PHH returns with add-on; MF holders await Corzine testimony; Inergy up on tender news

By Paul Deckelman and Paul A. Harris

New York, Dec. 7 - Less than a week after junk market primaryside players heard that PHH Corp. had withdrawn a planned bond deal, the provider of mortgage and vehicle fleet management services made an unexpected reappearance on Wednesday, pricing a $100 million add-on to an existing tranche of bonds.

The deal was the latest in a series of quickly shopped add-ons to established issues that the junk market has seen in recent days, following similar deals this week from Ford Motor Credit Co., LLC, NII Capital Corp. and Fidelity National Information Services, Inc., as well as last week's deal from Landry's Acquisition Co.

The new PHH was seen by traders having moved up a little, after pricing around a point under par.

That was the only real primaryside activity, although there was some talk that office-supplies company Acco Brands Corp. is expected to hit the junk bond and bank loan markets early next year, looking to generate $1.4 billion of debt financing to support its acquisition of sector peer MeadWestvaco's office supplies business.

In the secondary realm, Inergy, LP's bonds were seen mostly at higher levels, helped by the news that company will tender for three series of outstanding bonds.

Traders saw some activity in MF Global Holdings Ltd.'s paper ahead of Thursday's scheduled appearance of former chief executive officer Jon Corzine before a congressional committee probing the events behind the brokerage company's sudden collapse several weeks ago.

Junk was generally higher, with secondary statistical performance indexes continuing to point northward.

PHH returns with add-on

The Wednesday primary market saw a single deal price, generating $99 million of proceeds.

Less than a week after withdrawing its $250 million offering of seven-year notes due to market conditions, PHH Corp. returned to price a $100 million fungible add-on to its 9¼% senior notes due March 1, 2016 (expected ratings Ba2/BB+/BB+) at 99.01 to yield 9.533%.

Citigroup and J.P. Morgan were the joint active bookrunners for the drive-by deal, which the company brought for the purposes of refinancing debt.

Bank of America Merrill Lynch, Goldman Sachs, RBS and Wells Fargo were the joint passive bookrunners.

The original $350 million issue priced at par in August 2010.

The whisper on NPC

NPC International, Inc. has been marketing a $190 million offering of eight-year senior notes (Caa1/CCC+) on a brief roadshow that wraps up Thursday.

The deal is in the market via Goldman Sachs and Barclays.

Although no official price talk was available on Wednesday, the deal is whispered in the context of 10% to 10½%, according to a buy-side source who is looking at both the bonds and the bank loan.

"Things are getting ratcheted down," the source remarked, noting that the Kansas-based Pizza Hut franchisee tightened pricing on its $375 million term loan to Libor plus 525 basis points from Libor plus 550 bps, and decreased the original issue discount to 98 from the 97 area.

Prior to coming into the junk bond market, NPC had planned to raise the cash in the mezzanine market but abandoned the mezz debt due to the strength in the high-yield market.

That was a wise move, according to a portfolio manager who took a peek at the previously proposed mezzanine piece, which was expected to pay 12%.

At the 10% to 10½% range, in which the company is discussing the junk bonds, its cost of capital falls dramatically, the buy-sider added.

CVR Energy expected

Although there have been no announcements, market sources expect CVR Energy, Inc. to roll out a $275 million offering of high-yield notes before the end of the week.

Deutsche Bank will run the books in a syndicate of banks that also involves RBS and Barclays.

Proceeds will be used to help fund the acquisition of Gary-Williams Energy Corp.

Handsome inflows

Cash has been flowing briskly into the high-yield asset class, according to an asset manager, who expects Lipper-AMG and EPFR Global to report substantial weekly inflows in their Thursday report of cash allocations to the various asset classes.

The last outflow this manager's fund sustained was on Nov. 28.

During the early part of the present week inflows have been "handsome," the manager said.

However during the week to Nov. 30 the funds posted big outflows, with Lipper-AMG reporting negative $1 billion, and EPFR reporting negative $1.62 billion.

Bridges to 2012

The high-yield market is expected to remain generally quiet and conspicuously illiquid for the remainder of 2012, in part because dealers, eying the Volker Rule which restricts proprietary trading, have been paring risk.

However a substantial pipeline appears to be taking shape for early 2012, as evidenced by a recent spurt of bridge syndication activity.

Physio-Control will hold a Thursday lender call for a $315 million senior secured bridge loan which is expected to be taken out with high-yield bonds in early to mid January 2012, according to a mutual fund manager.

