Ally megadeal, MagnaChip, RKI offerings price; Cricket hops on AT&T, Leap acquisition news

By Paul Deckelman and Paul A. Harris

New York, July 15 - The recently revived high-yield primary market continued to churn out new deals on Monday, pricing a total of nearly $2 billion of dollar-denominated, fully junk-rated paper from domestic or industrialized-country borrowers.

The biggest deal of the day was a $1.375 billion three-part drive-by offering from automotive and mortgage lender and on-line banking concern Ally Financial, Inc. - the company formerly known as GMAC.

Korean high-tech firm MagnaChip Semiconductor Corp. also did a quick-to-market offering, pricing $225 million of eight-year notes.

And energy operator RKI Exploration & Production, LLC came to market with the $350 million of eight-year notes that it had shopped around to investors last week via a roadshow.

All of those transactions priced fairly late in the session, with no immediate aftermarket dealings seen.

Merger and acquisition-related new offerings were announced by pork powerhouse Smithfield Foods, Inc., proceeds of which are to help pay for that company's pending acquisition by Chinese sector peer Shuanghui International, and by casino operator Pinnacle Entertainment, Inc., which will purchase gaming rival Ameristar Casinos, Inc.

The big news coming out of the non-new-deal secondary market on Monday -in fact overshadowing the new-deal arena, in the opinion of some market participants - was also M&A driven. Cricket Communications Inc.'s bonds zoomed higher by more than a dozen points in extremely heavy trading, as investors reacted to the news that wireless giant AT&T Inc. will acquire its considerably smaller sector peer, Cricket corporate parent Leap Wireless International, Inc., for $1.2 billion cash consideration, plus the assumption of several billion dollars of debt.

That huge piece of news sucked most of the oxygen right out of the non-primary market, which was otherwise firmer in mostly quiet dealings.

Statistical indicators of junk market performance remained higher.

Ally benchmark three-year deal

Three issuers brought a combined four tranches of notes, raising a total of $1.95 billion on Monday.

Ally Financial priced $1.375 billion of non-callable three-year senior notes (B1/B+/BB-) in two tranches.

A $1 billion tranche of fixed-rate notes priced at par to yield 3½%.

A $375 million tranche of floating-rate notes priced at par to yield Libor plus 268 basis points.

Both tranches came on top of price talk.

Barclays, Citigroup Global Markets, Goldman Sachs & Co. and Morgan Stanley & Co. were the joint bookrunners for the quick-to-market debt refinancing deal which was priced on the investment grade syndicate desk.

RKI comes atop talk

The only Monday deal to have run a roadshow came from RKI Exploration, which priced a $350 million issue of eight-year senior notes (B3/B-) at par to yield 8½%.

The yield printed on top of yield talk.

Citigroup, J.P. Morgan and UBS were the joint bookrunners.

The Oklahoma City-based energy company plans to use the proceeds to fully repay its second-lien credit facility and pay down its revolver.

MagnaChip at a discount

In other Monday drive-by action, South Korea-based MagnaChip Semiconductor priced a $225 million issue of 6 5/8% eight-year senior notes (B1/BB-) at 99.5 to yield 6.707%.

The yield priced slightly below the midpoint of yield talk that was set in the 6¾% area.

Barclays and Morgan Stanley were the joint bookrunners for the debt refinancing.

Smithfield deal starts Tuesday

An $800 million dual-tranche offering of senior notes backing the buyout of Smithfield Foods will be the subject of an investor call set to take place on Tuesday.

The deal is set to price later this week.

The bonds are coming with five-year and eight-year maturities. Specific tranche sizes remain to be determined.

Morgan Stanley is the bookrunner.

Proceeds will be used to partially fund the purchase of Smithfield Foods, a Smithfield, Va.-based food company, by Shuanghui International Holdings Ltd.

Chassix starts Tuesday

Elsewhere, Chassix, Inc. plans to host an investor conference call on Tuesday to discuss its $325 million offering of five-year senior secured notes (expected ratings B3/B).

Dealers plan a two-day roadshow, with the deal set to price thereafter.

BofA Merrill Lynch is the left bookrunner. BMO, PNC and RBC are the joint bookrunners.

Proceeds will be used to repay and terminate the company's term loan B, including prepayment premiums and accrued interest, and to repay the ABL facility in full, excluding about $3 million of outstanding letters of credit. Proceeds will also be used for general corporate purposes.

