CIT megadeal, U.S. Steel drive by, firm in trading; Neuberger prices; Bon-Ton bonds rise

By Paul Deckelman and Paul A. Harris

New York, March 12 - The high-yield market continued to play host to quickly marketed "drive-by" primary deals on Monday, including a giant-sized offering from commercial lender CIT Group, Inc., which priced a $1.5 billion tranche of six-year notes.

That new paper was seen moving up modestly when it was freed for secondary dealings.

Another well-known issuer - United States Steel Corp. - came to market with $400 million offering of 10-year notes.

Those bonds, too, were trading at slightly firmer levels after pricing at par.

There was some activity noted in the steelmaker's existing bonds, since the proceeds from the quick-to-market deal will be used to redeem some existing debt.

The third deal of the day came from the forward calendar, as asset-management firm Neuberger Berman Group LLC did a two-part offering of $800 million, consisting of eight-year and 10-year notes. That deal came too late in the day for any kind of an aftermarket.

Among recently priced new deals, Friday's offering from Office Depot Inc. continued to trade at a significant premium to its par issue price, although on not much activity.

And a general lack of activity seemed to be the overriding theme in the secondary market away from the new issues as well.

There was considerable trading, though, in a few issues, including retailer Bon-Ton Stores Inc., and ATP Oil & Gas Corp. Both had a fair amount of upside trading last week.

Statistical indicators of market performance were modestly higher on the day Monday.

CIT prices $1.5 billion

The primary market saw three issuers bring a combined four tranches of notes to raise a total of $2.7 billion on Monday.

CIT Group priced a $1.5 billion issue of senior notes (B1/BB-) at par to yield 5¼% on Monday, according to market sources.

The yield printed at the tight end of the 5¼% to 5 3/8% yield talk.

Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Morgan Stanley & Co. LLC and UBS Securities LLC led the deal, which priced on the investment-grade desk.

The New York-based financial-services firm will use proceeds for general corporate purposes and the refinancing of its outstanding 7% series C notes maturing in 2015, 2016 and/or 2017.

Neuberger prices two-parter

Neuberger Berman Group LLC and Neuberger Berman Finance Corp. priced $800 million of senior notes (Ba1/BB+).

The deal included a $300 million tranche of eight-year notes that priced at par to yield 5 5/8%. The yield printed in the middle of the 5½% to 5¾% revised price talk, which was tightened from earlier talk that had the bonds coming with a yield in the 6% area.

In addition, Neuberger Berman priced a $500 million tranche of 10-year notes at par to yield 5 7/8%. The 10-year notes also priced in the middle of the revised 5¾% to 6% price talk. The original talk had the 10-year notes pricing 25 bps behind the eight-year notes.

J.P. Morgan Securities LLC, Barclays Capital Inc., Credit Suisse Securities (USA) LLC and Morgan Stanley & Co. LLC were the joint bookrunners.

The proceeds from the Rule 144A and Regulation S for life notes will be used to redeem all of the outstanding preferred units held by the Lehman Brothers Holdings Inc. parties and the vested preferred units held by NBSH Acquisition LLC, as well as to pay an additional preferred return to the holders of the preferred units and for general corporate purposes.

U.S. Steel on top of talk

United States Steel Corp. priced a $400 million issue of 10-year senior notes (B1/BB/) at par to yield 7½% on Monday.

The yield printed on top of price talk.

J.P. Morgan Securities LLC, Barclays Capital Inc., Bank of America Merrill Lynch, Credit Suisse Securities (USA) LLC, Goldman, Sachs & Co. and Morgan Stanley & Co. LLC were the joint bookrunners for the quick-to-market issue.

The Pittsburgh-based steel maker plans to use the proceeds to redeem its $300 million of 5.650% senior notes due 2013 with any remaining proceeds used for general corporate purposes.

A trader saw sellers of the steel-maker's notes 7½% notes at 100.50 bid, after which prices retreated back to 100.125 bid, 100.375 offered, in decent trading, to close the day.

MotorCity seven-year deal

MotorCity Casino Hotel plans to price a $275 million offering of seven-year senior notes (expected ratings Caa3/CCC+) on Wednesday.

Bank of America Merrill Lynch and Deutsche Bank Securities Inc. are the joint bookrunners.

The proceeds will be used to fund the tender offer for the company's 8% senior notes due 2013.

The issuing entity will be special purpose vehicle CCM Merger, Inc.

Monitronics starts Tuesday

Monitronics International, Inc. plans to start a roadshow on Tuesday for its $460 million offering of eight-year senior notes.

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

Bank of America Merrill Lynch is the left lead bookrunner. Citigroup Global Markets and Credit Suisse Securities (USA) LLC are the joint bookrunners.

The proceeds, along with a new senior secured credit facility, will be used to repay all outstanding borrowings under the existing senior secured credit facility and to purchase notes under, and terminate, the existing securitization debt.

