CIT, Kabel BW price big deals, new Kabels climb, existing CITs active; Copano, Limited up

By Paul Deckelman

New York, Mar. 23 - CIT Group Inc. brought a $2 billion, two-part offering of second-priority secured notes to market on Wednesday, primary market sources said.

The commercial lender's new bonds priced fairly late in the afternoon, limiting their aftermarket activity and keeping them around their issue price.

However, the news that CIT was doing the deal and would use the proceeds to take out its shortest maturity 7% notes caused busy trading in that whole series of bonds, although traders saw little real price movement.

Another big deal that priced Wednesday was German cable operator Kabel BW's massive four-part offering, which was mostly denominated in euros. However, the deal's dollar-denominated tranche was seen having firmed smartly when it was freed for trading, up more than 2 points on the session.

Also seen trading actively and higher were two of Tuesday's offerings, for Copano Energy LLC and Limited Brands, Inc. But Tuesday's biggest deal, from Intelsat Jackson Holdings SA, continued to hold right around issue.

Elsewhere in the new-deal arena, Japanese telecommunications operator eAccess Ltd. set tranche sizes for its two-part offering, and price talk emerged; the bonds are expected to price on Thursday.

International Wire Group, Inc. obliquely unveiled plans for an add-on offering to its existing bonds, although that will be contingent upon getting the existing holders' consent to the deal and to the use of the proceeds to make a distribution to its shareholders.

Secondary activity away from the new deals was mostly muted, traders said, while statistical performance indicators were largely unchanged.

CIT is market's main name

Although the German Kabel BW deal was bigger overall because of the presence of three euro tranches, purely from a dollar-sized standpoint, CIT Group was certainly the big deal of the day - and this, in turn sparked brisk trading in the company's outstanding bonds all day in the secondary market.

The company priced a $2 billion two-part offering of second-priority senior secured notes, planning on using the proceeds to redeem some of its more than $20 billion of outstanding series A secured notes.

The New York-based commercial lender's quickly-shopped deal priced just hours after the company's initial announcement that it would do a benchmark-sized offering of three-year notes. Following an investor call at mid-morning in New York, the company restructured its deal, expanding it to a two-part transaction with the addition of a seven-year piece.

CIT ended up pricing $1.3 billion of 5¼% secured notes due 2014 and $700 million of 6 5/8% secured notes due 2018. Both tranches priced at par, in line with price talk that circulated following the investor call.

The deal was brought to market via joint book-running managers Merrill Lynch, Barclays Capital Inc., Citigroup Global Markets Inc., Deutsche Bank Securities Inc. and J.P. Morgan Securities LLC.

CIT said that it plans to use the roughly $1.974 billion of net proceeds to retire all of the company's outstanding 7% series A second-priority senior secured notes due 2013 and a portion of its 7% series A notes due 2014, along with related premiums, fees and expenses.

Existing CIT paper is active

Those outstanding series A bonds were seen as "kind of active," spurred on by news of the big deal and the impending buyback of some of its issues.

A trader said that while they were busy, the increased activity levels did not translate into big price swings - he saw the bonds "up a quarter-ish,

"They were up a little bit," he noted, on "a lot of activity but not a lot of change in price."

He saw CIT's 7% notes due 2016 trading at around 100 3/8 bid, while its 2017 notes were around 100 1/8 bid, 100 3/8 offered.

He saw the 2014 series As trading in a 101¾ - 101 7/8 context. The 2015 series As were at 100¾ bid, 101 offered, and the 2013 bonds - the immediate object of the company's plans to extinguish series A debt - were around 102 1/8 bid, 102 3/8 offered, with "most of the trades" at 102¼ bid.

Kabel comes to market

The other big deal of the day originated overseas - but certainly resonated with investors in the domestic U.S. junk market.

German cable and broadband operator Kabel BW was heard by high yield syndicate sources to have priced its massive €2.27 billion equivalent four-part bond offering.

