Ford's $1 billion deal revives primary; others slate; Sears busy again; Leap jumps

By Paul Deckelman and Paul A. Harris

New York, Jan. 4 - The high-yield primary market returned to action on Wednesday with a bang, pricing a $1 billion two-part drive-by issue from familiar borrower Ford Motor Credit Co. LLC.

Syndicate sources also saw a number of other prospective new deals surface, as borrowers seem intent to take advantage of declining interest rates and ample liquidity to get their financing needs done.

Education technology provider Datatel, Inc., as expected, launched a $530 million offering of seven-year notes as part of the funding for its acquisition of an industry rival.

Office supplies producer ACCO Brands Corp. is expected to sell $270 million of bonds in addition to bank debt, also to fund the acquisition of a sector peer.

And in another merger-and-acquisition-driven transaction, propane distributor AmeriGas Partners, LP is expected to come to market via two subsidiaries as soon as Thursday afternoon with a $1.55 billion two-par behemoth of a deal.

The secondary market remained strong for yet another session with statistical indicators all heading northward.

Among specific names seen doing better was wireless telecommunications operator Leap Wireless International Inc., despite there being no fresh news seen during the session.

Even retailing giant Sears Holding Corp.'s recently hard-hit bonds got a reprieve, carried higher on the overall uptrend.

Ford Credit prices $1 billion

The 2012 primary market sparked to life on Wednesday with Ford Motor Credit raising $1 billion by tapping two existing issues.

BNP Paribas, Deutsche Bank, Goldman Sachs and Morgan Stanley led the transaction.

The deal included a $300 million add-on to the 3 7/8% notes due Jan. 15, 2015, which priced at 99.672 to yield 4%. The yield printed at the tight end of the 4% to 4 1/8% price talk, according to market sources.

The original $1.25 billion issue priced at par on Oct. 28, 2011.

In addition, Ford Motor Credit priced a $700 million add-on to the 5% notes due May 15, 2018 at 100.744 to yield 5%. The yield came at the tight end of the 5% to 5 1/8% price talk.

The original $1.25 billion issue priced at par on April 28, 2011.

Proceeds from Wednesday's add-ons will be used for general corporate purposes.

Plenty of players in Ford

Comparatively low yields notwithstanding, the Ford Credit deal saw ample participation from high-yield accounts, according to a trader from the crossover space who kept a close eye on the deal.

That's because the high-yield calendar has been ultra-thin, with no new junk issues pricing for three weeks and an anemic amount of December issuance altogether, the trader said.

In the face of that thin calendar, high-yield accounts have taken in a substantial amount of cash, with AMG Data Services reporting $455 million of inflows for week to the Dec. 28 close - an uncharacteristically robust amount for the year-end period, according to one buyside source.

The Ford deal's modest new issue premium sent some investors heading for the exits, the trader said, but added that it appeared to go well, nonetheless, with both tranches trading up a half-point in the secondary market.

AmeriGas' $1.55 billion

A calendar began to take shape on Wednesday.

AmeriGas Finance LLC and AmeriGas Finance Corp. will host an investor conference call at 10:30 a.m. ET on Thursday for a $1.55 billion two-part senior notes offering.

The deal is set to price on Thursday afternoon.

The offering is comprised of tranches of notes maturing on May 20, 2020 and May 20, 2022. The eight-year notes come with four years of call protection, and the 10-year notes come with five years of call protection.

Credit Suisse, Citigroup, J.P. Morgan and Wells Fargo are the joint bookrunners for the acquisition financing.

Datatel's $530 million

Datatel kicked off its $530 million offering of seven-year senior notes (Caa1/CCC+) on Wednesday.

The deal is expected to price during the middle part of the week ahead.

J.P. Morgan, Bank of America Merrill Lynch, Barclays, Citigroup and Credit Suisse are the leads.

Proceeds, in addition to a $1.2 billion credit facility, will be used to help fund the acquisition of SunGard Higher Education by Hellman & Friedman LLC and the concurrent merger with Datatel, an existing Hellman & Friedman portfolio company.

New Fords drive by

When the new Ford Motor Credit add-on bonds were freed for aftermarket activity, traders saw the Dearborn, Mich.-based Ford Motor Co. auto-loan financing arm's paper trading around their issue price.

A trader quoted the new 5% notes at 100 1/8 bid 100 5/8 offered, versus the 100.744 level at which the $700 million tranche had priced.

A second trader saw those bonds in a 100 1/8-to-100¾ context, estimating them going home at 1001/2.

He saw the 3 7/8% notes at 99¾ bid, 100.05 offered versus their 99.672 issue price.

Yet another trader pegged the new bonds at 99¾ bid, 100¼ offered on the 3 7/8s and at 100½ bid, 101 offered on the 5% paper.

