Yonkers Racing, Atlas Energy price deals; CIT bonds mostly slide in 'avalanche' of trading

By Paul Deckelman and Paul A. Harris

New York, July 13 - Yonkers Racing Corp. and Atlas Energy Operating Co., LLC got the high yield primary market restarted on Monday, already doubling in one session the whole of last week's output of pricings, although their combined dollar amount is only slightly more than last week's solitary Regal Cinemas Corp. offering.

When the Yonkers seven-year senior secured notes broke, they were seen having firmed more than 1½ points from their issue price. The Atlas deal - a quickly shopped transaction that priced just hours after the Moon Township, Pa.-based natural gas exploration and production company announced its plans to do a bond deal - came to market too late in the session for any meaningful secondary action.

Primaryside players also noted that Reliance Intermediate Holdings LP had hit the road to hawk its planned offering of 10-year senior notes to prospective investors.

Meanwhile, CapitalSource, Inc. and ISS Financing plc were heard to be planning bond issues, the latter a euro-denominated offering.

In the secondary market CIT Group Inc.'s bonds were for the most part careening rapidly downward, like a runaway freight train on a downhill slope, or, as one trader put it, like "an avalanche," as the New York-based commercial lender engaged in desperate talks with government regulators in an effort to save itself from insolvency. CIT - which has literally several hundred different bond issues in its capital structure - easily dominated the most-actives list in Junkbondland for a third consecutive session, with almost all of its issues seen multiple points lower, some on volume in the tens of millions of dollars.

Here and there, a CIT bond moved up, and in a very few cases, by several points, as traders noted that issues were starting to converge around anticipated recovery levels, which was seen boosting the value of some of its lower dollar value paper.

Little was going on outside on the CIT universe. Levi Strauss & Co.'s bonds were seen off by several points, this ahead of the scheduled release of second-quarter results by the San Francisco-based apparel company, to be followed by its conference call with analysts and investors.

Yonkers oversubscribed

In Monday's primary market Yonkers Racing Corp. priced a $225 million issue of 11 3/8% seven-year senior secured notes (B1/B+) at 97.095 to yield 12%.

The yield came 12.5 basis points beyond the wide end of the 11¾% area price talk.

Credit Suisse Securities and J.P. Morgan Securities Inc. were joint bookrunners.

Proceeds will be used to repay existing debt and to terminate an interest-rate swap arrangement.

The deal went well, seeing a good amount of demand, most of which came in around 12%, an informed source said.

At that level it was oversubscribed, the source added.

Atlas Energy drives by

Atlas Energy Operating Co., LLC and Atlas Energy Finance Corp. priced an upsized $200 million issue of 12 1/8% eight-year senior notes (expected ratings B3/B+) at 98.116 to yield 12½% on Monday.

The yield came on top of the yield talk. The price came within price talk which specified 2 points of original issue discount. The deal was increased from $150 million.

JP Morgan, Wells Fargo Securities, Banc of America Securities LLC and RBC Capital Markets were joint bookrunners for the quick-to-market deal.

Proceeds will be used to repay the Moon Township, Pa.-based energy company's revolver.

CapitalSource to bring $300 million

Meanwhile new deals rolled out on Monday.

CapitalSource intends to price a $300 million issue of five-year senior secured bullet notes (expected ratings Ba3/BB) late this week, following the conclusion of an investor roadshow.

Credit Suisse is leading the Rule 144A for life offering.

Proceeds will be used to repay the company's senior secured credit facility.

Reliance launches

Reliance Intermediate Holdings LP began a roadshow on Monday for its $250 million offering of 10-year senior notes (Ba2/BB-//DBRS: BB).

The deal is expected to price next week.

Credit Suisse has the books for the Rule 144A for life deal.

Approximately C$103 million of the proceeds are to be invested in the company's wholly owned subsidiary, Reliance LP, in the form of additional equity, with the balance to fund transaction costs as well as a distribution to Reliance Intermediate's owners.

ISS Global plans €525 million

ISS Financing plc, a financing unit of Copenhagen, Denmark-based facilities services provider ISS Global A/S, is roadshowing €525 million of senior notes due June 15, 2014 this week.

Goldman Sachs & Co. and Deutsche Bank Securities are joint bookrunners for the deal to fund the tender for up to €500 million of the company's existing euro medium-term notes due 2010.

Yonkers bonds race upward

When the new Yonkers Racing 11 7/8% senior secured notes due 2016 were freed for secondary dealings, they were seen having gotten as good as 98½ bid, 99½ offered - up from the 97.095 level at which they had priced earlier in the session .

Another trader a little later on quoted the bonds "up and down around 98," pegging them at 98 bid, 98½ offered, "about where they should be."

New Atlas Energy unseen

Traders did not see Atlas Energy Operating's new 12 1/8% notes due 2017.

One trader did see the company's existing 10¾% notes due 2018 around the 92 bid, 94 offered range.

