Cricket, Berry price; American Entertainment pulls deal; Remy rebounds

By Paul Deckelman and Paul A. Harris

New York, Oct. 18 - Cricket Communications Inc. (Leap Wireless International Inc.), Berry Petroleum Corp. and Southern Union Gas all successfully priced new deals in Wednesday's session, bringing the total of junk issuance to $1.5 billion.

But American Entertainment Properties Corp. was heard by high yield syndicate sources Wednesday to have withdrawn its planned eight-year bond offering - which had already been downsized.

In the secondary market, several traders said that not a whole lot was going on. They did see Remy International Inc.'s bonds - which had fallen badly on Tuesday - regaining some of their lost ground during Wednesday's dealings. In the same sector Dura Automotive Systems Inc.'s bonds were also seen higher.

Airline issues such as Delta Air Lines Inc. and Northwest Airlines Corp. were better, given a boost by the continued lower price of oil on world markets, as well as better-than-expected quarterly results from industry leader AMR Corp., the parent company of American Airlines.

On the downside, MagnaChip Semiconductor Ltd.'s bonds were in retreat, a slide which traders attributed to generalized tech-sector weakness.

A source from a hedge fund told Prospect News at the Wednesday close that the broad high-yield market had outperformed Treasuries for the third consecutive day.

The source added that the CDX 100 index went out at 101 and one-sixteenth bid, 101 and three-sixteenths offered, up an eighth of a point, and commented that high yield spreads to Treasuries are about as narrow as they have ever been.

A short while earlier another source from the buy-side said that the broad market was unchanged on the day and added that save for the new issues - the supply of which is growing - there are not many bonds for sale at present.

"Nobody wants to sell anything," the source asserted.

"Right now the dealers are very short the high-yield market, evidenced by the lack of price action on bad news.

"It's a waiting game to see if something blows up to push things down and let these guys cover.

"Then it might be a little more two-sided."

The buy-sider said that such a catalyst could be unfavorable economic data or, more likely, another hedge fund blowup.

Meanwhile in the primary market, the amount of bonds issued on Wednesday that had junk ratings from both Moody's Investors Service and Standard & Poor's topped $1.5 billion.

Cricket/Leap prices $750 million

The session's biggest issue by dollars came from Cricket Communications, the operating subsidiary of Leap Wireless.

The San Diego-based wireless company priced a $750 million issue of eight-year unsecured senior notes (Caa2/CCC) at par to yield 9 3/8%, in the middle of the 9¼% to 9½% price talk.

Citigroup, Goldman Sachs & Co., Morgan Stanley, Banc of America Securities LLC and Deutsche Bank Securities were joint bookrunners for the debt refinancing deal.

Berry sells 10-year notes

Elsewhere California exploration and production company, Berry Petroleum, priced a $200 million issue of 10-year senior subordinated notes (B3/B) at par to yield 8¼%.

That yield was on the wide end of the 8% to 8¼% price talk.

JP Morgan, Citigroup, Wells Fargo Securities and Goldman Sachs & Co. were joint bookrunners for the debt refinancing and general corporate purposes deal.

Southern Union prices hybrid

Southern Union priced a $600 million issue of series A junior subordinated notes due Nov. 1, 2066 (expected ratings Ba1/BB+/BBB-) at a 250 basis points spread to Treasuries on Wednesday, according to information which the company filed with the Securities and Exchange Commission.

That spread was at the tight end of the Treasuries plus 262.5 basis points area price talk, according to a market source.

The notes, which were sold at a dollar price of 99.844, will pay a 7.2% fixed-rate coupon until Nov. 1, 2011, after which they will bear interest at three-month Libor plus 301.75 basis points.

Credit Suisse, Goldman Sachs & Co., Lehman Brothers and Merrill Lynch & Co. were joint bookrunners. Credit Suisse was the structuring agent.

The issuer is a Houston-based natural gas transportation, storage and distribution company will use the proceeds to fund an acquisition.

Last July another energy company, Enterprise Products Operating LP, priced a $300 million issue of 60-year fixed-rate to floating-rate junior subordinated notes (Ba1/B+/BB+) - which would eventually grow to $550 million by means of two ensuing add-ons - at a 331 basis points spread to Treasuries.

Talking the deals

Three junk offerings are parked on the forward calendar as business that is expected to price before Friday's close.

Talk surface on two of them Wednesday.

FelCor Lodging Trust Inc. talked its $215 million offering of five-year senior floating-rate notes (Ba3/B+) at Libor plus 187.5 to 200 basis points.

The quick-to-market Merrill Lynch-led deal is expected to price Thursday morning.

Elsewhere glass fiber manufacturer AGY Holding Corp. talked its $175 million offering of eight-year senior second lien notes (B2/B-) at a yield in the 10¼% area.

The deal, via UBS, is expected to price on Thursday afternoon.

Those two offerings join Buffets Inc.'s $330 million offering of senior notes (Caa1/CCC) in two tranches, which were talked earlier in the week.

The buffet-style restaurant company has talked its eight-year fixed-rate notes, which are non-callable for four years, at 11¾% to 12%.

Meanwhile Buffets talked its seven-year floating-rate notes, which are non-callable for two years, at Libor plus 650 to 675 basis points.

Credit Suisse has the books.

Southern Union Gas spread tightens

Traders did not see the new Berry Petroleum or Cricket Communications bonds trading in the secondary market.

