Ally, Commercial Vehicle price; iGate, Chesapeake Midstream set talk; acquisition lifts Graham

By Paul Deckelman and Paul A. Harris

New York, April 13 -Ally Financial drove by the junk market with a $1.5 billion two-part offering on Wednesday, with both tranches structured as add-ons to the mega-deal-sized bond sale the Detroit-based lender did in early February.

Trader did not see the late-pricing deal make it to the secondary market, but they did see the former GMAC's existing bonds all trading higher.

Also pricing was an upsized $250 million secured deal from truck components maker Commercial Vehicle Group, Inc., which moved up solidly in the aftermarket from its par issue price.

Non-U.S. issuers DryShips Inc. and China Automation Group Ltd. also priced deals of $500 million and $200 million, respectively, while Freenet AG came in with a €400 million transaction.

Price talk emerged on several deals which could come to market Thursday - domestic issuers iGate Corp. and Chesapeake Midstream Partners LP and as well as French shipper CGA-CGM, which is doing a dollar- and euro-denominated two-part offering.

Silgan Holdings, Inc. was heard by syndicate sources to be preparing to sell an issue of junk bonds as part of the financing for the Stamford, Conn.-based packaging company's acquisition of sector peer Graham Packaging Co. Inc.; the latter's several bond issues were seen firmer in active trading, since that debt is to be assumed or refinanced by Silgan as part of the $4.1 billion takeover deal.

Also on the M&A front, Community Health Systems Inc.'s bonds were the most actively traded junk paper for a third straight day and moved up for a second consecutive session, recovering from the lows to which they plunged in very heavy trading Monday on news the company was accused of serious improprieties in a lawsuit filed by Tenet Healthcare Corp., which is trying to torpedo a pending hostile takeover by the larger Community Health.

Ally drives through

The pace of the primary market remained torrid on Wednesday.

Three issuers brought a combined four tranches into the dollar market. Altogether they priced $1.95 billion of notes.

Ally Financial priced $1.5 billion of notes (B1/B/BB), as it added on to two existing issues which were priced earlier this year.

The quick-to-market Wednesday transaction included a $750 million tap of its 4½% senior notes due Feb. 11, 2014. The add-on to the fixed-rate notes priced at par. As a result the new notes also yield 4½%

The automotive lender also priced a $750 million add-on to its Libor plus 320 bps floating-rate notes due Feb. 11, 2014 at par, resulting in a Libor plus 320 bps yield.

The Detroit-based company, formerly GMAC, Inc., plans to use the proceeds to make loans, purchase receivables and for general corporate purposes, which may include debt refinancing.

Commercial Vehicle upsizes

Elsewhere Commercial Vehicle Group priced an upsized $250 million issue of eight-year senior secured notes (B2/B-) at par to yield 7 7/8%.

The yield printed at the tight end of price talk which had been set in the 8% area. The amount was increased from $225 million.

Credit Suisse Securities (USA) LLC ran the books.

The notes become callable on April 15, 2014 at par plus 75% of the coupon, a dollar price of 105.906. However, a special call provision allows the issuer to redeem 10% of the notes annually at 103 during the non-call period.

Proceeds will be used to refinance debt and for general corporate purposes.

China Automation prices

China Automation Group Ltd. priced a $200 million issue of 7¾% five-year senior notes (Ba3//) at 98.986 to yield 8%.

The yield printed on the wide end of price talk.

UBS ran the books.

Proceeds will be used to repay debt and for general corporate purposes.

Talking the deals

Dealers set the stage for what promises to be a busy Thursday.

French maritime shipping firm CMA CGM SA set tranche sizes and price talk for an $810 million equivalent offering of senior notes (B2/B-).

A $375 million tranche of six-year notes is talked with a yield in the 8 5/8% area.

Meanwhile, a €300 million tranche of eight-year notes is talked with a yield in the 9% area.

Deutsche Bank Securities Inc., BNP Paribas, SG CIB, Citigroup and Natixis Bleichroeder are the joint bookrunners.

Deutsche Bank will bill and deliver for the dollar-denominated tranche. BNP Paribas will bill and deliver for the euro-denominated tranche.

Elsewhere iGate Corp. talked its $770 million offering of five-year senior notes (B2/B+) with an 8¾% to 9% yield.

Jefferies & Co. and RBC Capital Markets are the joint bookrunners.

In addition the price talk there were structural and covenant changes, a market source said.

Among the structural changes, a special call was removed that would have allowed the issuer to redeem 10% of the notes annually at 103, during the non-call period.

