years of call protection.

However, on Wednesday morning, word circulated in the market that the 10-year piece of paper had been eliminated, with the full size of the deal shifted into the remaining seven-year notes.

On Wednesday afternoon, market participants heard that the offering had been upsized to $1.1 billion. It was the first transaction of $1 billion or more seen in Junkbondland since XPO Logistics, a Greenwich, Conn,-based provider of transportation and logistics services, priced $1.6 billion of 6½% notes due 2022 at par back on June 4, as part of a broader two-part deal that also included a tranche of six-year euro-denominated notes.

The Tribune Media deal, a regularly scheduled forward calendar offering, had been marketed to potential investors via a roadshow that began on Friday and that had been scheduled to run through Thursday, with pricing originally expected later on Thursday, but the timing was moved up on Wednesday.

The Rule 144A and Regulation S with registration rights deal was brought to market via joint bookrunning managers Deutsche Bank Securities Inc., Citigroup Global Markets Inc., BofA Merrill Lynch, J.P. Morgan Securities LLC, Goldman Sachs & Co. and Morgan Stanley & Co. LLC.

Barclays, Credit Suisse Securities (USA) LLC, SunTrust Robinson Humphrey Inc., UBS Securities LLC and Wells Fargo Securities LLC were the co-managers.

Tribune plans to use the proceeds from the bond deal to repay a portion of its term loan.

Worldwide Flight shops euro deal

The only other real news coming out of the primary arena on Wednesday came from Europe, where syndicate sources said that Worldwide Flight Services – based just outside of Paris and thought to be the world’s largest international air cargo handling company – had begun a roadshow to market its proposed €225 million offering of seven-year unsecured notes (expected ratings B2/B) to potential investors.

They said that the roadshow began on Tuesday and will run through Friday, with pricing expected thereafter.

One market source said he heard that the deal was being shopped around in “the low-to-mid 8s” [percentage] area, but that he thinks it might get done “in the high 8s.”

Morgan Stanley and ING Financial Markets LLC are the global coordinators for the transaction, with Morgan Stanley handling billing and delivery.

Proceeds from the offering will be used to support Worldwide’s pending acquisition by Platinum Equity LLC, a Beverly Hills, Calif.-based global investment firm, from Paris-based private equity firm LBO France, which had bought Worldwide Flight Services in 2006. The Platinum Equity transaction is expected to close at the end of June. Financial terms were not announced.

New Radian notes trade busily

In the secondary realm, the new notes that Radian Group priced on Tuesday were the busiest of the day. Those notes had priced too late in the session on Tuesday for any kind of real aftermarket activity at that time but more than made up for it when they began trading on Wednesday morning.

More than $37 million of the bonds changed hands.

A trader said that the paper “was wrapped around par,” where the Philadelphia-based mortgage insurance company had priced its $350 million of 5¼% notes due 2020 after the regularly scheduled forward calendar issue was upsized from an originally announced $300 million.

A second trader quoted the notes in a 99 7/8-to-100 1/8 context.

A third pegged them at 99 7/8 bid going home, off 1/8 point.

Harland Clarke climbs

Away from the new or recently priced deals, one of the more notable names on Wednesday was Harland Clarke Holdings’ 9¼% notes due 2021, which were up 2 points on the session, ending just over 90 bid on volume of over $15 million.

The bonds had been trading over 93 last week but had fallen as low as 88 bid on Tuesday, before turning back upward on Wednesday.

There was no firm news seen out on the San Antonio-based provider of payment, marketing and security services that might explain those gyrations.

Bombardier bombs out

On the downside, Montreal-based aircraft and transportation equipment manufacturer Bombardier’s 7½% notes due 2025 fell by more than 1 point on Wednesday, to just over 91½ bid, with over $10 million of the notes changing hands.

The notes have been sliding since hitting their recent peak at about 93¾ last Thursday.

At the same time, the company’s Toronto Stock Exchange-traded shares have been beaten down over the previous few sessions, falling some 6.5% on Tuesday – its biggest one-day loss since March – and losing another five Canadian cents, or 2.04%, on Wednesday, closing at C$2.40.

The slide in the stock and bonds coincided with the company’s failure so far to rack up any firm orders for its brand-new and highly touted “C Series” of medium-sized jetliners, finally making their long-awaited debut at the Paris Air Show, an important showcase for new aviation products. Development of the plane had been delayed by various technical mishaps over the past two years, and the project has been plagued by cost overruns.

Adding to Bombardier’s discomfort, rival plane manufacturer Embraer of Brazil has gotten orders for at least 32 of its similarly-sized E-Jets, considered the C Series’ main competition.

Fed doesn’t hurt market

Amid expectations that the Federal Reserve might announce a firm date for when it will start raising U.S. interest rates for the first time in nine years, perhaps as soon as September, the Fed’s decision to leave rates where they are for now and its somewhat vague language indicating a rate rise will come at some point later in the year were seen as benign by the financial markets, including junk.

A trader said that “the market started off with a little bit of weakness,” as investors cautiously hugged the sidelines ahead of the scheduled end of the two-day meeting of the central bank’s policy-setting Federal Open Market Committee. When no negative vibes came out of that meeting, “it caught a bid as the day went on.”

He said that for most issues, “there wasn’t a ton of movement, but bids firmed up a little from it.”

Indicators stay mixed

Statistical indicators of junk market performance were mixed for a second straight session on Wednesday. They had turned mixed on Tuesday after having been lower across the board on both Friday and Monday. However, Wednesday’s session was only the fourth in the last 12 trading days in which the indicators were not all pointing negative.

The KDP High Yield Daily index rose by 5 basis points on Wednesday to end at 70.55 – its first gain after three consecutive losses, including Tuesday’s 12-bps nosedive and Monday’s 13-bps plunge. Before Wednesday, losses had been recorded in 10 out of the previous 11 sessions.

Its yield came in by 1 bp, ended Wednesday at 5.68%, after having risen over the previous three sessions, including Tuesday’s 5 bps widening, which had also been its ninth rise in the previous 10 sessions.

However, the Markit Series 24 CDX North American High Yield index was down by 11/32 point on Wednesday, finishing at 105 21/32 bid, 105 23/32 offered, after having advanced by 5/16 point on Tuesday. Wednesday’s loss was its third in the last four sessions and ninth in the last 12 sessions.

But the Merrill Lynch North American Master II High Yield index improved by 0.132% on Wednesday, its first gain after three straight setbacks, including Tuesday’s 0.11% drop, which had also been its 10th loss in the previous 12 sessions.

Wednesday’s victory lifted its year-to-date return to 2.894% from 2.758% on Tuesday, although it remained well down from the 4.062% reading, the index’s peak level for the year so far, recorded on May 29.

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