Citigroup and RBC are leading the bridge syndication and are expected to lead the bond deal, the source added.

The bridge is part of financing for the LBO of the company by Bain Capital from Medtronic Inc.

Under the agreement, the company is being purchased from Medtronic for cash in a transaction valued at about $487 million.

On Wednesday Samson Investment Co. held a call to launch a $2.25 billion bridge loan.

The bridge loan is backing a $2.25 billion high-yield bond offering that will be used, along with a $2.25 billion senior secured revolving credit facility, to fund the buyout of the company by Kohlberg Kravis Roberts & Co. LP, Natural Gas Partners, Crestview Partners and Itochu Corp.

J.P. Morgan, Wells Fargo, Bank of America Merrill Lynch, Barclays, BMO, Citigroup, Credit Suisse, RBC, Mizuho and Jefferies are the bookrunners on the bridge with JP Morgan and Wells Fargo the lead arrangers.

"The deal should go fine, but there were a lot of questions on the call," said an investor who listened in, and who said that the bridge loan, which is capped at 10%, is quite easy to like.

Whether or not the full bridge would be syndicated the investor could not say. However the source expressed the belief that most of it would be syndicated.

Finally Acco Brands Corp., expected in early 2012 with $1.4 billion of debt financing via Barclays, will commence syndication of its bridge loan in the very near future, according to an informed source who declined to furnish the size of that loan or any other information about it.

In contrast to the above-mentioned Physio-Control and Samson bridges, the Acco bridge figures to be a much more privately marketed offering, the source said.

New PHH notes edge up

When the new tranche of PHH 2016 notes were freed for secondary dealings, a trader saw the Mt. Laurel, N.J.-based company's paper having moved up a little to 99 5/8 bid, par offered.

That compares with the 99.01 level at which the quick-to-market $100 million issue priced earlier in the session.

At another desk, a trader saw the company's existing 7 1/8% notes due 2013 having lost nearly 1¾ points, to finish at 99½ bid.

Ford Credit, NII stay busy

Also on the new deal front, traders saw continued brisk activity in the newly issued notes from Ford Credit and NII Capital.

As was the case on both Monday and Tuesday, Ford Motor Credit Co.'s 5 7/8% notes due 2021 was again the most active Junkbondland issue on Wednesday, a trader said.

He saw more than $43 million of the notes trading - well down from the more than $100 million which had traded both on Monday, the day the bonds priced, and on Tuesday, but still by far the most active high-yield issue.

He quoted the bonds down 3/8 point at 102¼ bid.

Another junk participant saw the bonds holding steady around the 102½ level, about where they had gone home on Tuesday.

The lending arm of Dearborn, Mich.-based automotive giant Ford Motor Co. priced the quickly shopped $1 billion issue - upsized from an originally planned $500 million - at 101.80 on Monday to yield 5 5/8%, on top of pre-deal market price talk. They then moved up to around the 102 level or slightly above that, in initial aftermarket dealings, and have stayed there ever since.

The new bonds are fungible with the existing $1 billion of the notes that priced at par back on July 27.

There were also busy dealings on Wednesday in the new 7 5/8% notes due 2021 that NII Capital Corp. priced on Monday.

A trader saw the bonds trading at 98 bid, which he said was down about a point on the day, with over $30 million having changed hands. At one point, the bonds had dipped as low as 97 5/8 bid.

As was the case on Tuesday, that $30 million figure was second only to the new Ford Credit issue in terms of volume.

A second trader quoted the bonds at 98½ bid, 98¾ offered, which he said was actually up from the 98¼ bid, 98½ offered level at which he had seen those bonds trade on Tuesday.

The bonds - issued by a subsidiary of NII Holdings Inc., a Reston, Va.-based provider of wireless service to Latin America - had priced on Monday at 98.5 to yield 7.852%.

The quickly-shopped $700 million add-on tranche - upsized from an originally announced $500 million - is considered fungible with the existing $750 million of the notes that priced at par back on March 24.

They had gotten as good as the 99 level on Tuesday, before falling back to their present levels.

New Charter still a champ

Also in the new-deal world, a market source saw the Charter Communications Inc. 7 3/8% notes due 2020 that priced last week continuing to trade well above the 102 bid level on Wednesday.'

He located the bonds as high as 102¾ bid, on volume of around $8 million.