New Regals hold gains

A trader said that Regal Cinemas' new 8 5/8% notes due 2019 were trading at 99¼ bid, par offered, but opined: "I don't think you see much trading in it at all" in the CIT-dominated session.

The Knoxville, Tenn.-based movie theater operator had priced its quickly shopped $400 million "drive-by" issue - upsized from the originally planned $300 million - on Thursday at 97.561 to yield 9%, and those bonds had firmed by Friday to 99½ bid, 99¾ offered.

Another trader, who had seen the bonds on Friday at 99 bid, 99¾ offered, said they weren't trading much Monday, like everything else overshadowed by the CIT drama.

"People have short memories about how this company tanked, years ago," he remarked.

Market indicators mostly easier

Back among the established issues, the CDX Series 12 High Yield index - which had gained about ½ point on Friday, moved up another ½ point Monday, a trader said, to 83¾ bid, 84 offered.

However, the KDP High Yield Daily Index, which had lost 11 basis points on Friday, eased by another 9 bps on Monday to end at 62.45, while its yield rose by 2 bps to 10.63%.

In the broader market, advancing issues - which had lagged decliners for a fifth consecutive session on Friday - remained behind on Monday by a more than six-to-five margin .

Overall market activity, measured by dollar-volume totals, jumped 31% from Friday's level.

CIT calamity dominates trading

Much of that extra volume undoubtedly came in the bonds of CIT Group, which mostly slid by multiple points - intensifying the downturn seen since the middle of last week and especially on Thursday and Friday - on market fears that the Federal Deposit Insurance Corp. will turn down CIT's request to participate in the FDIC's Temporary Liquidity Guarantee Program, which has allowed may struggling banks to replenish their depleted coffers by issuing low-interest, federally-backed bonds of three years maturity or less.

The speculation is centered around the idea that unlike larger banks that have taken advantage of the program, government regulators do not consider CIT - which mostly lends money to small and medium-sized businesses - to be so vital a cog in the machinery of the economy that it would be "too big to fail," as would an institution like, say, Citigroup or other large money-center banks.

With reports that CIT - seeking cash with which to pay looming debt maturities this year and next - is in continued talks with federal regulators seeking relief, a trader said Monday's session was "just an avalanche of CIT. I really don't know of anything else trading."

A second trader declared that CIT "was active on Friday - but it was a lot more active today, so if you didn't have anything to do in CIT, your chances of getting something done were kind of limited."

The first trader said that "the top 10 most active bonds in all of high yield are CIT issues" - and pointed out that the most actively traded CIT issue, the floating-rate notes slated to come due on Aug. 17, saw volume of $87 million - while the most-active non-CIT paper only had turnover of about $13 million."

He said that "it was all about 'bid-wanted, where can I sell CIT?' The majority of the messages today were 'bid wanted,' 'bid wanted,' 'bid wanted.'"

He added that "they have so many issues outstanding, it was just like a dumping-fest."

The CIT '09 floaters tumbled to 72½ on a round-lot basis, well down from 94 3/8 on Friday, with $87 million traded.

The trader also saw CIT's 4¾% notes due 2010 fall to 59½ bid, from 70 on Friday, on $54 million traded. That issue alone, he said, accounted for "25 pages of trades on Trace."

CIT's 7 7/8% notes due 2012 lost over 10 points on the day to end at 54¼ bid, on $50 million traded, while its 5 1/8% notes due 2014 retreated to 49 from 57 on Friday, also on turnover of $50 million. CIT's 4¼% notes due 2010 plunged to 69 bid from 82 previously, with $47 million of the bonds changing hands.

'Get me out'

Unlike the bond-price action seen in CIT over the several previous sessions - which saw CIT paper initially falling as much as 5 points or more in the early going, only to usually come back later on and end with only relatively minor losses - Monday was "a full-fledged avalanche," the trader said. "This was 'get me out.' There was no price sensitivity. Accounts that owned them didn't even want to risk what was coming down the pike with this situation. They just said 'get me out.' There was a real insensitivity to price - it was just 'what can you pay? - I'll sell 'em'."

Not all of the CIT issues, however, were on the downside. A market source - while seeing the 4 1/8% notes slated to come due this November collapsing by 21 points down to the 66 level, on market belief that CIT will not be able to pay that bond off - also saw its 5 1/8% notes due 2014 actually move up by nearly 6 points in active trading to around the 58 mark, while its 6% notes due 2036 were up nearly a point at the 52 level.

Another source - who saw its 6 7/8% notes due Nov. 1 down 17 points on the day, quoting them at 72 - also saw its 5.40% notes due 2016 up by nearly 2 points on the day to the 59 level.

A trader said that the day's trading in CIT was "kind of a mixed bag. I would say the stuff that was down the most was the higher dollar priced items. They're starting to trade toward a recovery value kind of price -- so the higher dollar priced items are still down more on the day, while the lower dollar priced items, some of them are actually unchanged, or just down a little bit, depending on where you look."