But one of the traders said that "neither one of them went up. Both were quoted back a quarter [point] from where they were issued.

"They were bracketed around issue price."

At another desk, a trader scoffed: "Is that even a junk bond?" referring to the 2015 bonds' sub-4% coupon, and he said even the 5% notes "aren't much of a junk bond either.

"It seems [both issues] are mostly trading off the high-grade desks," he opined.

A market source quoted the existing 5% notes - $1.25 billion of which priced last April at par - as having fallen to a par level in Wednesday's dealings, calling them down 1 5/8 points.

Ford Credit's 5 7/8% notes due 2021 were among the most actively traded junk bond issues, with over $14 million changing hands. Despite the brisk volume, a trader, who quoted the bonds trading at bid levels between 105 and 1051/2, called them "off a touch, but not much. There was nothing dramatic [happening]."

Ford Credit priced $1 billion of those bonds on Dec. 5 at 101.8 to yield 5 5/8% as an add-on to the original $1 billion of the bonds, which priced at par last July.

Parent Ford Motor Co.'s 7.45% bonds due 2033 were quoted down a quarter-point at 120 bid, 121 offered.

Market continues upside ride

Away from the new-deal arena, a trader ventured that for yet another day in a row, "the market seems stronger.

"Everything in general seemed to trader up throughout the day. A lot of these things you are seeing up 2 points or 21/4. A majority of paper looks like it's up somewhere between a half-point and 1½ points."

A second trader said, "The whole market had a good tone to it today."

He cited as a factor "the typical January effect" as end-of-year selling to clean up portfolios is now past and accounts holding cash - some having obtained even more when bonds in their portfolios matured on Dec. 31 or Jan. 1 - now want to put some of that money to work.

Market signposts strengthen

Statistical measures of junk market performance, which kicked off the new trading year on Tuesday by firming, kept right on rising on Wednesday.

A trader saw the CDX North American Series 17 High Yield index up 5/16 point on Wednesday to close at 93 7/8 bid, 94 1/8 offered, after having gained 5/8 point on Tuesday.

The KDP High Yield Daily index rose by 4 basis points on Wednesday to finish at 72.69, after having jumped by 34 bps on Tuesday. Its yield tightened by 7 bps on Wednesday, to 7.29%, after having come in by 11 bps on Tuesday.

The widely followed Merrill Lynch High Yield Master II Index posted its 14th consecutive winning turn on Wednesday, as it rose by 0.144%, on top of the 0.425% advance seen on Tuesday to begin the new year.

The gain lifted the index's year-to-date return to 0.569% from 0.425% on Tuesday.

The index had closed out 2011 with a return of 4.383% - well below the index's high-water mark for the year of 6.362%, which was set on July 26, but well up from its 2011 low-point, a 3.998% deficit recorded Oct. 4.

Leap takes a jump

Among the active movers in Wednesday's market were the bonds of Cricket Communications Inc., the operating unit of Leap Wireless International, a San Diego-based provider of pre-paid wireless service.

"WOW!" a trader said on seeing the 7¾% notes due 2020. He saw those bonds push up more than 2 points on the session, to around 92 bid, 92¼ offered, after "they started the day lower," around 90¾ bid in morning dealings.

He said that the bonds had been trading as low as 89½ on Tuesday and were at 86 bid, 88 offered last week.

"What the heck is going on with them?" he wondered aloud, seeing the company's Nasdaq-traded shares down 71 cents, or 7.16%, at $9.20., with volume of 3.2 million shares nearly 1½ times the norm.

However, he said there had been no news out.

Over $26 million of the bonds traded.

Sector peer MetroPCS Wireless - sometimes mentioned as a potential merger partner for Leap - was also active on volume of more than $20 million for its 6 5/8% notes due 2020, but these were down a point on the day, a trader said, at 97½ bid.

Sears busy, moving up

Elsewhere, a trader said that the "Sears debacle continued" on Wednesday, as the bonds continued to trade busily.

However, he said that the recently battered bonds were "gaining strength." He placed the 6 5/8% notes due 2018 up a quarter-point at 761/4, with about $25 million changing hands.

But another trader said the debt was "basically unchanged."

On Dec. 27, the retailer posted comparable store sales for the fourth quarter and for the year. For the quarter, sales were down 5.2%. For the year, sales slipped 2.6%.

Given that the company has been struggling to recover from the economic downturn, Sears then said it was planning to cut costs. Among the cost-cutting endeavors were plans to shutter some 120 stores under both the Sears and Kmart monikers. Investors reacted negatively to the closures, pushing the bonds lower.

On Wednesday, Moody's Investors Service put in its 2 cents, downgrading the company to B3 from B1. Moody's attributed the change to the belief that the Hoffman Estates, Ill.-based retailer would report significant losses for fiscal 2011.

Stephanie N. Rotondo contributed to this report

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