One did see the new Southern Union Gas 60-year subordinated bonds having moved up in initial secondary dealings, with the issue's spread over comparable Treasuries having narrowed to 240 basis points bid, 238 bps offered, tightening from the 250 bps spread at which the bonds had priced.

Remy in rebound

Back among the established issues, Remy International's bonds "were running back up," a trader said, after having slid badly on Tuesday by anywhere from 8 to 13 points on the day, depending on whom you spoke to.

He saw the senior notes of the Anderson, Ind.-based maker of Delco Remy automotive electrical systems up about 5 points on the day and its junior notes up as much as 8 points, with its 9 3/8% subordinated notes due 2012 at 38 bid, 39.5 offered and its 11% subs due 2009 bid at 40.5 and looking for offerings. "People were looking for those bonds as the day progressed," he said.

A market source at another desk actually pegged the 9 3/8s off slightly, at 38 bid - but said the 11s were 8½ points better at 39.5, while the company's 8 5/8% senior notes due 2007 were 4 points better at 88.5 and its senior floating-rate notes due 2009 were ¾ point better at 96.5.

Remy "came back 7 points," said another trader, who saw the 9 3/8s at 36 bid, 37 offered.

While some traders chalked Tuesday's slide in the bonds up to generalized investor angst playing off the pounding that fellow automotive parts name Dura has been taking lately, the latter trader suggested that the market may have been reacting to news that the company had hired the Rothschild investment bank as an advisor as it seeks to allocate its assets.

"Perhaps people thought that this was a sign they were going to file [for bankruptcy], but when it became apparent the firm was only advising them on asset allocation, the bonds recovered."

Dura heads higher

The trader also saw Dura's 9 5/8% notes due 2012 "bouncing 2 points" to about the 31 bid, 32 offered area on "no news - just short covering."

Another trader saw the bonds "feeling better at the end of the day," up 3 points on the session at 31 bid, 32.5 offered

Those Dura senior bonds had traded down to around the 28 bid, 30 offered area, trading flat, or without accrued interest, after the Rochester Hills, Mich.-based auto components manufacturer chose not to make the $17.25 million Oct. 15 coupon interest payment on those bonds, instead invoking the standard 30-day grace period, during which it is expected to try to negotiate an arrangement with the bondholders to head off a default and a probable slide into Chapter 11.

Airlines reach for the skies

Among the airline issues, a trader saw AMR's 9% notes due 2012 "already trading at 101.5 bid, 102.5 offered," up another point from that level on Wednesday, helped by the Fort Worth, Tex.-based airline giant's better-than-expected third-quarter earnings.

"What a difference a year makes," he said, in referring to the fact that those same bonds were trading in a range of 67 to 74 a year ago as the company continued to lose money.

It was the second straight quarterly gain for AMR - the first time that has happened in six years, as the airline operator was helped by recently lower fuel prices, as well as stronger revenues.

AMR, on its quarterly conference call, also touted its efforts so far this year at improving its balance sheet (see related story elsewhere in this issue).

Another trader, however, did not see much movement in the company's bonds, which have already been trading at very strong levels. He quoted them unchanged at 101.25 bid, 102.25 offered, while AMR's 9% notes due 2016 were at 99 bid, 101 offered.

Among other airline names, Delta was about a point better on the session, another trader said, with the bankrupt Atlanta-based air carrier's 8.30% notes due 2029 around 33 bid, 34.5 offered. He did not notice any movement in Northwest's bonds, calling them unchanged in the high 50s.

Another trader did see the bankrupt Eagan, Minn.-based carrier's 10% notes due 2009 at 58.5 bid, 59.5 offered, while Delta's 8.30s were also up a point at 33.5 bid, 34.5 offered. The trader attributed those gains to the continued easing in the price of crude oil, which points to likely lower prices for jet fuel, as well as better AMR numbers. The trader saw the AMR 9s of '12 at 102 bid, 103 offered, up a point.

AK up on vote, sector M&A

Back on solid ground, traders saw AK Steel Corp. bonds better for a second straight day, helped by anticipation about the vote that was taking place Wednesday among some 1,800 hourly workers at the Middletown, Ohio-based steel company's main works on a contract proposal - a vote which could end an eight-month old lockout there.

Also helping to boost sentiment, several traders said, was a feeling that the steel industry may see more merger and acquisition activity - which could see AK wind up on someone's shopping list.

M&A buzz intensified after India's Tata Steel bid $10 billion for U.K. steelmaker Corus Group plc - and Brazilian steeler Companhia Siderurgica Nacional was reportedly preparing a counter-bid to the Indian steel giant's offer for Corus. A trader cited a Wall Street Journal story about steel-sector consolidation as adding fuel to the fire.

AK's 7¾% notes due 2012 were seen up ¾ point at 100.25 Wednesday, after having risen a like amount on Tuesday, although another source had those same bonds at 99.5, calling them up a point on the day for a second straight session.

MagnaChip trades off

A trader saw MagnaChip Semiconductor's 8% notes due 2014 down as much as 5 points on the session to 52 bid, 53 offered, citing disappointing tech-sector earnings as a likely catalyst.

Another market source saw those bonds down 4 points on the session to the 52 level and pegged the chipmaker's 8.64% notes due 2011 down nearly a point at 82.5. However, its 6 7/8% notes due 2011 were seen pretty much unchanged at 80.5.

© 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.