Pinnacle expected this week

Pinnacle Entertainment is expected to bring an $800 million offering of senior notes before the end of the week, according to a high-yield bond investor who spoke off the record on Monday.

The deal is part of the financing backing Pinnacle's acquisition of Ameristar Casinos, Inc.

J.P. Morgan will lead the deal.

A $1.6 billion term loan, also backing the acquisition, is scheduled to launch at a bank meeting on Tuesday, the investor said.

Along with providing funds to support the Ameristar acquisition, Pinnacle plans to use proceeds from the bonds to redeem its existing 8 5/8% senior notes due 2017, provide working capital and for general corporate purposes.

Day's deals not traded

In the secondary realm, a trader said that he had not seen any initial aftermarket dealings in either the new MagnaChip Semiconductor or the new RKI Exploration & Production issues - and this was also well before Ally Financial's three-tranche behemoth finally got done.

American Equity improves

The trader also said that he did not see any additional dealings in Friday's offering from American Equity Investment Life Holding Co.

He saw the West Des Moines, Iowa-based life insurance and annuities underwriter's notes due 2021 quoted late in the day on Friday at 101½ bid, 102½ offered, after the $400 million deal had priced at par.

But at another desk, a trader saw those bonds continuing to improve on Monday, pegging them at 102¼ bid, 102¾ offered.

Quiksilver holds gains

A trader said that Quiksilver Inc.'s 7 7/8% senior secured notes due 2018 were at 102 7/8 bid, 104¼ offered, and quoted the company's 10% senior unsecured notes due 2020 at 100¾ bid, 101¾ offered.

However, at a second desk, a trader located the 7 7/8% notes in a bid range of 101½ to 102½ and quoted the 10% notes at a very wide 101 3/8 to 104 context.

Quiksilver, a Huntington Beach, Calif.-based maker of swimsuits, wetsuits and other clothing and accessories for surfer dudes and dudettes, skateboarders and snowboarders, priced $280 million of the 7 7/8% notes on Thursday at 99.483, to yield 8%. It also priced $225 million of the 10% notes at a sizably discounted 98.757 to yield 10¼%.

The new bonds came too late in Thursday's session for any aftermarket activity, but by Friday had firmed to around par bid for the 7 7/8s and par bid, 100 3/8 offered for the 10% notes. The bonds' co-issuer was company unit QS Wholesale, Inc.

Best Buy seen better

A trader also saw Best Buy Co., Inc.'s 5% notes due 2018 "probably a little better" on Monday, seeing them going out around 99¾ bid, par offered.

A second trader called the bonds up 1/8 point, at 99 3/8 bid, 100 1/8 offered. And yet another trader said they were at 99½ bid, par offered.

That was better than last week, when the Richfield, Minn.-based electronics retailer priced its quick-to-market $500 million split-rated (Baa2/BB/BB-) issue, which attracted some attention from both the junk and the investment-grade crossover sides of the bond market.

The notes had priced at 99.997 to yield 5%, after having been upsized from an originally announced $350 million, but they struggled in the aftermarket both on Thursday and again on Friday, trading below their issue price most of the time.

One of the traders said the notes had fallen all the way down to 98½ bid at one point, before coming off their lows.

Other deals hold Friday gains

A trader saw several of the other deals that priced late last week about unchanged from where they had been on Friday.

These included Monitronics Escrow Corp.'s 9 1/8% notes due 2020. The company - a unit of Dallas-based security alarm company Monitronics International, Inc. and that company's corporate parent, Ascent Capital Corp., Inc. - priced a quickly shopped $175 million add-on to its existing 9 1/8% notes on Thursday at par to yield 9.118%, after upsizing that offering from an originally announced $150 million. The new bonds had been seen having firmed to 102 bid, 102¼ offered.

Expro Finance Luxembourg SCA's 8½% senior secured notes due 2016 were seen by the trader clinging to Friday's 105 to 105¼ context.

The company - a unit of British oilfield services provider Expro International Group, plc - priced a $100 million drive-by add-on to its existing paper on Thursday. That addition had come to market at 104.5 to yield 6.99%

Post Holdings, Inc.'s $350 million add-on to its 7 3/8% notes due 2022 were quoted at7¾ bid, 108¾ offered.

That's the level to which the St. Louis-based breakfast cereal producer's bonds rose after pricing on Thursday at 105.75 to yield 6.292%.

The quick-to-market transaction was upsized from an originally announced $300 million.

