First Data, OPTI, Peabody, Elan price; ILFC brings huge split-rated deal; new Tembecs tumble

By Paul Deckelman and Paul A. Harris

New York, Aug. 11 - The high-yield primary parade continued to march on in Wednesday's session, as nearly $2.4 billion more of new purely junk bonds came to market from familiar issuers including First Data Corp., OPTI Canada Inc., Peabody Energy Corp. and Elan Corp. plc. There was also a sizable offering from the somewhat lesser-known QEP Resources, Inc., a Denver-based natural gas company.

On top of that, junk players watched as several well-known names priced big split-rated deals likely to attract some interest from junk players, such as American Tower Corp. and, especially, International Lease Finance Corp., whose four-part offering weighed in at a dizzying $4.4 billion - and caused holders of the company's existing bonds to flee them, since they will be effectively subordinated to the new paper.

While the new OPTI Canada, QEP and Peabody bonds were heard to have firmed in the aftermarket, early efforts to take the new First Data paper higher fell flat and they ended up straddling their issue price.

Doing even worse was Tuesday's new deal from Tembec Inc., as the Canadian forest products company's $250 million offering toppled over like a dead tree struck by lightning. But another Tuesday transaction - Regal Entertainment Inc.'s eight-year notes - came off its aftermarket highs but still managed to hang on to most of its gains, which was no small feat in Wednesday's decidedly "down" market.

Away from the new deals, American General Finance Inc.'s bonds were battered after parent AIG sold most of the company to Fortress Investment Group, amid bondholder fears the new owners will seek to cut debt by means of exchange offers on unfavorable terms.

Traders meantime saw the overall junk secondary down around ½ point or more, with all of the major statistical indicators pointing south.

Peabody at wide end

During the Wednesday primary market session, Peabody Energy priced a $650 million issue of 10-year senior notes (Ba1/BB+/BB+) at par to yield 6½%.

The yield printed at the wide end of the 6 3/8% to 6½% yield talk. The 381 basis points spread to Treasuries came at the wide end of the Treasuries plus 375 bps spread talk.

Bank of America Merrill Lynch, Morgan Stanley, HSBC, Citigroup and RBS Securities were the joint bookrunners for the quick-to-market debt refinancing deal.

QEP, at tight end

QEP Resources priced an upsized $625 million issue of 6 7/8% 10.5-year senior notes (Ba1/BB+) at 99.074 to yield 7%.

The yield printed at the tight end of the 7% to 7 1/8% price talk. The amount was increased from $500 million.

Deutsche Bank Securities Inc., Bank of America Merrill Lynch, BMO Capital Markets Corp., J.P. Morgan Securities Inc. and Wells Fargo Securities, LLC were the joint bookrunners for the debt refinancing deal.

First Data's 10-year secureds

First Data Corp. priced a $510 million issue of 8 7/8% 10-year senior secured first-lien notes (B1/B+) at 98.387 to yield 9 1/8%.

The yield printed in the middle of the 9% to 9¼% yield talk.

Citigroup, Credit Suisse, Bank of America Merrill Lynch, Deutsche Bank Securities, Goldman Sachs & Co. and HSBC were the joint bookrunners for the quick-to-market deal, which was also a debt refinancing.

OPTI two-parter

OPTI Canada priced a $400 million two-part first-lien senior secured notes transaction.

The Calgary, Alta.-based oil sands developer raised $99.510 million with the sale of notes mirroring its 9% first-lien senior secured notes due Dec. 15, 2012 (B2/B). The non-fungible mirror notes priced at 99.51 to yield 9.228%, in line with reoffer price talk of 99.50.

OPTI raised $289.5 million with its issue of 9¾% three-year notes (B3/B), which priced at 96.50 to yield 11.162%.

The coupon on the three-year notes came on top of coupon talk. The reoffer price came cheap to the 97 to 98 price talk. The 11.162% yield came wide of the 10½% to 11% yield talk.

Credit Suisse was the bookrunner.

The company will use the proceeds to repay the drawn balance on its credit facility, and for general corporate purposes.

Elan taps 83/4s due 2016

Elan Finance plc and Elan Finance Corp. priced a $200 million add-on to their 8¾% senior notes due Oct. 15, 2016 (B2/B) at 96.00 to yield 9.62%.

The reoffer price came a dollar less than the cheap end of the 97 to 97.5 price talk.

Morgan Stanley and Citigroup were the joint bookrunners for the quick-to-market debt refinancing deal.