Kabel BW Erste Beteiligungs GmbH and Kabel Baden-Wuerttemberg GmbH & Co. KG were the official issuers of three out of the four tranches - the $500 million and €800 million mirror tranches of 7½% senior secured notes due 2019 and a €420 million of senior secured floating-rate notes due 2018.

The two fixed-rate tranches, which priced at par, came to market at revised price talk that was released Wednesday morning envisioning a yield of 7½% - tighter than the original talk of a yield in the 7¾% area for each tranche that had circulated in the market on Tuesday. Additionally, the euro-denominated tranche was downsized from the originally announced $850 million.

The floating-rate tranche was meanwhile upsized from the originally announced €350 million. It also priced at par to yield 425 bps over the 3-month Euribor rate - again, in line with revised price talk, which had tightened from the initial talk of 425 to 450 bps over the Euribor rate.

Kabel's Musketeer GmbH unit was the official issuer of the fourth tranche, for €680 million of 9½% unsecured senior notes due 2021. Those notes, which priced at par, came at the revised price talk of 9½%, which was tightened from Tuesday's talk in the 9¾% area

Credit Suisse Securities (Europe) Ltd., Deutsche Bank AG, London Branch and J.P. Morgan Securities Ltd. were the bookrunners on the deal.

Proceeds from the deal will be a part of the financing for the German cabler's acquisition by U.S. billionaire John Malone's international media conglomerate, Liberty Global Inc.

Market awaits eAccess deal

CIT and Kabel were the day's only two pricings in Junkbondland, traders said.

One deal which could come to market on Thursday is that of Tokyo-based mobile broadband and voice services provider eAccess, which will price $400 million of dollar-denominated bonds and €200 million of euro-denominated paper.

It set tranche sizes Wednesday on that planned two-part, dual currency offering of seven-year senior notes and price talk emerged on those dollar and euro tranches, according to high yield syndicate sources.

The sources heard price talk on the dollar tranche of a yield in the 8¼% area, with the euro paper expected to yield 12.5 basis points above the dollar yield.

Order books on the dollar tranche were closed at 4 p.m. ET on Wednesday. The books on the euro tranche will close on Thursday at 12 noon, London time, while the Asian books will close on Thursday at the end of business there. Pricing could occur after that.

eAccess plans to use the new deal proceeds, together with borrowings under a new senior secured credit facility, to repay and terminate its old credit facilities; the bond deal proceeds are to be escrowed pending the funding under the new credit facility, which is expected to take place on March 31.

UBS Investment Bank is the lead left bookrunner, while ING Financial Markets LLC and Credit Agricole CIB are the joint bookrunners.

International Wire deal ahead

Elsewhere on the primaryside, there was a little bit of calendar-building going on, with International Wire Group, Inc. unveiling plans to sell up to $110 million of new senior secured notes due 2015, in order to fund a one-time distribution to the company's stockholders and option holders - but only if it first needs the consent of its existing bondholders.

The Camden, N.Y.-based electrical wire manufacturer announced that it would seek consent to issue the new notes and make the equity distribution from the holders of the $116.5 million of 9¾% senior secured notes due 2015 that remain currently outstanding from the $140 million of the bonds which the company sold last April.

International Wire Group said adoption of the proposed indenture amendments would require the consent of the holders of at least a majority of the outstanding principal amount of the 9¾% notes, voting as a single class. It is offering a cash consent payment of $30 per $1,000 principal amount to those holders who deliver valid consents by the solicitation's expiration deadline at 5 p.m. ET on April 1.

New Kabel bonds climb

When the dollar-denominated tranche of Kabel BW's big new deal came to market, the bonds were seen almost immediately on firmer ground.

A trader quoted them at 101 7/8 bid, 102 3/8 offered, well up from their issue price at par earlier in the day.

A trader at another shop saw the new bonds even better, noting that "we traded quite a few of them" around a 102¼ bid, 102½ offered level."

Kabel "did really well" yet another trader said, seeing the bonds well above 102.