Cricket jumps on Leap news

Away from the new-deal arena, Cricket Communications' bonds zoomed higher by more than a dozen points on Monday, propelled by the news that wireless giant AT&T has agreed to acquire Leap Wireless International Inc. - the San Diego-based Cricket's corporate parent.

Cricket's 7¾% notes due 2020 jumped as high as 116 bid in very heavy trading, although by the end of the day, a trader said that "they weakened a little bit and came off their day's high."

He saw the bonds going home at 113¾ bid, 114¼ offered.

A second trader saw them late in the day at 113 7/8 bid - a pickup of nearly 13 points from the 101 3/8 bid level at which the bonds had finished on Friday.

AT&T and Cricket announced their big deal late on Friday afternoon - after the stock market had closed and the junk bond market had pretty much shut down for the day and the week.

Trading in the Cricket notes was intense. A trader said on Monday morning that Cricket's bonds were "all that's trading" in the otherwise relatively sleepy summer session.

Over $75 million of the notes had changed hands by around mid-morning, with almost all of that round-lot trades of at least $1 million. And volume intensified as the day wore on.

A trader said late Monday that over $126 million of the bonds had been traded.

Leap's Nasdaq-traded shares likewise climbed sharply on heavy volume, gaining $8.97, or 112.41%, to close at $16.95. Volume of 33.5 million shares was more than 18 times the norm.

Under the terms of the agreement between the two companies, AT&T will acquire Leap for $15 per share in cash, or a total of $1.2 billion, getting all of Leap's wireless properties, including wireless spectrum licenses, network assets and retail stores.

As of April 15, Leap had $2.8 billion of net debt, including its $1.6 billion of 7¾% notes. Those notes are not callable until October of 2015, when the company can redeem them at 103 7/8. Until then, they are subject to a make-whole call at 50 basis points over the comparable Treasury issue, which, according to market sources, translates out to a value of around 115, explaining the sharp rise on Monday.

AT&T, based in Dallas, is currently the second-largest provider of wireless communications in the United States, trailing Verizon Wireless by several million customers. Both are over the 100 million-customer mark.

The acquisition of Cricket, assuming it is approved by the shareholders of both companies and obtains the necessary regulatory approvals, would add about 5 million customers to its roster, give it the valuable and coveted radio-frequency spectrum space it needs to continue expansion and augment its standing in the pre-paid, or "pay as you go" segment of the wireless industry, where Leap and Cricket operate.

For Leap, the deal is the culmination of years of speculation that it would be acquired by a larger industry rival. The ebb and flow of such speculation - frequently involving Dallas-based carrier MetroPCS Corp., which operates in the pre-paid segment of the business - had periodically sent its bonds and share shooting higher, only to come back down to more normal levels when nothing ever became of such possible transactions.

Leap's acquisition is the latest in a series of consolidation transactions in the wireless industry. Late last year, Leap's sometime supposed acquirer, MetroPCS, itself agreed to be acquired by Deutche Telekom, the parent of No. 4 U.S. wireless operator T-Mobile, a deal which closed in May.

And the third-biggest carrier, Sprint Nextel Corp., is in the process of being bought by Japan's SoftBank Corp.

Market indicators gaining

Statistical junk market performance indicators were stronger for a fifth straight session on Monday.

The Markit Series 20 CDX North American High Yield index was up by a quarter-point to end Monday at 105½ bid, 105 5/8 offered. It was the index's third straight gain following an unchanged session last week, having also risen by 7/32 of a point on Friday and by 29/32 of a point on Thursday.

The KDP High Yield Daily Index rose by 17 basis points on Monday, its fifth consecutive rise. It had jumped by 25 bps on Friday. Its yield came in by 7 bps, to 6.04%, also its fifth straight narrowing. On Friday, it had closed 12 bps lower.

And the widely followed Merrill Lynch High Yield Master II index also saw its fifth straight gain on Monday, as it rose by 0.255%. That followed Friday's 0.261% advance.

The latest gain raised the index's year-to-date return to 3.003% from 2.74% on Friday. Monday's close represented the year-to-date return's first time above the psychologically significant 3% mark since June 19, when it stood at 3.139%.

Monday's yield to worst was 6.154%, down from 6.242% on Friday, and its spread to worst over Treasuries was 484 bps, in a little from 488 bps on Friday and the latter performance measure's tightest level since June 3, when it stood at 483 bps over.

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