Level 3 prices year's first deal; Sorenson, Marquette slate bonds; NewPage up, sales lift Ford

By Paul Deckelman and Paul A. Harris

New York, Jan. 5 - Level 3 Communications Inc. earned the honor Tuesday of pricing the first junk bond issue of the new year - a well-oversubscribed $640 million offering of eight-year senior notes, the proceeds of which will be used to fund a tender offer for the company's existing 12¼% notes due 2013. The Broomfield, Colo.-based telecommunications infrastructure company's offering came to market too late for any trading, although its existing issues, including the 121/4s were seen having gained during the session ahead of the deal

Elsewhere on the new-deal front, syndicate sources heard Sorenson Communications, Inc. to be shopping an issue of five-year secured notes around to prospective investors, while Marquette Transportation Co. LLC was getting to hit the road, beginning Tuesday, with an offering of seven-year senior secured notes.

The secondary market stretched its new year's winning streak into a second session, with numerical indexes showing solid gains and traders noting that most issues moved up.

NewPage Corp.'s bonds were seen doing particularly well, apparently buoyed by the overall strength of the market as well as optimism about possibly improving conditions in the coated paper industry.

Ford Motor Co.'s bonds, and those of its Ford Motor Credit Co. unit, were firmer, no doubt helped by the considerably stronger than expected December sales figures reported by the Number-Two domestic carmaker. General Motors Corp.'s bonds were also seen up, helped by the generally upbeat tone of the market in general as well as by the somewhat smaller-than-expected sales decline which the top U.S. auto manufacturer reported for December.

Although the High-Yield CDX 13 index was close to flat on Tuesday, cash bonds traded higher, according to a high-yield mutual fund manager.

Bonds of Clearwire Communications, LLC gained 2 points during the session to close at 104 bid, the buy-sider said.

"The market is all bidders, with no sellers," the fund manager remarked.

Cash flows remain positive, the buy-sider said, noting that fund flows continued positive during the first two sessions of 2010.

"We're expecting the first month of 2010 to be a lot like the final month of 2009," the manager said.

Incidentally, high yield returned 58.2% in 2009, according to the source, who cited numbers reported by Barclays Capital.

That could be the market's best-ever return, the investor said, adding that it tops the 46% that high yield returned in 1991.

Level 3 prices 2010's first deal

The year's first issue came from a name familiar to high-yield players.

Level 3 Financing, Inc. priced a $640 million issue of 10% eight-year senior notes (Caa1/CCC) at 97.982 to yield 10 3/8%, in a Tuesday drive-by deal.

The yield printed at the tight end of the 10½% area yield talk. The issue price came in line with discount talk of approximately 2 points.

Bank of America Merrill Lynch, Citigroup and Morgan Stanley were joint bookrunners.

Proceeds will be used to fund the company's concurrent tender for its 12¼% senior notes.

Just before the final terms circulated, an investor told Prospect News that the deal was believed to be playing to $2.5 billion of orders, and that talk was tightening to 10 3/8%.

This investor played the deal, based partly upon an outlook that demand for broadband continues to increase.

"Pricing has always been an issue for Level 3," the investor remarked, adding that the Broomfield, Colo.-based company nevertheless continues to term out its debt.

"They've done a good job of cutting costs and maintaining EBITDA margins," the buy-sider asserted.

Once freed to trade, the new Level 3 Financing 10% notes due 2018 went out at 99 bid, according to the investor, up about a point from the 97.982 pricing level.

Sorenson to bring $735 million

Meanwhile the forward calendar built out on Tuesday.

Sorenson Communications announced plans to price a $735 million offering of five-year senior secured notes during the middle part of next week.

Goldman Sachs & Co. is the left lead bookrunner. Morgan Stanley is the joint bookrunner.

Proceeds will be used to repay the company's second-lien term loan, as well as its PIK holdco loan, and to fund an equity distribution.

Marquette Transportation to roadshow

Elsewhere Marquette Transportation Co. will start a roadshow on Wednesday for its $250 million offering of seven-year second-lien notes (B3/B-).

The roadshow wraps up on Jan. 12, with the deal expected to price the following day.

JP Morgan has the books for the Rule 144A for life notes offer.

Proceeds will be used to repay debt.

Meanwhile, United Air Lines, Inc. has been marketing its $500 million offering of 3.5-year senior secured notes (expected ratings B3/B+) on a roadshow expected to conclude on Jan. 11.

JP Morgan is the left lead bookrunner. Goldman Sachs & Co. and Morgan Stanley & Co. are joint bookrunners.

That deal is being whispered at an 11% yield, a high-yield mutual fund manager said on Tuesday.

The notes will be secured by certain of United's routes, takeoff and landing slots, as well as airport gate leaseholds utilized in connection with these routes.

Investors continue to inspect that collateral, which is currently encumbered under United's senior secured credit facility but would be made available by substituting other collateral into the senior secured credit facility, the buy-sider said.

Elsewhere, Brocade Communications Systems, Inc.'s planned $600 million of senior secured notes, announced by the company on Monday, could come as early as Wednesday, a buy-side source said, adding that Bank of America Merrill Lynch will run the books.