International Lease adds junk tranche

Meanwhile, International Lease Finance Corp. priced a $500 million issue of 8 7/8% seven-year senior unsecured notes (B1/BB+/BB) at 99.353 to yield 9%, in a tranche added to the aircraft leasing company's mammoth, upsized $3.9 billion three-tranche split-rated senior secured first-lien notes deal (Ba3/BBB-/BBB-).

The crossover deal, meanwhile, featured a $1.35 billion tranche of 6½% four-year notes which priced at 99.997 to yield 6½%. This was at the tight end of guidance in the 6 5/8% yield area.

A $1.275 billion tranche of 6¾% six-year notes priced at 99.996 to yield 6¾%. They were sold at the tight end of talk in the 6 7/8% area.

A $1.275 tranche of 7 1/8% eight-year notes sold at 99.996 to yield 7 1/8%. They priced at the tight end of guidance in the 7¼% area.

The split-rated deal was announced on Monday at a $2.5 billion size.

Bank of America Merrill Lynch, Citigroup Global Markets Inc. and J.P. Morgan Securities Inc. were the bookrunners.

Proceeds are being used to refinance a portion of the issuer's outstanding $3.9 billion in AIG Funding, Inc. loans and for general corporate purposes.

Also in the crossover space, Wednesday, American Tower Corp. sold an upsized $700 million in 5.05% 10-year split-rated senior unsecured notes on Wednesday to yield 237.5 basis points over Treasuries.

The size was initially $500 million and the bonds were priced in line with guidance.

The notes (Baa3/BB+/BBB-) priced at 99.88 to yield 5.065%.

Citigroup Global Markets, Credit Suisse Securities, J.P. Morgan Securities and RBS Securities ran the books.

Talking the deals

Multiplan Inc. talked its $675 million offering of eight-year senior unsecured notes (Caa1/CCC+) with a 9¾% area yield.

The deal is set to price on Thursday morning, via Bank of America Merrill Lynch, Credit Suisse Securities and Barclays Capital Inc.

And New Enterprise Stone & Lime Co., Inc. talked its $250 million offering of eight-year senior notes (Caa1/B+/) with a 9¾% area yield.

The order book is set to close at 4 p.m. ET, on Thursday.

Bank of America Merrill Lynch has the books.

Tower Automotive announces

Finally, Tower Automotive Holdings USA, LLC and TV Holdings Finance, Inc. kicked off a $450 million offering of seven-year senior secured first-lien notes (/B/), on Wednesday.

JP Morgan, Citigroup and Goldman Sachs & Co. are joint bookrunners for the debt refinancing deal.

Specific timing on the deal remains to be determined, a syndicate source said, late Wednesday.

Watching the primary

A secondary market trader said that "anybody who can, is coming with a deal."

Another trader, though, cautioned that with the heavy pace of new issues, "at some point, there's going to be no powder left in the cannon to buy these things. For all of this cash everyone was sitting on, it's starting to get used up pretty quickly. They just keep cranking these things out."

He added that "it will be interesting to see" what the high yield mutual fund flow numbers - a key indicator of overall junk market liquidity trends which usually circulate on Thursday afternoons - are this week. Last week, the market saw a $583 million inflow in the week ended Wednesday, according to the Lipper/FMI numbers - the fourth consecutive weekly cash infusion, which has fueled the remarkably busy junk bond new issue market in recent weeks.

First Data fails to hold gains

A trader saw First Data Corp.'s new 8 7/8% notes due 2020 trading at 99 bid, 99½ offered, soon after the Atlanta-based electronic transaction processing company had priced its new $510 million offering at 98.387. But he added that "they came - but it looks like they went lower."

Another trader agreed, seeing the new bonds hung up in a mid-98 context, not far from their issue price.

A trader said that 98¼ bids got hit "a couple of times," leaving the paper at 98¼ bid, 98½ offered, "basically straddling the pricing."

At another shop, a trader flatly declared "they traded up on the break - but then came back down to around issue."

Among the company's existing bonds, a trader said that there was 'a lot of activity in First Data because of the deal," quoting its 9 7/8% notes due 2015 at 79 bid, down 1 point on the day. A second who saw the bonds at 79 called that a 1½ point loss.

On the other hand, a source at another shop quoted First Data's 11¼% notes due 2016 up a point at the 74½ bid level.

"But the news is really the new deal," the first trader said.

New energy names hang in...

When the new Peabody Energy Corp. 6½% notes due 2020 were freed to trade, the St. Louis-based coal operator's new $650 million issue was seen to have firmed to 100¾ bid 101¾ offered, up from the par price at which the bonds had come to market.

QEP Resources' 6 7/8% notes due 2021 meantime were seen trading around par bid. That was up around a point from the 99.074 level where the upsized $625 million of paper had priced.

