Nielsen deal finally prices; new Lennar, Encore bonds firm; Ford jumps despite sizable loss

By Paul Deckelman

New York, April 24 - Nielsen Finance LLC/Nielsen Finance Co.'s on-again, off-again bond offering was on again, definitively, on Friday, as the New York-based media and market research company successfully brought an upsized offering of seven-year notes to market - closing out a busy week in the primary market that saw new deals price each day of the week for the first time since last May.

While Nielsen was pricing, secondary market players were getting a crack at recent new deals, and they took Thursday's offering from Lennar Corp. solidly higher, while also continuing to lift another one of the week's offerings, the new notes from Encore Acquisition Co.

Among the established issues, Ford Motor Co. was clearly the star of the session, as the Number-Two domestic carmaker's bonds were up about 5 points pretty much across the board, investors shrugging off the company's disclosure Friday of a wider quarterly loss versus a year ago - since the loss was also less than Wall Street had been fearing.

On the downside, CIT Group Inc.'s bonds fell after two of the three major ratings agencies, Moody's Investors Service and Fitch Ratings, downgraded the New York-based commercial lender's ratings to junk status following poor quarterly results. Standard & Poor's also downgraded CIT, but kept it precariously investment grade.

Nielsen finally makes it

Nielsen Finance - whose deal had surfaced in the market on Thursday, only to seemingly be put on the back burner - finally priced on Friday, a day late, but not exactly a dollar short - in fact, the issue was solidly upsized to $500 million from the originally announced $300 million.

The 11½% senior notes due May 1, 2016, priced at 92.173, to yield 13¼%, in line with pre-deal market price talk. The notes priced at a spread over Treasuries of 1,047 basis points.

The bonds came to market via joint book-running managers JP Morgan Chase & Co., Goldman Sachs, Credit-Suisse, Deutsche Bank Securities and Morgan Stanley.

Corporate parent Nielsen Co. BV, a global media, market research and information provider which, among other things, compiles the well-known Nielsen television ratings and publishes such entertainment and media industry trade publications as Billboard, The Hollywood Reporter and Adweek, plans to use the deal proceeds for general corporate purposes, including capital expenditures and debt repayment.

The pricing brought to a close a short-lived but unusual odyssey which saw the deal first emerge, then appear to be pulled back, only to quickly emerge again, this time for good.

The issue had initially surfaced on the radar screens of junk market players on Thursday, after the company filed notice with the Securities and Exchange Commission of its intention to sell $300 million seven-year bonds in a Rule 144A/Regulation S transaction - but Nielsen later said the SEC filing had been made in error and should be disregarded. It declared that there were no plans at this time to make such a debt offering - only to once again reverse course Friday morning with yet another announcement, that the debt deal would in fact be done.

A clean sweep

The Nielsen deal closed out a week which saw a total face amount of $2.93 billion price in six deals, for Nielsen, Lennar, Encore, JBS USA LLC, DigitalGlobe Inc. and Georgia-Pacific LLC.

That fell a little short of the tally the previous week, which saw $3.13 billion price, but that came in just three deals, for HCA Inc., Crown Castle International Corp. and Seagate Technology International, with most of that concentrated in the first two deals, each of which exceeded $1 billion.

In contrast, the latest week's deals, while respectably sized, did not exceed $750 million, and were evenly spread throughout the week. It was, in fact, the first week in which at least one new junk new deal was priced on each day of the week since the week of May 5-9 last year, although on that occasion - well before the bottom dropped out of the junk market in September and stymied new-deal activity - some 8 deals totaling 12 tranches priced, carrying a collective face value of about $4.7 billion.

A trader noted that the market has "a lot of cash - we're flush with cash," especially after the latest big mutual fund inflow number reported on Thursday, $644.1 million, and he said that issuers were finding this a propitious time to meet their financing needs, with the market having no shortage of liquidity, despite the continued struggles of the equity and Treasury markets and continued worries about the overall economy and the health of individual companies within it.

New Lennar bonds move up

While the Nielsen drama was being played out, a deal which did actually come to market on Thursday, Miami-based homebuilder Lennar Corp.'s $400 million offering of 12¼% senior notes due 2017, was trading solidly higher.

Several high yield syndicate sources noted the emergence of slightly revised terms on the issue - as it turns out, the bonds priced at 98.098, rather than the 98.123 reported on Thursday, and the bonds will mature on June 1 of 2017, rather than May 15, as originally believed. All other terms which had emerged on Thursday were still valid.

The change in the official pricing level had little or no impact on the bonds' behavior in secondary.

A trader saw the new issues having first traded up about a point in the early going, and then by the day's end, he said, "they pushed higher, up another point, to around the par level." The bonds, he said were "pretty active."

At another shop, a trader saw the new Lennars doing even better, quoting them at 100¾ bid, 101¼ offered.

Besides the desire to put cash to work, the trader noted positive developments within the housing industry itself that made a bond like Lennar's more desirable. "The housing numbers came out, and they showed inventories [of unsold new homes] at a seven-year low," an apparent sign that builders like Lennar are making headway in cutting down their backlogs.

The Commerce Department revised its statistics on the level of new-home sales for February up to a 358,000 annual rate, from the 337,000 estimate reported last month.