For instance, he said, one of the lowest-priced items, the CIT 6.10% hybrid securities due 2067, which were trading around 25 in the morning, had moved back up to around 30 by the end of the day, "pretty much where they went out" on Friday.

He saw the 4¾% '10s which had traded around 74-75 on Friday, get as low as 62 on Monday - and late in the day, had come off those lows to trade around 65.

He said "the bulk of the issues that are in that 2012 to 2016 [area] are trading between 50 and 60, where it's settled into." He quoted its 2012s "pretty unchanged on the day," with the floating-rate notes due that year around 571/2-591/2, unchanged.

He said that "as we kind of condense to a recovery value, depending on which end of the yield curve you're on, you're either higher or lower on the day."

'Barometers' trade a little better

Away from CIT, a trader saw Freeport-McMoRan Copper & Gold Inc.'s 8 3/8% notes due 2017 - the usual high yield volume leader most days - edge up to 101½ bid, a ¼ point gain on the day. Only $13 million of the Phoenix-based metals mining concern's bonds traded.

He saw Community Health Systems Inc.'s 8 7/8% notes due 2015 better by ½ point at 97 bid, on volume of $8 million, while another issue often tracked as a market bellwether, First Data Corp.'s 9 7/8% notes due 2015, were ¼ point better than Friday at 681/4, on just $3 million of turnover. That was about the same volume level as for Aramark Corp.'s 8½% notes due 2015, which firmed by about 1/8 point to 95 7/8 bid.

Elsewhere, he said that Georgia-Pacific LLC's 8 1/8% notes due 2011 rose to 10 bid from 99 7/8 previously on $5 million traded.

Motorola Inc.'s 6½% bonds due 2028 were unchanged from Friday at 69 bid, on $10 million traded.

Levi lower ahead of numbers

A trader saw Levi Strauss & Co.'s 8 7/8% notes due 2016 at 93¾ bid, which he called "a significant drop" from its most recent previous round-lot level of 97 last Wednesday, with $6 million of the bonds traded.

At another desk, a market source quoted the company's 9¾% notes due 2015 down 1½ points to around the 95 level.

Levi - maker of the eponymous brand of blue jeans - is scheduled to release its fiscal second-quarter numbers at 4 pm ET on Tuesday and then company executives will host a conference call. Analysts will be closely scrutinizing those numbers for clues about how the venerable company is weathering the recession, which has taken a severe toll on a fashion industry heavily dependent on consumer discretionary spending. Back in April, Levi reported that for the fiscal first quarter ended Feb. 28 its profit fell by 51% from year-ago levels due to weaker sales and the stronger dollar's negative effect on overseas sales.

Heading into the latest quarter's earnings release, the company had two pieces of corporate news to announce. One was its completion of its previously acquisition of 73 Levi's and Dockers Outlets by MOST stores that had been licensed to Anchor Blue Retail Group, Inc. - which sold them as part of its bankruptcy reorganization - for $72 million, subject to certain post-closing adjustments.

The other corporate development announced Monday was Levi's decision to renew the lease on its San Francisco headquarters for a 10-year period. The renewal deal was brokered with the help of city officials anxious to keep the iconic company and its more than 1,000 headquarters jobs from leaving.

Levi has called the City By The Bay home since its founding there some 156 years ago during the California Gold Rush, and has occupied its current flagship location at Levi's Plaza since 1982. The privately held apparel company did not disclose any financial details about its lease arrangement.

Levi had indicated it might be open to moving its corporate headquarters as a money-saving measure - which a number of other major companies have done - which would have meant the loss of about 1,200 jobs in San Francisco.

Kellwood unfazed by ongoing battle

Also in the apparel sector, traders saw little or no activity in Kellwood Co.'s bonds - despite a looming deadline for the St. Louis-based clothing manufacturer to reach a deal to give holders new debt for their $140 million of 7 7/8% notes slated to come due on Wednesday.

A trader said that he had "not seen a trade on this in a long time, or a quote for that matter. I don't know where they were and where they are going."

Another trader said he saw no trades in that paper on Monday, quoting it offered at 95, but with no bids.

Kellwood's bond exchange efforts have been stymied by its biggest bondholder, Deutsche Bank AG, which on Friday did what Kellwood called "a complete 180" and backed out of an exchange deal which Kellwood said it had not only previously endorsed, but had actually helped to cobble together.

"We are surprised and disappointed by Deutsche Bank's current position as they were on our bondholder steering committee, helped structure the deal and told us all along that they supported it," the company's chief executive officer, Michael Kramer, said in a statement.

Deutsche did not publicly comment on the reasons for the sudden about face.

Kellwood - which some months ago hired the Lazard investment bank to help it restructure its debt - had hoped to get the approval of the holders of at least 95% of the existing bonds for the exchange, which would give them new 12.875% secured PIK paper due in 2014.

While Kellwood searches for an alternative, the company said in a statement that it is profitable and "operationally well-run." It said that it planned to conduct "business as usual."

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