Air Lease megadeal, DJO drive by; new U.S. Steel, CIT very busy; junk stronger overall

By Paul Deckelman and Paul A. Harris

New York, March 13 - The high-yield primary market saw a pair of new deals totaling $1.23 billion on Tuesday. Like most of Junkbondland's recent new deals, both of the day's issues were opportunistically timed "drive-by" transactions.

DJO Global Inc., a maker of orthotic and prosthetic devices, priced $230 million of six-year senior secured notes. The bonds were seen at least 2 points above their par pricing levels in the aftermarket.

Air Lease Corp., an aircraft leasing company, massively upsized its offering of five-year notes to $1 billion. The new bonds traded a little above their par issue price.

Traders saw both halves of financial firm Neuberger Berman Group LLC's $800 million two-part issue - a late pricer during Monday's session - move up solidly when it was freed for trading on Tuesday, although there was not that much activity in it.

There was no shortage of trading activity in Monday's other two bond deals: the $1 billion issue from CIT Group Inc. and United States Steel Corp.'s $400 million transaction. U.S. Steel was the busiest junk issue of the day, followed by CIT. Both rose, although CIT did better in trading.

Junk issues overall were mostly higher, with the market getting a shot in the arm from the surge in equity levels sparked by the news that J.P. Morgan Chase & Co., like most big banks, had passed its Federal Reserve stress test and had received the green light to up its dividend and buy back stock. Statistical performance indicators were solidly on the upside.

Among specific junk issues, ATP Oil & Gas Corp. climbed, helped also by the offshore energy company's own good news about expanded liquidity.

Air Lease massively upsizes

Air Lease priced a massively upsized $1 billion issue of unrated, non-callable five-year senior notes at par to yield 5 5/8% on Tuesday, according to a market source.

The yield printed on top of price talk that was upwardly revised from earlier talk, which had the yield coming in the 5½% area.

J.P. Morgan was the bookrunner for the quick-to-market issue, which was upsized from $500 million.

The Los Angeles-based aircraft leasing company plans to use the proceeds to fund the acquisition of commercial aircraft and for general corporate purposes.

DJO at the tight end

DJO Finance LLC and DJO Finance Corp. priced a $230 million issue of six-year second priority senior secured notes at par to yield 8¾% on Tuesday, according to a syndicate source.

The yield printed at the tight end of the 8¾% to 9% yield talk.

Credit Suisse, Goldman, Sachs, UBS, Wells Fargo, Macquarie, RBC and Natixis were the joint bookrunners.

The Vista, Calif.-based medical device company plans to use the proceeds to refinance debt.

Talking the deals

Apart from Tuesday's completed deals, syndicates set the table for an active mid-week session.

Cenveo Corp. talked its $450 million offering of senior notes due May 15, 2020 (Caa2/CCC+/) to yield 11½% to 11¾%.

The books close at 2 p.m. ET on Wednesday, and the deal is set to price thereafter.

Bank of America Merrill Lynch, Morgan Stanley, Macquarie and Barclays are the joint bookrunners.

MotorCity Casino Hotel talked its $275 million offering of seven-year senior notes (expected ratings Caa3/CCC+) to yield 9% to 9¼%.

Books close at 11 a.m. ET on Wednesday, and the deal is set to price thereafter.

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

Fortescue for Wednesday

FMG Resources Pty Ltd., a subsidiary of Australia's Fortescue Minerals Group, plans to price $1 billion of senior notes (B1/BB-) in two tranches on Wednesday afternoon.

The deal, which was announced late Tuesday, will feature tranches of five-year notes with three years of call protection and 10-year notes which come with five years of call protection.

J.P. Morgan, Bank of America Merrill Lynch, Citigroup, Credit Suisse, Deutsche Bank, RBS and UBS are the joint bookrunners.

The iron ore mining company plans to use the proceeds for equipment financing and general corporate purposes.

Nord Anglia starts roadshow

England's Nord Anglia Education began a global roadshow on Tuesday in Los Angeles for its $325 million offering of five-year senior secured notes (B2/B/).

Barclays and Goldman Sachs are the joint bookrunners. Goldman Sachs will bill and deliver.

Proceeds will be used to repay bank debt and shareholder loan notes.

The prospective issuer is a provider of international education services, headquartered in Burton-upon-Trent, Staffordshire, England.