"This thing is getting cleaned up," the trader said, although he acknowledged: "We still have a ways to go."

Several traders have recently noted better investor sentiment about the bonds of such Lennar peers as KB Home and D.R. Horton Inc. Bonds such as Horton's 6½% notes due 2016 and KB's 6¼% notes due 2015, have recently been quoted trading at levels in the mid-80s, relatively rarified territory in a junk market where the average bond, according to such statistical indices as the Merrill Lynch High Yield Master II Index, trades for about 66 cents on the dollar, and many issues trade for well below that.

New Encore bonds continue to excel

A trader saw Encore Acquisition's recently priced 9½% notes due 2016 continuing to firm, pegging those bonds "up another point" around 95 bid, 96 offered.

The Fort Worth, Tex.-based independent energy exploration and production company's upsized $225 million issue had priced on Wednesday at 92.228 to yield 11 1/8%, and then began moving up "right out of the box" after it was freed for secondary dealings, a market source said.

Traders noted that the company, which acquires and develops domestic onshore energy properties in states like Texas, Louisiana, Oklahoma, Montana and the Dakotas, is considered a solid, well-managed company in the sector.

Market indicators move up

Back among the established issues, a market source saw the CDX Series 12 High Yield index - which had gained 3/8 point on Thursday - tacking on another ¾ point Friday to end at 75¼ bid, 75¾ offered.

Meanwhile, the KDP High Yield Daily Index, which risen by 16 bps on Thursday, jumped another 40 bps Friday to 56.74, while its yield tightened by 10 bps to 12.38%.

Advancing issues, which on Wednesday and Thursday had led decliners by a five-four margin, widened their bulge on Friday to about two to one.

Overall market activity, measured by dollar-volume totals, fell 17% from Thursday's levels.

Ford jumps higher

A trader characterized Friday's market as "a lift-athon - prices were lifted, as people had their buying shoes on." encouraged by the big gains seen in Ford's bonds on the smaller-than-expected loss the carmaker posted.

"Ford was up 2 points or more, and we were off to the races."

A trader saw the carmaker's 7.45% bonds due 2031 at around the 45 bid, 47 offered mark, which he said was "up a good 5 or 6 points" on the day, while another had the bonds up 5 points at 44½ bid, 45½ offered.

Ford Motor Credit Co.'s 7% notes due 2013 meantime gained almost 5 points to end at the mid-74 level, while its 8% notes due 2016 were also at 74, up 5 points on the day.

Ford, a trader said, "easily traded in the hundreds of millions" of dollars across its capital structure on Friday.

Another trader said that many market players felt the company's earnings release, and ensuing conference call, despite the nominal loss, were full of positives.

"Everyone very surprised by their cash burn, or lack thereof. Burned only $3.7 billion [in automotive operating-related cash flow during the first quarter]. Estimates were for like $6 or $7 billion," the trader added.

Overall, Ford's automotive gross cash increased by $7.9 billion during the first quarter, primarily reflecting the draw of $10.1 billion under its revolving credit facility and the net impact of $2 billion related to the conversion of assets in the Temporary Asset Account set aside for the VEBA healthcare trust into a new Ford note.

The company finished the quarter with $21.3 billion in automotive gross cash and reiterated that based on current planning assumptions it does not expect to seek a bridge loan from the U.S. government.

In addition, based on current planning assumptions, the company said it remains on track to meet or beat its financial targets, including the target for its overall and North American automotive pre-tax results to be breakeven or better in 2011, excluding special items.

"Clearly, these continue to be challenging days for the global auto industry. I remain encouraged by the progress Ford is making to allow us to operate through the downturn and emerge as a lean, globally integrated automaker poised for profitable growth when the economy rebounds," said Alan Mulally, president and chief executive officer, in a news release.

Also on Friday, Ford said that for the first quarter it had a net loss of $1.4 billion, or $0.60 per share, compared to net income of $70 million, or $0.03 per share, in the first quarter of 2008.

Revenue for the quarter, excluding special items, was $24.8 billion, down from $39.2 billion a year ago.

"Our results in the first quarter reflected the extremely difficult business environment and weak demand for autos around the world," Mulally remarked in the release.

"Despite the challenges, Ford made strong progress on our transformation plan by gaining share with strong new products, slowing operating-related cash outflows, reducing outstanding debt, lowering our structural costs and reaching new agreements with the UAW," Mulally added.

Elsewhere in the autosphere, a trader said that with bankruptcy of one sort or another pretty much almost a foregone conclusion, "General Motors [Corp.] is sort of an afterthought these days."

He quoted GM's bonds, including its benchmark 8 3/8% notes due 2033 as "all trading in a 7 to 8 range."

CIT tumbles on twin downgrades

On the downside, a trader saw CIT Group's bonds lower after Moody's and Fitch unceremoniously dumped the commercial lenders ratings into Junkbondland, after it reported poor quarterly results.

A trader called it one of the "big" pieces of news on the day, along with Ford, quoting its 7 5/8% notes due 2012 "down 2 points, 3 points," at 67 bid, 70 offered.

Stephanie N. Rotondo contributed to this report

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