Ascometal starts roadshow

France's Ascometal began a roadshow in Europe on Monday for its €300 million offering of eight-year senior secured notes (expected ratings B3/B-).

The European roadshow wraps up on Wednesday and will be followed by a roadshow in the United States, which is set to run March 16 to March 20.

Joint bookrunner Bank of America Merrill Lynch will bill and deliver. Morgan Stanley also is a joint bookrunner.

The issuing entity will be Captain BidCo SAS, a special purpose vehicle of the Courbevoie, France-based steel producer.

The proceeds will be used to refinance debt used to fund the acquisition of Ascometal.

CIT trades up

A secondary market trader said of Monday's session that "it was a slow start in the morning, but then we printed a few new issues."

He saw the new CIT Group six-year notes "kind of active" in a bid range of 100 5/8 to 1003/4, after the $1.5 billion drive-by issue had priced earlier in the session at par, before settling in around 100½ bid, 100¾ offered.

He said that CIT was probably the most active issue Monday out of all of the new deals that came either on Monday or last week. "There seems to be a lot of trading in that," he suggested.

A second trader also saw the new CIT bonds at 100½ bid, 100¾ offered.

CIT, another trader declared, "was doing fairly well for a six-year," going home at 100 5/8 bid, 100 7/8 offered.

There was little or no activity, however, seen in the 7% Series C notes due 2015, 2016 and 2017, which CIT said it would take out using the proceeds of Monday's megadeal.

U.S. Steel gains come in low

A trader saw the new U.S. Steel bonds at 100 3/8 bid, 100 7/8 offered.

At another shop, a trader said the inside market in the biggest U.S. steelmaker's quickly-shopped new issue was 100 3/8 bid, 100¾ offered, versus the $400 million deal's par issue price.

"It looked like the underwriters didn't do that hot a job. A number of larger accounts that you would expect to be in the aftermarket on the buyside kind of let them [the deal] go," the trader said.

He continued that he would have expected the familiar junk borrower's new bonds to trade "with a 101 handle after the break, at that [issue] price."

Asked about why, in his opinion, the bonds weren't doing better once they were freed to trade, he said he was "not sure if there were enough accounts participating in the deal.

"But my first pass on this is that it seems like it wasn't that well-placed," the trader said.

Yet another trader saw the new Steel bonds at 100 3/8 bid, 100 5/8 offered.

A market source quoted the company's 5.65% notes due 2013 as having firmed almost 3 points, to the 105 range.

U.S. Steel said it will use the new-deal proceeds to redeem the $300 million of outstanding 5.65% notes.

Another source saw those bonds going out around 105 7/8 bid, calling it a 2¾ point jump, although noting that while there were some fairly sizable odd-lot trades during the day in the $500,000 to $750,000 range, there were no actual round-lot transactions.

U.S. Steel's 7 3/8% notes due 2020 were little-changed on the day at 102¼ bid, on volume of more than $9 million.

Neuberger comes too late

A trader said before the close that the Neuberger Berman $800 million two-part offering would likely price late.

And sure enough, the New York-based asset-management company's deal came to market too late in the session for any kind of real aftermarket dealings.

Office Depot holds big gains

Among the bonds that priced last week, the aftermarket star of Friday's new-deal roster, Office Depot's 9¾% senior secured notes due 2019, pretty much held onto the aftermarket gains they had notched after the Boca Raton, Fla.-based office products supplier's $250 million issue priced at par and then moved up to around 102 bid, 102½ offered later in the session.

A trader said he saw one trade on Monday at 102¾ bid, but nothing after that.

"It's not that big an issue, so I wouldn't expect it to be very active to begin with," the trader said.

A second trader said the bonds had done fairly well, trading on Monday at 101¾ bid, 102¾ offered.

But he added, "I don't think a lot traded in that one."

First Data, Silgan hold levels

Among the other Friday deals, a trader said the First Data Corp.'s 7 3/8% senior secured notes due 2019 were in a 100 1/8 to 100 3/8 range all day, without a lot of activity. "It didn't go anywhere," the trader said.

Another saw the bonds in a 100 3/8 to 100 5/8 context, up about a point from the 99.5 level at which the Atlanta-based electronic transaction processor's $845 million add-on issue had priced on Friday to yield 7.462%.

That was in line with the 100¼ to 100½ context the bonds had moved in on Friday after the quick-to-market pricing.

A trader initially saw Silgan Holdings, Inc.'s new 5% notes due 2020 at 100 1/8 bid, 100 3/8 offered, firming up slightly later on to 100¼ bid, 100 5/8 offered. "They were not extremely active," he said.

Another trader saw them trading between par and 100½ bid.

The Stamford, Conn.-based maker of rigid packaging priced $500 million of the notes - up from an originally announced $300 million - at par in a same-day transaction on Friday. The bonds had moved up initially to 100¼ bid, 100¾ offered after pricing.