That quickly-shopped $750 million issue - technically sold by the St. Louis-based cable operator's CCO Holdings, LLC and CCO Holdings Capital Corp. subsidiaries - priced last Wednesday at par, and then was heard to have moved up to 101 bid, 101½ offered in initial aftermarket dealings.

It had firmed to around the 102 area by the end of last week, and then pushed above that level on Monday, and has stayed there ever since.

The market source also saw the company's 6½% notes due 2021 trading Wednesday at 98¾ bid, with over $11 million having changed hands.

Year-end wind-down starts

Away from news deal, a trader said that Wednesday's market "had kind of a Christmas feel to it - and that's not necessarily a good sign."

He said that "there was a lot of housecleaning towards the year-end starting in, with people selling kind of funky odd positions, just to clean things up for Dec. 31."

A second trader said that "there was not a whole lot going on here."

However, another trader said it was his impression that the market had an overall firmer tone, "particularly later in the day."

For instance, he saw United Rentals Inc.'s 8 3/8% notes due 2020 - which he said "could be taken as a proxy for the high-yield market on the day," moving up to 102½ bid from 101½ earlier.

The Greenwich, Conn.-based construction and industrial equipment rental company's issue "closed up about a half to a point from where we opened," on volume of more than $8 million.

He saw a similar trajectory in another benchmark issue, Nashville-based hospital operator HCA Corp.'s 6½% notes due 2020. He saw that paper up 1 point on the day, going out at 102¼ bid. Volume of over 414 million made it one of the busiest junk names on the day.

Signposts stay strong

Statistical measures of market performance notched their sixth consecutive session of gains on Wednesday.

A trader saw the CDX North American series 17 High Yield index up by 3/8 point to finish at 93 bid, 93¼ offered, after having gained 5/16 of a point on Tuesday.

The KDP High Yield Daily index was up by 4 basis points on Wednesday to 71.84, after having gained 11 bps on Tuesday.

Its yield, however, rose by 3 bps on Wednesday to 7.69%, after having contracted by 5 bps on Tuesday.

And the widely followed Merrill Lynch High Yield Master II Index rose for a sixth straight session, gaining 0.140% on Wednesday, on top of Tuesday's 0.117% rise.

That gain lifted the index's year-to-date return to 3.334% from 3.19% on Tuesday.

It was the highest year-to-date showing since Nov. 8, when the index registered a cumulative return of 3.891.

The year-to-date return remains below its recent peak level of 4.28%, recorded on Oct. 28, and is well below its high-water mark for the year of 6.362%, which was set on July 26.

However, it is still well up from its 2011 low point, a 3.998% deficit recorded Oct. 4.

Junk once more rose in tandem with modestly better results in the equity markets, as participants held out hopes that Friday's summit of European leaders might find a solution to the continent's debt woes.

The bellwether Dow Jones Industrial Average, which had risen by 52.30 points on Tuesday, gained another 46.24 points, or 0.38% on Wednesday, its third straight rise. The Dow closed at 12,196.37.

The Standard & Poor's 500 index gained 0.20%, although the Nasdaq composite index lost 0.01% on the day.

Inergy improves on tender

Elsewhere, traders noted some activity in the bonds of Kansas City, Mo.-based propane distributor Inergy after the company announced tender offers for its three series of bonds.

The company's 6 7/8% notes due 2021 firmed to 101¼ bid going home, up from 97½ on Tuesday, with over $9 million of the notes changing hands.

Its 7% notes due 2018 were quoted 2 points higher on the day at 102 bid, up from par on Tuesday, though only about $1 million bonds traded.

Inergy announced that it will buy up to $300 million face amount of those two series of bonds, with the $750 million of 6 7/8s having a higher priority than the $600 million of 7% notes.

It also announced that it will separately tender for all $95 million of its outstanding 8¾% notes due 2015. Those bonds - which had most recently traded around the 105 level - were quoted as high as 114, the takeout level, but no actual trades were seen.

A trader said buyers who already had the small deal - the remnant of the $225 million of the bonds that originally priced in September of 2009 - "are going to hang onto them, unless they absolutely have to sell them to raise cash for some reason," he said in explaining the lack of trades.

The two tender offers expire on Jan. 5, although the early tender deadline, including a $30 per $1,000 principal amount consent payment, is 5 p.m. ET on Dec. 20.

MF awaits Corzine

A trader said that MF Global Holdings' bonds are "on hold" in a 33-34 range ahead of Thursday's scheduled appearance before a congressional investigating committee of the failed New York-based futures broker's former chairman and chief executive officer, Jon Corzine.