...but OPTI investors unhappy

A trader saw OPTI Canada's 9% "mirror tranche" add-on to its existing 9% notes due 2012 having moved up to 100 7/8 bid, up from the 99.51 mark at which that $100 million bond issue had priced earlier in the session.

However, the Calgary, Alta.-based oil-sands energy company's existing issues did not share in those gains, instead falling 3 to 5 points, according to market sources.

One trader saw the existing 8¼% notes due 2014 falling 3 points to around 85, while the 7 7/8% notes due 2014 dropped 5 points to 821/2.

Another source placed the 8¼% notes at 82½ bid, 83, down from opening levels around 85. The source also pegged the 7 7/8% notes due 2014 at 82 bid, 83 offered, down from 86 bid, 87 offered previously.

The first trader explained that "[The new issue] is coming in front of them, so [investors] didn't like it much," he said.

Existing ILFCs lose altitude

The same phenomenon was seen in trading in International Lease Finance Corp.'s existing bonds, which were pushed lower after the California-based aircraft leasing company brought its $4.4 billion of new split-rated bonds to market on Wednesday.

Three out of the four tranches of new paper sold are senior secured notes, which jumps their holders ahead of ordinary unsecured bondholders in the event of a default, causing the existing holders to grumble at their new subordination. ILFC's 8¾% notes due 2017 lost 4 points to end at around the 99 level.

Traders meantime did not see any of the new paper making the rounds.

Tembec takes a tumble

A trader asked rhetorically "was somebody yelling 'TIMBER!'" as Tembec Inc.'s new 11¼% notes due 2018 continued to fall further and further from Tuesday's issue price at 98.717 to yield 11½%.

He saw the bonds initially trading Wednesday at 95 bid, 98 offered, and wondered "what in the world is this?" Later on, they declined to 94 bid, 95 offered.

"Those things were trading all over the place," he said. "They kept going down and down. I don't know what was going on - it was just a real kind of screwed-up market." He said that "at one point, you were trying to hit a 95½ bid and it's not there, while 15 minutes later, they're offered at 95, and you try to buy them and they're not there."

He suggested that "there was a lot of jockeying going on in that name today. Maybe people feel that if you're going to short any of the new issues, this is the one to short. Who knows?"

"I think it's fair to say that with its 3 to 4 point drop" on the session from Tuesday's levels, "investors weren't pleased with that one."

Regal shows resilience

Even away from the Tembec carnage, a trader said that "the way they're cranking these things out, it's fair to say that it's very rare this week that any of these new issues have popped and stayed above their issue price."

One notable exception to that rule, however, was Regal Cinemas' new 9 1/8% notes due 2018. The Knoxville, Tenn.-based movie theater chain operator's $275 million deal priced on Tuesday at par, and then proceeded to get as high as 102½ bid, before coming off that peak to end Tuesday still with a handsome aftermarket gain at 101¾ bid, 102¼ offered. The trader said that "to stay up around the 102½ level most of the day [Tuesday] was impressive, considering that the rest of the new issues were trying to hang on to their issue prices."

On Wednesday, with the market generally lower and many new issues struggling just to get out of the gate once they had priced, a trader said that the new Regal bonds "held in better than most things today," staying around 101½ bid, 101¾ offered. "That's down slightly" - but not down as much as a lot of other stuff."

For example, he said that Tenet Healthcare Corp.'s recently priced 8% notes due 2020 were being offered Wednesday at 971/2; the Dallas-based hospital operator had priced its $600 million drive-by issue on Aug. 3 at par.

He also saw the new Borgata Hotel Casino & Spa "back down now," with both tranches of the $800 million senior secured bond deal offered at par; the Atlantic City-based gaming operator's bonds had firmed as high as 102 bid last week after they were priced, "so really, we saw a lot of stuff fade."

He said the main factor behind the failure of many new deals to either rise by points in the aftermarket or keep the gains if they did rise was "there's just a ton of supply. "It feels like you're hitting that saturation point at this point in time. So there's not a lot of upside, with this much stuff coming."

Market indicators fall back

Away from the new-deal sector, a trader saw the CDX North American HY Series 14 index slide by 7/8 point on Wednesday to end at 97 1/8 bid, 97 3/8 offered, after having fallen by ½ point on Tuesday.

The KDP High Yield Daily index meantime plunged by 40 basis points on Wednesday to an even 72.00, after having declined by 3 bps on Tuesday. Its yield ballooned out by 13 bps on Wednesday at 8.22%, after having been 1 bp tighter on Tuesday.