Good volume seen in Goodyear

A trader saw considerable activity in Goodyear Tire & Rubber Co.'s recently priced 7% notes due 2022, calling them "pretty much unchanged, maybe a smidge better."

Over $27 million of the bonds changed hands on Monday, with a source quoting them at an even par level.

However, at another desk, a high-yield source called the Akron, Ohio-based tire-making giant's bonds 2-point losers on the day, pegging them at 99 5/8 bid.

Goodyear priced $700 million of the bonds at par in a drive-by deal on Feb. 23.

A lackluster market

Away from the new deals, a trader said that the overall market "was kind of unchanged - up and down one-eighth [point] most of the day."

"It was kind of sleepy until you got some new-issue pricing going on," the trader said. "There were a lot of one-off trades here and there, but nothing dramatic in price changes."

Nothing really "stands out," a second trader agreed.

"I don't think there were a lot of notable price movers," a third chimed in.

Junkbondland was coming off a week that saw generally lower levels versus the previous week according to the various statistical indicators, including the Merrill Lynch High Yield Master II Index and the sector-by-sector results tabulated by Advantage Data.

This was the first such "down" week of 2012, after nine previous weeks of continued upside movement (see related story elsewhere in this issue).

Weakness in the first part of last week, particularly in last Tuesday's session, which coincided with a steep fall in the equity markets, proved to be too much for the gains to overcome.

"I think part of it was the market was over-extended on the upside and you still have a lot of accounts out there spending money because they have to - not particularly because they want to," one of the traders theorized.

"If you're a portfolio manager right now, you're just trying to get allocations so that you can add the new issues," he said, "rather than constantly adding to the stuff you already have."

Noting last week's equity-market gyrations - the bellwether Dow Jones Industrial Average is still unable to get above the psychologically important 13,000 level and convincingly stay there - he said that "just like the equity market had a correction to go through, so do we. And with the calendar coming hot and heavy, [the overall market] can back up a bit."

ATP still active at higher levels

Among specific names, a trader said that ATP Oil & Gas's 11 7/8% second-lien senior secured notes due 2015 were still up today, seeing the Houston-based offshore energy exploration and production company's notes trading around 73 bid.

"They seemed pretty active today, with a 73 handle most of the time," the trader said. "There were a couple of trades lower and some odd-lot trades higher."

A second trader saw the bonds trading between 73-74, or maybe 721/2-731/2.

More than $20 million of the bonds changed hands on Monday at levels as high as 74, putting ATP far up on the junk market's most-actives list.

On Friday, ATP was the most actively traded junk issue of the session, with volume of more than $44 million recorded, including over $33 million of round-lot transactions.

Those bonds rose 4 points on Friday to close in the low- to mid-70s area. That continued the momentum seen the previous week when they jumped from around the 60 level up to the high-60s over several sessions on news that one of its Gulf of Mexico wells had indeed struck oil, and the company's subsequent announcement that the newly active well could yield as much as 7,000 barrels per day of oil and equivalents.

Bon-Ton keeps getting better

"Bon-Ton continues to move up in the retailing space," trading with an 80 handle on Monday, a trader said.

"That one continues to move up," the trader added.

It was the latest milestone for the York, Pa.-based department-store operator's 10¼% notes due 2014, which saw nearly $10 million of turnover on Monday, at levels as high as 81½ bid.

A market source pegged them going out at 80 5/8, calling that a nearly 41/2-point jump.

That continued the strong momentum seen last week when the bonds firmed smartly over several days.

The bonds firmed from the mid-60s into the mid-70s after the company said that for the four weeks ending Feb. 25, it saw a 0.7% increase in same-store sales in stores open at least one year. This is considered the key retailing industry performance metric.

Its total sales came to $199.4 million, up nearly 1% year-over-year.

The company also ended the month with $453 million available under its credit facility.

Market signs up on day

Statistical measures of junk-market performance were on the positive side on Monday, though with not much conviction, after having been mixed on Friday.

A market source said that the CDX North American Series 17 High Yield index gained 1/16 of a point on Monday to close at 97 bid, 97¼ offered, after having been down by 1/16 point on Friday.

The KDP High Yield Daily Index meantime rose by 3 basis points, to 74.11, after having eased by 3 bps on Friday. Its yield was unchanged Monday at 6.57%, after having narrowed by 3 bps on Friday.

And the widely followed Merrill Lynch High Yield Master II Index notched its fourth consecutive daily advance on Monday, gaining 0.091% on top of Friday's 0.113% rise.

The latest gain lifted the index's year-to-date return to back above the psychologically significant 5% level for the first time in over a week, to 5.061% from 4.966% Friday.

However, it is still down from its peak level for 2012 of 5.361%, which was recorded on March 2.

Stephanie N. Rotondo contributed to this report

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