Thursday, he said, "could be kind of interesting, with Corzine getting grilled" by the House Agriculture Committee, which subpoenaed the former chief executive officer of Goldman Sachs and U.S. Senator and later governor of New Jersey as it seeks an explanation for the spectacular implosion of MF Global, which slid into bankruptcy at the end of October.

A second trader said that MF Global's bonds were trading around "as we get closer to hearing the big man speak - or plead the Fifth."

He said the whole situation was "just ugly, unless they pull a rabbit out of the hat - there's going to be fines, jail time or whatever" - and quoted the company's 6¼% notes due 2016 trading unchanged to perhaps up ½ point at 33½ bid, 34 offered, on "decent volume."

While all of the company's paper, including its 9% bonds due 2038 and its two convertible issues, the 1 7/8% notes due 2016 and the 3 3/8% notes due 2018, all trade in a similar low-30s context, "the 6¼ was the volume leader - that was where most of the action was." He said that about $10 million or $12 million of the latter issue changed hands on Wednesday.

During Thursday's hearing, members of the Agriculture Committee may also ask Corzine for information on some $1.2 billion of brokerage client money which is currently missing and feared lost in the firm's collapse. Several other House and Senate panels are also probing various aspects of the fall of MF Global and are expected to seek Corzine's testimony. News reports speculate that Corzine could at some point during the hearing invoke his Fifth Amendment constitutional right to decline to answer to avoid self-incrimination.

"This is something that probably isn't going to be pleasant, so that should be 'must-see TV'," the first trader suggested.

ATP trades actively

A trader said that ATP Oil & Gas Corp.'s 11 7/8% second-lien senior secured notes due 2015 "jumped onto my screen a lot of times today," seeing "good volume" in the Houston-based energy exploration and production company's issue. He pegged the bonds going home right around 661/2-to-67 bid, which he called down around a point from Tuesday's levels, and from the 68 point where the bonds had opened the day.

Another market source saw the bonds around 66 5/8 bid, with over $18 million having changed hands, placing the issue high up on the junk market's most-actives list.

Sprint busy, but stable

A trader said that Sprint Nextel Corp. was "another [volume] leader," with the Overland Park, Kan.-based wireless giant's 6% notes due 2016 at 82 to 821/2, down ½ point.

However, at another desk, those bonds were being quoted near the end of the day as good as 83½ bid. Volume of over $18 million made that one of the busiest junk credits.

The first trader also saw Sprint's 8 3/8% notes at 88¾ bid, 89 offered, calling them unchanged on the day, while another source located them higher, at 90½ bid, on volume of over $8 million.

Sprint's 49%-owned affiliate, Clearwire Corp.'s bonds were meanwhile seen by one of the traders to be little changed on Wednesday.'

He said the "didn't see a lot of action in that name," calling the Bellevue, Wash.-based broadband service provider's 12% notes due 2015 in a 91 to 92 context, while its 8 ¼% notes were at 62 bid, 64, which he said was unchanged.

The company's 12% notes due 2017 were ending at 81½ bid, 83 offered, which he said was also unchanged.

However, another market source said that bonds were probably up at least a point or more from late levels Tuesday around 79 to 80 - to which those bonds had risen from their levels in the lower 70s at the end of last week. The '17s shot up on Tuesday along with a surprise rise in the company's Nasdaq-traded shares, following the announcement that Clearwire plans to raise $595 million via a two-part equity offering - $300 million of its class A common shares to the public, and another $295 million of class B shares in a private sale to Sprint, which last week pleaded to invest up to $350 million in Clearwire should its network partner sell new stock.

Clearwire stockholders meantime had second thoughts about the stock sale, fearing its potential for diluting their existing holdings. While the shares on Tuesday had recovered from early losses of as much as 8% to end up nearly 6% that session on trading 1½ times heavier than usual, on Wednesday the market hammered the shares down 22 cents, or 8.80%, to end at $2.28. Volume of 31.6 million shares was about 3½ times the norm.

AMR trails off

A trader said that action in AMR Corp.'s bonds - last week's Junkbondland volume leader, following the not totally unexpected bankruptcy filing by the Fort Worth, Tex.-based American Airlines parent - was finally "getting boring."

He said that the company's bonds were pretty much unchanged, with the American 10½% notes due 2012 continuing to trade around 92 bid, while the parent company's 6¼% notes due 2014 remained in the low 20s.

"Every day," another trader said, "AMR is less and less active, at least on a relative basis."

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