TRW drives by, firms up; Avis, Noranda hitting road to sell deals; JPM conference quiets market

By Paul Deckelman and Paul A. Harris

New York, Feb. 25 - TRW Automotive Inc. brought a quick-to-market $400 million issue of eight year notes to the market on Monday, the day's sole dollar-denominated, junk-rated pricing from a domestic issuer. Traders said that the vehicle components manufacturer's new bonds were quoted up around a point in the aftermarket.

Recent new issues from the likes of Aramark Corp. and Station Casinos LLC, which both priced deals on Friday, were heard to have backed up a little from the levels they had initially hit after those pricings.

Away from the deals that have actually priced, Avis Budget Finance Corp. was heard by syndicate sources to be getting ready to market a euro-denominated offering of eight-year notes to European investors via a roadshow beginning on Tuesday.

Noranda Aluminum Acquisition Corp. was also heard on the verge of pitching a $225 million issue of 6.5-year notes to potential bond buyers.

Overall activity in Junkbondland was restrained. One factor that was cited was the impact of J.P. Morgan's traditionally well-attended high-yield and leveraged finance conference, which opened on Monday down in Florida.

Traders also noted the impact of faltering equities on the junk market.

Statistical indicators of market performance turned mixed after having been up across the board on Friday.

TRW eight-years

TRW Automotive priced a $400 million issue of non-callable eight-year senior notes (Ba2/BB/BBB-) at par to yield 4½%.

The deal, which priced on top of yield talk, played to an order book that was three-times oversubscribed, according to a trader.

Not long before the final terms rolled out. a different trader professed the expectation that the deal would come at 4 3/8%.

The level of demand suggested it might come at the tight end, a source said, adding that allocations were considered lousy.

The deal generated substantial interest among high-grade accounts, market sources said.

BofA Merrill Lynch, J.P. Morgan Securities LLC, Goldman, Sachs & Co. and UBS Investment Bank were the joint bookrunners for the general corporate purposes deal.

Noranda starts Tuesday

The Monday session saw two deals board the presently meager active forward calendar.

Noranda Aluminum Acquisition plans to start a roadshow on Tuesday for its $225 million offering of 6.25-year senior notes (existing ratings Caa1/CCC+).

An investor call is scheduled for 12:15 p.m. ET on Wednesday.

Initial yield guidance is in the mid-9% range, according to a buyside source.

The deal is set to price late in the present week.

BofA Merrill Lynch, Citigroup Global Markets and UBS Investment Bank are the joint bookrunners.

Proceeds, along with an expected $60 million of incremental term loan borrowings under the company's existing senior secured credit facilities, will be used to redeem the floating-rate notes due 2015 and for general corporate purposes.

Avis selling €250 million

Avis Budget plans to start a roadshow on Tuesday in London for its €250 million offering of eight-year senior notes (existing senior unsecured ratings B2/B).

The roadshow continues in London on Wednesday and moves to Paris on Thursday.

Initial chatter has the deal coming in the context of 5¼% to 5½%, according to a trader.

Joint bookrunner Citigroup will bill and deliver. Credit Agricole CIB, Deutsche Bank and JP Morgan are also joint bookrunners.

The Parsippany, N.J.-based provider of vehicle rental services plans to use the proceeds to finance the acquisition of Zipcar Inc.

The rest of the February-March crossover week could be relatively quiet in the new issue market, the traders said, adding that a substantial number of companies in the high-yield universe still have financial numbers to report.

TRW quoted up

A trader said that TRW Automotive's 4½% notes due 2021 were being quoted around a 1003/4-to 101¼ bid context, after having priced at par.

But, he said, "it's hard to put a market together," although he saw the bonds bid at 100 7.8 late in the day.

A trader at another desk opined, "I have to think that it will go mostly to [investment-grade] accounts," given the split-rating attached to the Livonia, Mich.-based automotive components and systems manufacturer's $400 million offering.

While both Moody's Investors Service and Standard & Poor's rate the bonds in the upper end of the junk spectrum, at Ba2 and BB, respectively, Fitch Ratings gives them a just barely high-grade BBB- status.

Station, Aramark back up

One of the traders saw the new Aramark 5¾% notes due 2020 open up in a 102-to-102½ bid context, around where those bonds had traded on Friday after pricing at par, but then he saw them ease a little from those highs, seeing them later in the day at 101 7/8 bid, 102 1/8 offered.

Later still, he said, "they were trading into a bid," finally going out around 101 5/8 bid, 102 offered.

A second trader saw the Philadelphia-based uniforms and foodservices provider's quickly shopped $1 billion offering at 101¾ bid, 102 offered, which he called unchanged.

Station Casinos' 7½% notes due 2021 opened at 100¼ to 100½ bid, but they too had backpedalled to around 99½ bid, par offered by the day's end, a trader said.

The Las Vegas-based casino operator had priced $500 million of the notes at par on Friday.

A second trader had them unchanged on the day at par bid, 100 3/8 offered.