The Merrill Lynch High Yield Master II index was down for a second straight session Wednesday, losing 0.331% on the day to bring its year-to-date return down to 8.641%, down from 9.002% on Tuesday - when the index suffered its first loss after 26 straight sessions on the upside, dating back to early July. The index was down further from the 9.085% recorded on Monday, the peak level for 2010 so far.

And advancing issues also saw an incredible winning streak of 27 consecutive sessions, dating back to July 2, broken on Wednesday, as they trailed decliners by around a seven-to-five margin, versus Tuesday when the gainers had a winning margin, albeit small, of a couple dozen issues out of the more than 1,400 tracked.

Overall activity, represented by dollar-volume levels, fell by 12% on Wednesday, after having jumped by 59% on Tuesday.

"You look what happens with equities," a junk trader said - "when the mood changes a little, they sell things and think about it later." Stock-watchers saw the bellwether Dow Jones Industrial Average swoon to the tune of 265.42 points, or 2.49% on Wednesday, to end at 10,378.83, with other, broader market indicators like the Standard & Poor's 500 and the Nasdaq composite index falling even further on a percentage basis.

That sour sentiment was seen carrying over into Junkbondland. "It was pretty negative overall today," the trader said.

Auto names cruising

However, one area where he did see some strength was in the autosphere, declaring that General Motors Corp. "held up nicely" on Wednesday, a day before the Detroit giant is scheduled to release its second-quarter earnings data. Analysts believe that the top domestic carmaker will likely post a sizable profit for the quarter - considered a key factor if GM's planned initial public offering is to succeed.

He saw GM's benchmark 8 3/8% bonds due 2033 at 35½ bid, 36 offered "all day long, on good volume," calling them about unchanged - a good showing amid a generally lower market.

And he saw GM domestic arch-rival Ford Motor Co.'s 7.45% bonds due 2031at 96½ bid, 97 offered, which he called down ½ point, adding "it was no big deal. Down ½ point in this market doesn't mean much. There was not a lot of volume.

"Ford and GM held up well."

Another trader saw GM's benchmarks unchanged on the day, also around 35½ bid, 36 offered, while pegging the Ford long bonds down ½ point at 97 bid, 98 offered.

AIG units under pressure

Elsewhere, a trader saw American General Finance Inc.'s bonds fall on the news that parent American International Group, Inc., had agreed to sell most of the money-losing consumer lender to Fortress Investment Group LLC - and the speculation that the new owner may try to restructure American General's heavy debt load on less-than-favorable terms for the company's bondholders.

He saw the 6.90% notes due 2017 down around 7 points on the day, finishing around 83 bid from prior levels around 90. At one point, he said, the bonds were down by as much as more than 8 points. He said there was "huge size trading in the name," with the 6.90s probably the best representative issue.

At another desk, a market source called the 6.90s nearly 10-point losers on the day, in very heavy dealings, seeing the bonds ending up around 82½ bid. Over $50 million of those bonds traded. The source also said that the company's 5 5/8% notes due 2011 slid by 3½ points to just under the 99 bid level.

Terms on the American General deal were not disclosed, though news reports said that AIG - which at one time had valued the unit as high as $2.4 billion - was selling 80% of the company to Fortress at essentially a fire-sale price, with the beleaguered New York-based insurance giant, looking to shed non-core assets, booking a $1.9 billion pre-tax loss on the deal.

Bondholders were spooked by the possibility that Fortress may try to reduce American General's $1.7 billion debt load through a bond swap that will leave current bondholders taking a haircut. Fitch Ratings cautioned that "new ownership and existing management may potentially seek to engage in some type of business reorganization, up to and including a restructuring of the firm's capital structure."

Clear Channel climb ends

A trader said that Clear Channel Communications Inc.'s 11% guaranteed senior toggle notes due 2016 were ending the day around 75 bid, "as are the 10¾% of 2016, they're very close, they're within a point of each other now that the 11s went to cash-pay." He called that mid-70s level down a couple of points, although trading was "not active."

The 11s had shot up by several points on Monday, in line with the news, disclosed in the San Antonio, Tex.-based media company's 10-Q filing with the Securities and Exchange Commission, that it will pay the interest due on those notes in cash rather than "paying in kind" by issuing new bonds.

The bonds had reached highs in the 78 bid, 79 offered area, "when they first went cash-pay," well up from previous levels in the mid-to-lower 70s, before starting to come down from those peak levels on Tuesday and continuing their retreat Wednesday.

Clear Channel's 5½% notes due 2014 were meantime seen down ½ point at 63 bid.

Stephanie N. Rotondo contributed to this report

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