Chesapeake Midstream Partners, LP talked its $350 million offering of 10-year senior notes (Ba3//) with a 5 7/8% to 6% yield.

Credit Suisse Securities, Wells Fargo Securities LLC, Goldman Sachs & Co. and RBS Securities Inc. are the joint bookrunners.

Goodyear Dunlop starts roadshow

The news flow from Europe remained intense on Wednesday.

Goodyear Dunlop Tires Europe BV began a roadshow for a €250 million offering of eight-year senior notes.

J.P. Morgan, BNP Paribas and Credit Agricole CIB are the joint bookrunners for the debt refinancing deal.

Ideal Standard brings secureds

Elsewhere Belgium's Ideal Standard International SA began a roadshow on Wednesday in Paris for a €250 million offering of seven-year senior secured notes (expected ratings Caa1//B+).

Goldman Sachs International and Deutsche Bank are the joint bookrunners.

Proceeds will be used to refinance debt.

Ally's outstanding bonds rise

Ally Financial's $1.5 billion two-part deal was heard to have priced fairly late in the afternoon and thus did not show up on the aftermarket radar screens on Wednesday, several traders said.

However, news that the Detroit-based automotive and residential lender was in fact in the market with a big new deal gave the company's existing paper a boost, in some cases by several points.

A market source saw Ally's 6 7/8% notes slated to come due this September at just above the 102 mark, a gain of ¼ point, on about $6 million of turnover.

Its 6 7/8% notes due 2012 moved up to 106½ bid, a gain of 1½ points on the session, with $3 million of the bonds traded.

Ally's 7% notes due 2012 rose by more than 1 point to close at 104¼ bid, with volume at $3 million.

Commercial Vehicle on upside

The Commercial Vehicle Group eight-year senior secured notes, which priced earlier in the day than the Ally Financial add-on bonds, did see some aftermarket dealings.

Several traders saw the New Albany, Ohio-based vehicle systems manufacturer's new deal trading around 102 bid, 102½ offered, versus the $250 million deal's par issue price.

Nortek trades around issue

A trader said that his shop "traded a bunch" of the new Nortek Inc. 8½% notes due 2021 in the par to 100¼ area.

The Providence, R.I.-based maker of building products priced its quickly shopped $500 million issue at par on Tuesday, too late for any kind of aftermarket dealings at that point.

Another trader saw the new Nortek bonds move up to 100¼ bid, 100¾ offered early in Wednesday's trading, but then settle in later around 100¼ bid, 100½ offered.

Tuesday deals hold their own

Among the other deals which priced and traded on Tuesday, Sugarhouse HSP Gaming Prop. Mezz, LP and Sugarhouse HSP Gaming Finance Corp.'s $235 million of new 8 5/8% senior secured second-lien notes due 2016 were seen by a trader on Wednesday right around the 103 bid level.

The Philadelphia-based casino operator had priced the bonds at par; when they were freed for secondary dealings they had moved up smartly and sweetly to levels around 102 5/8 bid, 102 7/8 offered.

A second trader saw the bonds Wednesday in that same 102½ bid, 103 offered context, but a third said he had not seen any trading of it during the session.

Vancouver, B.C.-based Taseko Mines Ltd.'s new 7¾% notes due 2019 were trading at 102¾ bid, 103¼ offered on Wednesday several traders said.

"You've got buyers right below [10]3, but nobody wants to sell them," one opined.

The metals mining operator's $200 million offering had priced at par on Tuesday and then moved up later that same session, getting as good as 102¾ bid, 102 7/8 offered.

Trader sees Gap activity

A junk trader noticed that some high-yield players were still dabbling in last Thursday's split-rated (Baa3/BB+/BBB-) offering from San Francisco-based clothing retailer Gap Inc., a former junk bonder which is now considered more of an investment-grade name.

The $1.25 billion of 5.95% notes due 2021 were priced at 99.65 to yield 5.997%, and on Wednesday, he saw some trading at 100 1/8.

"Junk guys bought it," he said, although "most have by now sold it," with volume in the credit tapering off to perhaps 40% of what it was on Tuesday.

When the bonds came to market, they priced at a spread of 245 basis points over comparable Treasuries, which initially narrowed in Friday dealings to around 230 bps over; on Wednesday, he said they were "trading right back at issue" at 245 bps over.

Indicators turn mixed

Away from the new-issue realm, a trader saw the CDX North American Series 16 HY index down 3/16 point on Wednesday to end at 102 1/8 bid, 102 3/8 offered, after having eased by 3/8 point on Tuesday.