New DJO does well

When DJO Global's new six-year secured notes were freed for secondary dealings, traders saw the orthopedic devices maker's new issue firming smartly from their par pricing level.

A trader saw the bonds trading at 102¼ bid, saying that left the bonds going out at 102-to-1021/2.

A second trader said that he saw the first trades in the new bonds at 101¼ bid, but after that, the paper had firmed to 102¼ bid.

Yet another trader saw those bonds trading at bid levels between 102 and 102 3/8.

Air Lease up slightly

Air Lease's upsized $1 billion offering of five-year notes came to market fairly late in the day, leaving not much time for trading.

Nonetheless, a trader saw the bonds quoted at par bid, 101 offered on the break versus their par issue price. That tightened up from there with the trader next seeing the bonds at 100¼ bid, 100½ offered.

Still later, he said, the bonds were at par bid, 100 3/8 offered.

New Neuberger bonds better

Neuberger Berman's $800 million two-part offering was seen at solidly stronger levels once the New York-based asset-management firm's deal was freed to trading on Tuesday morning.

Those bonds had come to market late Monday - too late for any kind of aftermarket at that time.

A trader saw the $300 million 8 5/8% notes due 2020 at 101¼ bid, 101 5/8 offered, while the $500 million of 5 7/8% notes due 2022 were at 101½ bid, 102½ offered - both well up from the par level at which each tranche had priced on Monday.

A second trader saw the new Neuberger bonds doing better than that, with the eight-year bonds at in a 101¼ to 101¾ context and the 10-years at 102¼ bid, 102 3/8 offered.

He said it was difficult to estimate the volume on the new issue because it's a 144A deal not showing up on Trace: "I didn't see many prints on it. I didn't see many posts on trades."

A trader at another shop opined that Neuberger Berman "didn't trade all that much, but it traded well," with the 8-year bonds moving up to around 102 bid and the 10-years at 1021/4-to1021/2.

U.S. Steel day's busiest

While there was not much actual trading gong on in Monday's Neuberger Berman bonds, it was quite a different story in Monday's other two deals - the quickly shopped offerings from U.S. Steel and CIT Group.

A trader said that some $92 million of the Pittsburgh-based steel giant's 7½% notes due 2022 changed hands on Tuesday. He saw them last trading around 101¼ bid - up from par, where that $400 million deal had priced and up as well from the 100 3/8 bid, 100¾ offered level the bonds traded up to in initial aftermarket dealings.

"During the morning," a second trader said, "most of the activity was in the new Steel issue. It looked like it was the only thing trading for a while."

He saw the bonds open up at 100½ bid. After that, he saw "a lot of activity between 100½ and 101, producing an afternoon level of 101-to1011/4.

However, another trader later on said that the Steel bonds "didn't do much" and pegged them in a 1001/2-to100¾ bid range.

CIT pretty active also

A trader saw CIT Group's new 5¼% notes due 2018 up seven-eighths of a point on the session, last trading at 101 3/8 bid.

The New York-based commercial lender priced $1.5 billion of those notes at par on Monday, and the notes moved up to 100½ bid, 100¾ offered in initial aftermarket trading.

"The new CIT issue started out slow," a second trader said, "but it got kind of active around 101-to 1011/4."

Yet another trader saw them at 101 1/8 bid, 101 3/8 offered. Some $43 million of the new bonds had changed hands by late afternoon, second only to the new U.S. Steel deal.

Recent deals actively traded

There was brisk activity seen - at mostly higher levels - in a number of other recently traded issues, a market source said.

For instance, Century Link Inc.'s big two-part megadeal, which priced back on March 5, was seen active in the market on Tuesday.

The Little Rock, Ark.-based telecommunications company's $1.4 billion of 5.8% notes due 2022 were trading at just under 102 bid on volume of nearly $35 million. Those bonds had priced at 99.042 to yield 5.821%.

The company's $650 million of 7.65% notes due 2042 were meantime seen at the 97½ bid level, with about $18 million traded. The notes had priced at 99.905 to yield 7.6585%. Traders noted that the split-rated (Baa3/BB-) deal had attracted interest from both high grade accounts looking for some yield as well as from junk accounts.

Chesapeake Energy Corp.'s 6.775% notes due 2019 were seen trading just over the par level on volume of about $15 million. The Oklahoma City-based natural gas company had priced that $1.3 billion issue, upsized from an originally announced $1 billion, at 98.75 on Feb. 13, to yield 7%.