Bank of America Merrill Lynch is expected to be bookrunner on a whopping $17 billion of January business, the source added.

Meanwhile, Santa Monica, Calif.-based real estate investment trust Anworth Mortgage Asset Corp. is expected to show up with $600 million of notes during the early part of 2010, the source added.

And Dollar Financial Corp. is expected to come with $750 million. The Berwyn, Pa.-based financial services company, issuing via subsidiary National Money Mart Co., priced a $600 million issue of 10 3/8% seven-year senior notes at 99.398 to yield 10½% on Dec. 10.

Level 3 bonds rise ahead of new deal

Level 3's new issue of 100% notes due 2018 came to market too late in the day for any real secondary trading. However, several issues of its existing bonds were seen to have firmed on the news of the new deal, the tender offer the company announced for its 12¼% notes due 2013 and the company's affirmation of its previously announced adjusted earnings guidance, calling for $900 million to $950 million of adjusted EBITDA for 2009.

A trader said that the company's 9¼% notes due 2014 were the most active bond in the capital structure, although with "a lot of small trades." He saw the bonds at around 98, on "some buying in front of the new issue."

A market source at another desk said that the bonds had finished Monday's dealings just under the 97 mark, but then opened Tuesday over a point higher at 98. The bonds traded in a context of 98-98½ late in the day Monday.

A trader said Level 3's 8¾% notes due 2017 had moved up by several points to 95 bid from 93.

The 12¼% notes slated to be taken out with the proceeds of the new bond deal were seen "relatively unchanged" at 108, matching the total consideration, including a $30 per $1,000 consent fee, which the company will pay to holders who tender their bonds and consents by or before the Jan. 19 early tender deadline.

He said that there were "some odd-lot trades in the bigger coupons," including and especially the 121/4s, "but the rest of it doesn't seem to be that crazy."

At another desk, a source pegged the 121/4s as having finished Monday just under 107, but then having moved up by over a point to levels north of 108.

Recent McJunkins jumpin'

A trader said that McJunkin Red Man Inc.'s recently priced $1 billion of new 9½% senior secured notes due 2016 "got lifted earlier in the day."

He saw the Tulsa, Okla.-based industrial pipe and valve maker's mega-deal - which had priced at 97.533 to yield 10% back on Dec. 16 - as having gone from 98 bid in the morning to 99 by mid-day and then 99½ bid, par offered later on. But investors didn't stop there, causing the bonds to continue firming and leaving them at 101 bid.

McJunkin's behavior, he said was "a typical example" of the trend seen in the overall market on Tuesday - "someone would put a toe in the water. The bonds would get lifted, and then be left bid."

Market indicators remain firmer

Back among statistical measures of market performance not related to the new-deal market, a trader saw the CDX Series 13 index gain ¼ point on Tuesday to end at 100 3/8 bid, 100 7/8 offered, after having jumped a full point on Monday to open the new 2010 trading year.

The KDP High Yield Daily Index meanwhile soared by 29 basis points on Tuesday to 71.60, after having gained 12 bps on Monday. Its yield tightened by 12 bps, to 7.90%, after having come in by 5 bps the previous session.

Advancing issues continued to lead decliners, expanding their advantage to better than two to one.

Overall market activity, as measured by dollar volume levels, continued to rebound healthily from the near morgue-like tone seen in the last week of the year, zooming 59% from Monday's already improved levels.

A trader said that "it's been a tough day putting the two sides of a trade together, because the right side has been difficult to come by."

He explained that "cash kept coming for though the end of the year for the portfolio managers, and over the last two days, nobody wants to sell anything. We've had more buyers than sellers. Offerings are kind of scarce."

He said that he hopes the latter condition "is alleviated as the calendar starts to come.

He further said that "where you could find offerings, they'll start out high, and eventually you'll find somebody to pay the price because there's so little out there to buy."

But he said that there seemed to be real trading activity in the bigger capitalization names, "with few exceptions."

"Everything was up," a second trader said, while a third noted that "if you had a half-way decent offering, someone was buying."

NewPage pops powerfully

A trader saw NewPage's 10% notes due 2012 "probably pretty active and up quite a bit," quoting the Miamisburg, Ohio-based coated paper maker's bonds as having jumped to the 80 bid level on Tuesday, with "lots of trading" in a 79-80 context, well up from 73½ bid, 74 on Monday.

He, like several other traders, professed no visibility as to what was driving the bonds up. "I don't see what the news is," he declared, and usually you don't get that big a pop unless there's news out there."

Another trader said that NewPage's paper was about the busiest of the day, racking up over $40 million by the close. He saw the bonds at 73½ bid "first thing in the morning," but then gradually move up to 80½ bid, 80 3/8 offered, although he knew of no specific news about the company to explain the rise.

However, The Wall Street Journal cited new research reports that see an improved outlook for the coated paper sector, and traders also pointed to the overall continued strong junk market conditions.