The KDP High Yield Daily Index meantime rose by 1 basis point on Wednesday to close at 75.85, after having fallen by 5 bps on Tuesday. Its yield narrowed by 1 bp to 6.58%, after having risen by 2 bps on Tuesday.

The Merrill Lynch High Yield Master II Index rose by 0.051% on Wednesday, essentially negating Tuesday's almost identically-sized 0.05% downturn, which had been the first retreat after nine consecutive sessions on the upside. That lifted its year-to-date return back up to 4.719% from Tuesday's 4.665%. It also established yet another new peak level for 2011, edging out the previous high-water market of 4.718%, which had been set on Monday.

Advancing issues moved back ahead of decliners on Wednesday after having trailed them over the previous two days, which in turn had broken an eight-session winning streak.

The gainers led the losers by a couple dozen issues out of the more than 1,300 which traded, while the decliners had led on Tuesday by a margin of better than six to five.

Overall market activity, as measured by dollar-volume levels, rose by 5% on Wednesday after having plunged by 47% on Tuesday from the previous session's levels.

'The lightest day'

Overall, however, a trader said of Wednesday's session that that "it felt like this was the lightest volume day of the week," perhaps because trading continued to taper off in what has easily been the busiest bond in Junkbondland this week, Community Health Systems' benchmark 8 7/8% notes due 2011.

Over $200 million of the big Franklin, Tenn.-based hospital operator's bonds changed hands in furious trading on Monday, when they were chopped down to about the par-101 bid area from prior levels at 104-105 on the news that Tenet Healthcare, which is trying to fend off the larger Community Health's unwanted $6 per share cash-and stock hostile takeover bid, had filed suit with the federal court in Dallas, Tenet's home base, alleging that Community Health had routinely done numerous improper admissions and Medicare billings to swell its revenues and profits, charges which Community Health called "without merit, unfounded and irresponsible."

On Tuesday, after the dust settled from Monday's shocking developments, about $120 million of the Community Health Systems bonds had traded, and they moved up a point or two from their lows to around 102-1021/2.

On Wednesday, volume in the credit fell further still, to around $53 million, although it was still easily the busiest junk bond credit. A trader saw the bonds at 102¾ bid, up ½ point on the day.

Level 3 gains continue

A trader also saw some continued interest in Level 3 Communications Inc.'s bonds, which firmed smartly in brisk trading on Monday on the news that it has agreed to acquire fiber optic cable infrastructure sector peer Global Crossing Ltd. in a deal valued at $3 billion including debt assumption, and then continued to gain on Tuesday and now, again on Wednesday.

He saw the Broomfield, Colo.-based telecom comapny's 11 7/8% notes due 2019 trading around 108¾ bid, 109¾ offered, up from Tuesday's levels at 108¼ bid, 108¾ offered and up further still from the 107ish levels at which the bonds had gone home on Monday - after zooming some 11 points from their mid-90s levels before news of the Global Crossing acquisition was announced.

Even though Level 3 will assume $1.1 billion of Global Crossing debt as part of the deal, traders said the bonds were up on investor sentiment that Level 3, as the acquiring and surviving entity, will be able to realize considerable synergies and will emerge from the merger as a stronger player in the fiber-optic network business.

Investors grab Graham

Yet another M&A-driven situation hit the junk market on Wednesday, as Graham Packaging's bonds moved up in very active trading on the news that the York, Pa.-based packaging producer will be bought by sector peer Silgan Holdings for $1.3 billion, or $19.96 per share in cash and Silgan stock. Silgan's promise to assume and ultimately refinance Graham's debt brings the total value of the deal to $4.1 billion.

A trader saw Graham's 8¼% notes due 2018 get as good as 112 bid, up more than 3 points on the day in response to the news.

A market source at another shop, however, saw those bonds later back off those highs to finish at about the 110 level, still up 1½ to 2 points on the session, with over $21 million of the paper having changed hands.

The source saw a similar trajectory for Graham's 8¼% notes due 2017, which also rose smartly to 112 on news the company is being acquired, only to lapse back down to around 109 going out, really not much changed. Some $14 million of those notes traded, the source indicated.

Graham's 9 7/8% notes due 2014 moved up to around the 104 bid level, up perhaps 3/8 point, in relatively light trading.

Silgan's 7¼% notes due 2016 were meantime seen holding steady at 108 bid.

Graham's New York Stock Exchange-traded shares gained $5.51, or 32.97%, on the day to end at $22.22. Volume of 13.8 million shares was almost 32 times the norm.

Silgan's Nasdaq-traded shares meantime rose $6.97, or 18.92%, to end at $43.80. Volume of 7.2 million shares was 28 times the usual turnover.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.