Cricket, MetroPCS mega-deals price, Harbinger too; Massey gains on takeover talk; Harrah's up

By Paul Deckelman and Paul A. Harris

New York, Nov. 5 - With a pair of prepaid wireless service providers leading the way, the high-yield market closed out another busy week on Friday, paced by billion-dollar offerings from Cricket Communications Inc. and MetroPCS Communications Inc. - two companies which, interestingly, have some shared history. Dallas-based MetroPCS tried unsuccessfully to buy Cricket parent Leap Wireless International Inc. several years ago and is still mentioned in the market from time to time as a prospective suitor for its San Diego-based rival.

But on Friday, they were only focused on a different kind of buying - that is, investors buying their respective 10-year bond issues of $1.2 billion for Cricket and $1 billion for MetroPCS. Proceeds from both deals will go to repurchase existing issues of each company's 2014 bonds.

Both new phone deals traded around their respective issue prices in the aftermarket.

Harbinger Group Inc. rounded out the day's pricing activity with its upsized $350 million offering of seven-year secured notes, which firmed by more than a point when they began trading around.

The three deals brought the week's dollar-denominated new-deal tally to just over $8 billion.

Meanwhile, Berry Plastics Corp., Genesis Energy LP and Precision Drilling Corp. announced plans for bond issues and market sources heard Allen Systems Group Inc. also shopping a deal around. All are considered likely to price in the upcoming week.

In the secondary market away from the trading in new issues, Massey Energy Co.'s bonds were seen as much as 2 points higher, in line with a surge in the Richmond, Va.-based coal operator's shares driven by takeover talk.

And Harrah's Entertainment Inc. bondholders were holding a winning hand, as the Las Vegas-based gaming company's bonds rose by several points on good quarterly numbers and optimism about the company's coming public stock offering.

Statistical market performance measures meantime showed gains for both the session and the week.

Cricket wide of talk

A trio of issuers, two of them doing drive-by business, each priced a single tranche of junk on Friday for a combined total of $2.525 billion.

A whopping $2.2 billion of Friday issuance came from wireless operators Cricket Communications and MetroPCS Communications.

Cricket priced a $1.2 billion issue of 7¾% 10-year senior notes (B3/B-) at 98.323 to yield 8%, according to a buy-side source.

The yield printed 25 basis points beyond the 7½% to 7¾% price talk.

Goldman Sachs & Co. was the left bookrunner for the deal which was only in the market for two days. Morgan Stanley & Co. Inc. was the joint bookrunner.

Proceeds will be used to fund the tender for Cricket's 9 3/8% senior notes due 2014.

Although talk was initially 7¾% to 8%, Friday sales calls moved rate discussions into the 8% area, the buy-side source said.

This investor received a full allocation of bonds. In a market in which the accounts have customarily received allocations that are mere fractions of the submitted orders, receiving a full allocation is an indication that the deal did not do extremely well, the buy-sider said.

This source had the new Cricket Communications 7¾% notes due 2020 trading at 97¾ bid, 98¼ offered, in the secondary, below the 98.323 issue price.

However a source close to the deal had the new Crickets at 98 7/8 bid, above the issue price.

MetroPCS doubles size

Also from the wireless sector, MetroPCS Wireless, Inc. doubled the size of its issue to $1 billion and priced its new 10-year senior notes (B2/B) at par to yield 6 5/8% on Friday.

The deal priced on top of guidance.

J.P. Morgan Securities LLC ran the books.

Proceeds will be used to redeem $451 million of the $950 million outstanding amount of its existing 9¼% senior notes due 2014 at 104.625 and for general corporate purposes.

The buy-side source had the MetroPCS bonds straddling the issue price in the secondary at 99 7/8 bid, par 1/8 offered.

Harbinger atop talk

Away from the wireless sector, Harbinger Group priced an upsized $350 million issue of 10 5/8% five-year senior secured notes (Caa1) at 98.587 to yield 11%, on top of the price talk. The size was increased from $325 million.

Credit Suisse Securities (USA) LLC and Goldman Sachs & Co. were joint bookrunners.

The New York-based holding company plans to use the proceeds for general corporate purposes, which may include acquisitions and other investments.

$8.123 billion week

With Friday's deals in the tally, the primary market saw $8.123 billion of issuance during the opening week of November. The deal count was 17.

Look for new issue volume to remain high, a trader from a high-yield mutual fund advised on Friday.

It seems likely that there is a record amount of cash chasing high-yield bonds, the source said.

First look at the weekly inflows reported by Lipper-AMG: during the most recent week the funds saw an additional $259 million, the ninth consecutive positive weekly flow, taking the year-to-date total inflows to $11.58 billion for funds that report on a weekly basis.