Those bonds had been the busiest in the junk space for about a week or two after that before finally settling into their current volume range.

Three other recent energy deals were also seen trading busily around on Tuesday.

Fort Worth, Texas-based natural gas operator Range Resources Inc.'s 5% notes due 2022 were trading at 100 5/8 bid on volume of about $11 million. The company's $600 million issue, upsized from an originally announced $500 million, priced on Feb. 24 at par. The new bonds got as good as above the 102 bid level before coming back down to current levels.

Midland, Texas-based energy exploration and production company Concho Resources, Inc.'s 5½% notes due 2022 were trading Tuesday at 100 7/8 bid on volume of over $10 million. It had priced that $600 million issue, upsized from $500 million, on March 7 at par.

And Bill Barrett Corp.'s 7% notes due 2022 traded at 100¼ bid on volume of just under $10 million. The Denver-based E&P operator priced its $400 million deal at par on March 5.

Junk gets jump from equities

Away from the new deals, "it was equity day," a trader said, noting the boost junk got from stocks, which had their best day of the year following positive news from the Federal Reserve on the financial health of the nation's big banks.

A trader said that early levels seen on different bonds "were probably up because once J.P. Morgan came out with their news, the market took off, and it seems like offerings have been lifted.

"Earlier in the morning, the market was up maybe a quarter-point, but later in the day after that news, it was up about seven-eighths of a point, with offerings just getting taken."

He said, "Aside from the new issues, and maybe flipping or adding [in those names]," there wasn't much happening.

"Everyone was waiting for the Fed and the Fed came" with the results of the stress tests to see whether big banks and other major financial companies had sufficient capital to withstand a drastic economic event.

"Then, J.P. Morgan's news broke, and BOOM! Most everything headed higher.'

Another trader added, "The market was firm to begin with, but that definitely added a late leg up."

ATP gains once more

Among specific names, ATP Oil and Gas's 11 7/8% second-lien notes due 2015 "ended up a good amount," a trader said, seeing the Houston-based offshore energy E&P company's paper rising to a 76-77 bid range before finally going home at 77 bid, which he called up 3 points on the day.

"They are just lovin' life," he said.

He saw "good volume" in the credit, in the mid-teens.

A second trader said that the bonds got a late start: "They didn't trade till 10 [a.m. ET], opening at 75, but then hitting a high tick around 76½ bid, up several points."

He saw a bunch of "smaller trades between 75 and 761/2, which is not the kind of activity you usually see in the name," normally the province of round-lot transactions. "But it's trading at its high."

In late February, the bonds were trading down around a 62-63 context, but they jumped to 66-67 in active dealings on Feb. 27, when the company announced that it had struck oil at one of its wells in its Telemark Hub out in the Gulf of Mexico.

Later that same week, the bonds firmed to about a 68-69 context, when the company estimated that production from the newly active well could rise to 7,000 barrels of oil and equivalents a day.

The bonds rode that momentum all last week and then were firming on Monday and again Tuesday of this week, helped by another piece of positive news. ATP announced late Friday that it had augmented its liquidity opposition.

The company said that it had increased its first-lien credit facility to $155 million from $140 million and had cut its interest rate on those borrowings to 8.75% from a floating 9%. Funding of the newly available amount is scheduled after the filing of the company's 10-K.

It also said that as a result of asset sale transactions, ATP has received additional liquidity of some $60 million so far this month, and during the remainder of the month, the company expects to receive additional liquidity in excess of $100 million from asset sale transactions that are scheduled to close shortly.

Market signs up on day

Statistical measures of junk market performance were higher across the board for a second consecutive session on Tuesday.

A market source said that the CDX North American Series 17 High Yield index jumped a full point on Tuesday to end at 98 bid, 98¼ offered, after having gained 1/16 point on Monday.

The KDP High Yield Daily Index meantime rose by 5 basis points to close at 74.16 Tuesday, after having advanced by 3 bps on Monday. Its yield came in by 1 basis point, to 6.55%, after having also declined by 1 bp on Monday.

And the widely followed Merrill Lynch High Yield Master II Index saw its fifth consecutive daily advance on Tuesday, rising by 0.102%, on top of Monday's 0.091% gain.

That lifted the index's year-to-date return to 5.168% on Tuesday, up from Monday's 5.061%, though it remained below its peak level for 2012 of 5.361%, which was recorded on March 2.

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