Limited, Copano are active

Among Tuesday's multitude of new deals, several traders said that Columbus, Ohio-based specialty retailer Limited Brands and Copano Energy were popular with investors in Wednesday's market.

One trader noted that Limited's 6 5/8% notes due 2021 were trading around 101 1/8 bid, 101 3/8 offered - up from the par level at which the $1 billion offering, upsized from an originally announced $750 million, had come to market.

It was also up from the levels just under 101 to which those bonds had traded on Tuesday after having been freed.

A second trader saw the new Limited bonds "very, very active" around 100 7/8 bid, 101¼ offered.

He saw much of the activity coming from high-grade crossover accounts wanting a piece of the $1 billion deal, "and high yield guys that went into it selling it to the crossover guys."

As for Copano, a trader saw the Houston-based midstream natural gas company's 7 1/8% notes due 2021 trading around 101 bid, up from the $360 million deal's par pricing level and up as well from levels around 100¾ bid on Wednesday.

He said that taken together, Limited and Copano "have been the volume leaders for the day," away from the brisk activity in CIT Group's paper. "Limited first, then Copano second, and right behind them, CIT paper."

Another trader saw the new Copano paper at 100¾ bid, 101 offered.

Intelsat little moved

As was the case on Tuesday, Intelsat Jackson Holding's new bonds stayed right around issue, which in the case of the Luxembourg-based communications satellite operator's $1.5 billion of 7¼% notes due 2019 and $1.15 billion of 7½% notes due 2021, was par.

A trader quipped that the new bonds "hadn't even gotten off the launch pad," after pricing at par for both tranches on Tuesday afternoon.

Indicators little changed

Away from the new-deal world, a trader saw the CDX North American Series 15 HY index unchanged on Wednesday to end at 103 1/8 bid, 103 3/8 offered, after having lost 3/16 point on Tuesday.

The KDP High Yield Daily Index meantime eased by 5 basis points on Wednesday to 75.58, on top of Tuesday's retreat of 2 bp. Its yield edged up by 1 bp for a second day in a row, to end at 6.76%.

The Merrill Lynch High Yield Master II index rose for a sixth consecutive session on Wednesday, by 0.01%, after Tuesday's 0.049% rise. That lifted its year-to-date return to 3.643% up from Tuesday's 3.633%, although it remained below its 2011 peak level of 3.73%, set on Mar. 9.

Declining issues overtook advancers on Wednesday for the first time in six sessions, although their winning margin was less than a dozen issues out of the nearly 1,400 tracked. On Tuesday, the advancers led decliners by around a seven-to-six margin.

Overall market activity, as measured by dollar-volume levels, zoomed by 54%, after having jumped 27% on Tuesday from the prior session's levels.

But with much of that coming in the CIT existing bonds or the new Kabel notes, away from those individual names, "it's been sort of a mixed bag."

He joked that with so much going on in CIT, usual volume leader Anadarko Petroleum Corp. had to take a back seat.

"For once, it's good to see APC [the company's NYSE ticker symbol] down at the bottom of the pile on activity, but it's still there."

But another trader said that apart from the new-deal names and apart from crossover names like Anadarko and SLM Corp., "it was not a terribly exciting day."

Direct Buy doing badly

A trader said that away from the new deals and related paper, like the movements in the existing CIT bonds, "the only other thing that seems to be active out there" were Direct Buy Holdings' 12% notes due 2017, which were "getting clobbered" in Wednesday's dealings, hammered down for a second straight session.

He said that the bonds - which had priced in January a little below par and which were still in the lower 90s as late as last week - had fallen below 60 bid, and then moved back up to a 67 bid, 69 offered area.

On Tuesday, traders had seen the bonds swoon down to wide 10-point margins down in the 70s from their pre-news levels around 90 or 91, after the company released presumably disappointing earnings and held an unfavorable conference call, during which the company announced the abrupt departure of the chief financial officer.

"There was a lot of activity down and up," the trader said. "I'm not sure what the catalyst for this was today, but there was a lot of volatility and a lot of trading."

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