Also instructive is the $258 million outflow from the investment-grade bond market, representing 0.1% of net assets, the trader said.

"People seem to be chasing yield," the trader said, and added that yield is largely unavailable in the high-grade market.

Hence, non-traditional investors are crowding into the junk market, alongside the high-yield accounts.

And most if not all of them are focused on the new issue calendar because there is virtually nothing offered in the secondary, the trader said.

The calendar builds

Friday saw a build-out of the new issue calendar which supports the trader's contentions.

Berry Plastics will conduct an investor roadshow during the Nov. 8 week for an $800 million offering of 10-year second-priority senior secured notes.

Credit Suisse and Barclays Capital are joint bookrunners for the debt refinancing deal.

Precision Drilling will begin a brief roadshow on Monday for a $550 million offering of 10-year senior notes.

Credit Suisse and RBC Capital Markets are the joint bookrunners for the bank debt refinancing.

Allen Systems Group Inc. intends to price a $300 million offering of six-year senior secured second-lien notes (B3//) on Wednesday or Thursday.

Early guidance on the deal is 10% to 10½%.

Bank of America Merrill Lynch has the books.

The Naples, Fla.-based enterprise software provider plans to use the proceeds to refinance debt and fund a dividend.

And Genesis Energy plans to start a roadshow on Monday for a $200 million offering of eight-year senior notes (expected ratings B3/B+).

The roadshow wraps up on Friday, and the notes are expected to price after that.

Bank of America Merrill Lynch, BMO Nesbitt Burns, BNP Paribas, Deutsche Bank Securities and RBC Capital Markets are the joint bookrunners for the acquisition financing.

When the second week in November gets underway, on Monday, it will do so with 10 deals on the road - amounting to $4.045 billion of potential issuance - all expected to price before the Friday close.

And there are bound to be more, market sources advised on Friday.

One likely name for the week ahead is HCA, Inc., which is expected to bring a dividend funding deal, with notes to be issued at the holding company level, a buy-side source said, adding that Bank of America Merrill Lynch is expected to lead.

Harbinger moves higher

When the new Harbinger 10 5/8% notes were freed for secondary dealings, a trader saw the New York-based holding company's bonds at 100¼ bid, well up from the 98.587 level at which the upsized issue had priced earlier in the day for an 11% yield.

Cricket, MetroPCS around issue.

That was not the case for the more than $2 billion of paper which priced from rival prepaid wireless phone companies Cricket Communications and MetroPCS.

A trader saw MetroPCS' $1 billion of 6 5/8% notes, which had priced at par, straddling that issue price at 99¾ bid, 100¼ offered.

Hanesbrands stays near par

A trader said that the big Hanesbrands Inc. 6 3/8% issue due 2020 which priced on Thursday was trading at 100¼ bid, 100½ offered.

He said that the Winston-Salem, N.C.-based socks and underwear maker's $1 billion offering - upsized from the originally announced $750 million - "popped up," after pricing at par, "but not too much."

Among the other deals which made their debut on Thursday, he said that USG Corp.'s new 8 3/8% notes due 2018 were trading at 101 7/8 bid.

The Chicago-based building products company's $350 million deal, which was upsized from the originally announced $300 million, priced at par late in the session Thursday. It was seen having risen to the 102-103 level in initial aftermarket dealings after pricing, but then came in a little from those peaks on Friday.

Another trader meantime said that "some of the other stuff" that came on Wednesday and Thursday "seemed like it stopped running up." He saw the Seminole Tribe of Florida Inc. 7¾% first-lien gaming division notes due 2017 holding at the same 105-106 level to which they had run up by Thursday, after having priced its $330 million issue at par on Wednesday.

He also saw the new Frac Tech Systems 7 1/8% notes due 2018 trading around 103 bid, actually up slightly from the 102¼ bid, 103¼ close seen Thursday. The Cisco, Tex.-based oilfield services company had priced its $550 million offering at par earlier that session.

Secondary continues to soar

Away from the new-deal world, a trader saw the CDX North American Series 15 HY index ending Friday at 102¾ bid, 102 15/16 offered, up 1/8 point on the session - not all that much compared with Thursday's gigantic 11/2-point advance. Still, on the strength of that big gain, the index ended the week well above the 100 3/8 bid, 100 5/8 level seen at the close of trading the previous week, on Friday Oct. 29.