Ford firmer on good numbers

Ford Motor Co.'s bonds were seen better, especially after the Dearborn, Mich.-based carmaker reported a sizzling nearly 33% gain in December sales versus year-earlier levels, which allowed Ford to close out a generally miserable 2009 showing a 15% decline for the year in sales versus 2008 - around half the decline which chief competitor GM saw.

A market source saw the Ford 7.45% bonds due 2031 having firmed to the 92 level from prior round-lot levels around 90.

Meanwhile the 8 1/8% notes due 2020 recently issued by Ford's unit, Ford Motor Credit Co., were seen having improved about ½ point to just under par.

While a trader saw "a lot of small trades" in Ford, "except for the short-dated paper," which trades on a yield-to-call basis, round-lot activity was seen as brisk in the Ford Credit 8 1/8s, with well over $20 million having changed hands.

Ford announced that for the month of December, total company sales were 184,655, up 32.8% from 139,067 in the same period last year.

Total Ford, Lincoln and Mercury sales for the month were 179,017, up 33.5% from 134,114 last year.

Car sales for the month were 61,195, up 42% from 43,087 in December 2008.

And, total truck sales for the month were 117,822, up 29.4% from 91,027 last year.

Also on Tuesday, Ford released full year 2009 results that included total sales of 1.682 million, down 15.4% from 1.988 million in 2008.

Ford, Lincoln and Mercury sales for the full year were 1.621 million, down 15.4% from 1.915 million in the previous year.

Car sales for the full year were 595,671, down 11.4% from 671,965 for full year 2008.

And, truck sales for 2009 were 1.025 million, down 17.5% from 1.243 million last year.

"Ford's plan is working," said Ken Czubay, vice president, U.S. Marketing Sales and Service, in a news release. "Customer consideration continues to grow for our high-quality, fuel-efficient vehicles. In 2010, we will introduce an even higher number of new products, giving customers more reasons to drive one."

GM gains, even amid sales drop

A trader saw General Motors Corp.'s benchmark 8 3/8% bonds due 2033 gain ½ point to 29¾ bid, 30¾ offered.

A market source at another desk pegged the long bonds up a full point, at 30 bid.

The bonds rose even as GM reported a 5.7% decline in December sales from a year ago. However, that was a smaller decline than the 9% area downturn that Wall Street had been expecting, and was largely due, GM said, to a slowdown in fleet sales, which the company is trying to lessen anyway, feeling it is the least lucrative sales area and undermines the resale value of used GM cars and trucks.

Still, for the year, GM posted a 30% sales drop.

ResCap rally runs its course

A trader said that Residential Capital LLC's bonds were "pretty quiet today" - in contrast with the scene on Monday when the Minneapolis-based mortgage lender's bonds firmed smartly on the news that corporate parent GMAC would put a large portion of the $3.8 billion -- about $2.7 billion of it, to be exact - into the sagging mortgage company.

'It looks like they had the big rally [Monday], when the 9 5/8% notes went from prior levels in the low 80s to around 91 during the opening, and then up to 94 bid, 95 offered by the end of trading on Monday, "and that's pretty much where they were today."

Zions trades at healthy discount

A trader noted that Zions Bancorporation's 7.75% notes due 2014 had moved up to around the 90 bid level, which he said was up about a point or so from where the Salt Lake City, Utah-based regional banking company's paper had finished 2009, "even though there's some fear in the commercial loan portfolio, the real estate portfolio - nobody's able to assess it."

The bonds, he said, "are trading at a healthy discount" to par. He said that the bonds had moved up over the last two sessions, fueled by considerable crossover interest in the credit, whose bonds - other than the solidly AAA rated FDIC-backed paper issued last year ¬¬- are mostly unrated by Moody's Investors Service, are rated BB+, BBB- or not rated by Standard & Poor's and are mostly rated BBB by Fitch Ratings.

"It's a five-B piece of paper, at a discount, and there's not a lot of paper around," making it an attractive buy. He theorized that some of the high-grade accounts "that didn't want to live with it are taking advantage of the price rise to move it out. There are some high yield guys and guys that are retailing the paper out" to small investors. The company priced some $450 million of the notes back in mid-September.

He also said that the company's older pieces of paper, which had been trading in the 60s or lower 70s, "are up a couple of points, so they're bid for without offerings."

A second trader said that on the company's other issues, "you've kind of seen bids popping up," while the 73/4s actually saw two-sided trading, with "north of $15 million" having changed hands on Tuesday. He said that of late, the bonds had been trading around the 861/2-87½ level, and now trade between 89½ and 903/4.

He saw no specific news that might be pushing the bonds up.

"From time to time, Zions Direct will have online auctions for retail investors - they do it every once in a while - but they haven't done it for a couple of weeks, and usually, it's nowhere near the volume we saw trade today; you're lucky if you get a couple of hundred thousand [dollars of bonds] to $1 million trade in those auctions that they do online, and that's more retail-geared."

The latest activity, on the other hand "has been crossover or institutional buying. Somebody's been talking up the name, which is good."

-Sara Rosenberg contributed to this report

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