Ashland hangs in

A trader said that there were bids as high as 104½ on Ashland Inc.'s new 6 7/8% bonds due 2043.

He added, "I haven't seen a right side on it."

The Covington, Ky.-based specialty chemicals manufacturer had priced $350 million of those bonds at par on Thursday as part of its massive $2.3 billion four-part drive-by deal.

The bonds quickly moved up to around the 1011/2-to-102 area when they were freed for the aftermarket later that same day and then tacked on more than 2 additional points in Friday's dealings.

He saw the 3 7/8% notes due 2018 trading around 102 bid. Ashland had priced $700 million of those bonds at par, and they had first moved up to 100½ bid, 101 offered on Thursday before coming up to the 102 mark Friday.

The trader saw the company's 4¾% notes due 2022 at 101¼ bid, 101¾ offered. Ashland had brought a $650 million add-on to the existing $500 million of those bonds it had sold last summer, pricing the addition at 99.059 to yield 4 7/8 points.

But he said that he hadn't seen the 3% notes due 2016. Ashland priced $600 million of those bonds on Thursday at par, and they were as good as 101½ bid, 102 offered by Friday.

"They seem to have held up most of the day, though I don't see any trading this afternoon," he said, adding that "they might be touch weaker, with the market being weaker, but I don't think the offerings are cheapening that much."

He estimated the bonds at 101.

Stocks soften market

Several traders noted the impact of sharply lower equity prices on Monday, with the bellweather Dow Jones industrial average swooning by 216.40 points, or 1.55%, to end at 13,784.17 and broader indexes down sharply as well.

One trader said, "The [equity volatility index] is up 5 points, 10-year Treasuries are down almost a full point, and it's all headline risk, with the sequester and the Italian elections."

He said that investors were pursuing "risk-off trades and people are kind of hedging themselves."

A second trader said that despite those scary headlines coming across the screens, "the [junk] market kind of held in most of the day; it was pretty firm."

"Some bids started getting hit toward the end of the day," although, he added, "I wouldn't say it's materially weaker, but your bids are probably backed up a good quarter of a point, if not a little bit more."

But he also said, "I don't see too many offerings chasing them at this point because it's all happening at the end of the day."

JPM conference takes toll

That trader also noted, "It's been a pretty light day," citing the impact of the J.P. Morgan High Yield and Leveraged Finance Conference, which opened on Monday in Miami.

The always well-attended event "has a lot of people out of pocket," in terms of portfolio managers and other senior decision-makers.

For instance, he said that one of the reasons why there wasn't more trading in the new TRW bonds was that "[J.P. Morgan is] one of the [lead underwriters], but they're not in New York right now."

Penney trades pre-earnings

A trader said that the bonds of J.C. Penney Co. Inc. continued to trade at a sizable discount to par, even as investors anticipated the Plano, Texas-based department store retailer's quarterly earnings release on Wednesday.

He saw its 6 3/8% bonds due 2036 trading in the high 70s, saying that the bonds moved between 78 and 80 bid, with most of the activity around 781/2-79 on volume of $3 million to $5 million.

He noted, "They actually moved up from last week," having gained about 1½ points.

Penney's 5¾% notes due 2018 were being quoted in an 89-90 context, but the trader said less than $1 million changed hands.

There was, he said, "a little more activity" in the company's 5.65% notes due 2020, pegging the bonds around the 85 level for most of its trades. He estimated the volume around $5 million to $6 million.

"They were in that range, plus or minus a point."

Penney is scheduled to release its fourth-quarter and full-2012 year results as the market is closing on Wednesday afternoon. Wall Street is expecting a loss of about 20 to 22 cents per share, versus a 59 cents per share profit a year ago.

The trader noted a big article in Monday's Wall Street Journal detailing CEO Ron Johnson's struggles to overhaul the aging franchise and make it more inviting to customers/

In the process, Johnson, the well-respected former retailing chief for tech trendsetter Apple Inc., did away with special sales promotions, coupons and clearance racks, all familiar fixtures for Penney's shoppers and saw sales plummet.

Johnson was forced to backtrack on some of the more sweeping revisions to the traditional Penney's marketing strategy.

Market indicators mixed

Statistical junk market performance indicators turned mixed on Monday, after having moved higher across the board on Friday.

The Markit Series 19 CDX North American High Yield index slid by 21/32 point on Monday to close at 101 7/8 bid, 102 1/8 offered, after having gained 15/32 of a point on Friday.

However, the KDP High Yield Daily index gained 2 basis points on Monday to finish at 75.28, its second straight gain, after having moved up by 6 bps on Friday. Its yield declined by 1 bp on Monday to 5.67%, after having come in by 2 bps on Friday.

And the widely followed Merrill Lynch High Yield Master II index posted its second straight gain on Monday, as it rose by 0.172%, on top of Friday's 0.068% advance.

The gain raised the index's year-to-date return to 1.674% from 1.499% on Friday, although it still remained well down from its peak level for 2013 so far of 1.991%, set on Jan. 28.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.