The KDP High Yield Daily index meantime soared by another 25 basis points on Friday to end at 75.21, on top of the 24 bps jump recorded on Thursday. Its yield fell by 8 bps to 6.91%, after having plunged by 11 bps on Thursday. The index showed a solid gain from the 74.62 reading the previous Friday, and its yield tightened considerably from 7.14% at that time.

The Merrill Lynch High Yield Master II index climbed by 0.199% on Thursday after having climbed by 0.41% on Thursday. The latest advance pushed its year-to-date return up to 15.405%, its 12th consecutive new 2010 peak level, eclipsing the old mark of 15.175%, just recorded on Thursday. The index gained 0.844% on the week to also end higher than its week-earlier close of 14.438%.

Advancing issues led decliners on Friday for a seventh straight session, by a seven-to-five margin, a little narrower than the eight-to-five advantage they held on Thursday.

Overall activity, represented by dollar-volume levels, fell by 23% on Friday, after having climbed by 27% on Thursday from the previous session's level.

A trader said that as has been the case in the secondary market in recent weeks, "it's just that everybody is buying stuff and reaching for yield."

Massive gain for Massey

Among specific non-new-deal secondary names moving around on Friday, a trader noted that Massey Energy's 6 7/8% notes due 2013 had pushed up to 102 bid, which he called up 1½ points on the session, driven by takeover rumors involving the coal mining company.

Another trader saw the bonds better at 101¼ bid, mentioning specifically that Alpha Natural Resources Inc. was said to be eyeing a bid for Massey.

Massey's New York Stock Exchange-traded shares rose by as much as 14% during the session before going home still up 11.21% on the day , or $4.73, to close at $46.94. Volume of more than 18 million shares was over four times the norm.

The shares soared, and the bonds came along for the rise, after The Wall Street Journal reported that Alpha was considering a buyout of Massey. The Journal said Massey hired investment bank Perella Weinberg as an adviser on Alpha's possible bid and will review its options at a board meeting later this month.

Massey's stock is considered undervalued, making the company a potential takeover target.

Massey last week reported a larger-than expected $41.4 million third-quarter loss, due in no small part to the continued fallout from a disastrous accident at one of its West Virginia mines this past April, in which 29 miners were killed, the worst U.S. coal mine accident in 40 years.

IPO, results help Harrah's

Also on the upside, Harrah's Entertainment's bonds traded "a decent amount, but the same amount as every day," a trader said, as the company disclosed some of the terms of its planned initial public offering.

The debt did gain "a couple of points," he said, on the news, the 10% notes due 2018 closing with a 91 handle.

Another trader also saw the bonds trading in that 91 context, deeming it up 1¾ points.

At another desk, a market source saw the 10s trading as high as 93½ bid, a 4 point gain on the session, and closing at that higher level.

Harrah's said in a regulatory filing that it had increased the size of the IPO to $610.9 million. It plans to sell 31.3 million common shares at $15 to $17 per share. The deal includes an overallotment option of 4.69 million shares.

Additionally, Harrah's - which has carried the name of its late founder, William F. Harrah, since he opened his first bingo parlor in Reno in 1937 - will change its name to Caesars Entertainment Corp.

Harrah's also released its third quarter results, which showed a 0.3% increase in revenue. Revenues hit $2.29 billion, up from $2.28 billion the year before.

The Las Vegas-based casino operator said the revenue gain was "due primarily to revenues associated with our February 2010 acquisition of Planet Hollywood, which were mostly offset by the continuing impact of the recession on customers' discretionary spending."

Harrah's also turned a $175.7 million profit, which compared to a loss of $1.05 billion in the same quarter of 2009.

"Revenue rose slightly during the third quarter," said Gary Loveman, chairman, president and chief executive officer, in the earnings release. "Although visitation also increased slightly in certain markets, including Las Vegas, and there are signs consumer spending may be stabilizing, we're continuing to exercise cost discipline while pursuing innovative ways to provide rewarding customer experiences."

GM trades actively

A trader said that General Motors Corp.'s benchmark 8 3/8% notes due 2033 saw "plenty of volume" on Friday, after having been pretty active all week.

He quoted the carmaker's issue at 35½ bid, 36 offered, which was "where they ended [Thursday]." That level was "where most of the activity was."

The bonds had traded as high as around 37 early in the week, then plunged to around 32 bid on Tuesday amid investor worries that GM's upcoming IPO valuation indicates that the company is not as valuable as thought, which will reduce the recovery that its bondholders will get when they exchange their bonds for around 10% of the company's stock.

GM domestic arch-rival Ford Motor Co.'s 7.45% bonds due 2031 were unchanged at 114½ bid, 115½ offered.

-Stephanie N. Rotondo contributed to this report

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