Monitronics caps $8.4 billion primary week, trades up; Lawson, Alliance, Rexel slate deals

By Paul Deckelman and Paul A. Harris

New York, March 16 - The high-yield primary market finished off a fairly busy week on a quiet note Friday, as just one deal priced - a downsized $410 million issue of eight-year notes for alarm services provider Monitronics International, Inc.

The new deal -with a generous coupon - was heard to have firmed solidly when it was freed for secondary dealings.

That offering capped off a week in which some $8.46 billion of new dollar-denominated, junk-rated paper priced in 15 tranches, a little behind the $9 billion of new paper that came to market in 19 tranches in the previous week ended March 9.

On a year- to-date basis, Friday's deals lifted the new issuance total to $83.18 billion in 161 deals, running about 8.6% ahead of the $76.47 billion in 182 deals that had priced by this time last year.

The week's total includes several offerings in the billion-dollar range, including CIT Group, Inc., MGM Resorts International, Fortescue Minerals Group and Air Lease Corp.

But traders said several of those deals - and some of the smaller offerings as well - were having a tough time of it in the secondary, struggling to stay at or above their respective issue prices because investors were put off by their relatively low coupons.

Elsewhere in the new-deal arena, business software company Lawson Software, Inc. and business services provider Alliance Data Systems Corp. were heard by syndicate sources to be getting ready to hit the road beginning Monday with their respective new deals. French electrical products maker Rexel SA also will be shopping around a dollar-denominated deal in the coming week.

Secondary market activity was largely focused on the new deals, although there was brisk trading at lower levels for ATP Oil & Gas Corp.'s bonds.

Several traders noted the impact on Friday's dealings of the distraction from everybody watching the televised college basketball championship playoffs known as March Madness, and well as partying ahead of Saturday's St. Patrick's Day holiday.

Statistical market performance indicators remained mixed on Friday, but were higher than a week ago.

Monitronics prices tight

The primary market saw one issue price during a relatively quiet Friday session.

Monitronics International priced a downsized $410 million issue of eight-year senior notes (Caa1/CCC+) at par to yield 9 1/8% at the tight end of price talk set in the 9¼% area.

The bond deal was downsized by $50 million as the company shifted the proceeds to its term loan B, upsizing the loan to $550 million from $500 million.

Bank of America Merrill Lynch was the left lead bookrunner. Citigroup Global Markets Inc. and Credit Suisse Securities (USA) LLC were the joint bookrunners.

The proceeds, along with a new senior secured credit facility, will be used to repay all outstanding borrowings under the existing senior secured credit facility and to purchase notes under, and terminate, the existing securitization debt.

Lawson rolls out $1.15 billion

Lawson Software plans to conduct a roadshow on Monday and Tuesday in Europe for its $1.15 billion equivalent offering of seven-year senior notes (expected ratings Caa1/B-).

A roadshow gets underway in the United States on Thursday.

The deal is set to price during the March 26 week.

The St. Paul, Minn.-based company plans to offer the notes in dollar- and euro-denominated tranches. Tranche sizes remain to be determined.

Left lead bookrunner Bank of America Merrill Lynch will bill and deliver. Credit Suisse, J.P. Morgan, Morgan Stanley, Barclays, Deutsche Bank, RBC and KKR are the joint bookrunners for the debt-refinancing deal.

Alliance Data starts Monday

Alliance Data Systems will begin a roadshow on Monday for a $350 million offering of eight-year senior notes.

The deal is set to price late in the week ahead.

Bank of America Merrill Lynch, J.P. Morgan, Barclays, RBC and Wells Fargo are joint bookrunners.

The unrated notes come with four years of call protection.

The proceeds will be used to repay outstanding revolver debt and for general corporate purposes.

The prospective issuer is a Dallas-based provider of transaction-based, data-driven marketing and loyalty solutions serving consumer-based industries.

Rexel 7.75-year deal

Rexel plans to price a $300 million offering of senior notes due in December of 2019 (existing ratings Ba2/BB/BB) in the middle or end of next week.

Bank of America Merrill Lynch, Barclays and RBS Securities Inc. are the joint bookrunners.

The Paris-based provider of electrical solutions and equipment plans to use the proceeds for general corporate purposes, including funding of potential future acquisitions.

Monitronics moves up

When the new Monitronics International eight-year notes were freed for aftermarket dealings Friday, a trader quoted those bonds at 102 bid, 102¾ offered, well up from the par levels in which the downsized $410 million of new paper priced.

A second trader saw the alarm company's bonds a little tighter, at 102 1/8 bid, 102½ offered. "Doing very well," the trader said.

The first trader noted that unlike many of the recent new deals, which have coupons like 5%, 5¼%, 5½% or even below the 5% mark, Monitoronics' 9 1/8% coupon "has a little more cushion because it's not so tied to Treasuries, when you've got a 5% coupon versus something that's almost double."

The second trader agreed.

"The yield-hungry people are going after the higher-yield deals, rather than the 5s because Treasuries have backed off a lot here - a lot," the second trader said.

The 10% Treasury notes, which are often seen as a benchmark against which most junk bonds are measured, were seen going home Friday at a yield of 2.29%, versus the 2.03% level recorded just the week before.

MGM trades near issue

Traders saw the new MGM Resorts International's 7¾% notes due 2022 trading within a narrow range bracketed by 99¾ on the downside and 100¼ on the upside.

The Las Vegas-based gaming giant priced its quickly-shopped $1 billion issue - upsized from an originally shopped $750 million - at par on Thursday to yield 7¾%.

The new bonds came to market too late Thursday for any secondary dealings at that time, but was freed to trade on Friday.

Spectrum stays up

Thursday's other notable deal - the $300 million offering of 6¾% notes due 2020 from consumer products company Spectrum Brands Holdings, Inc. - continued to trade at a premium, just as it did after it priced.

"That did very well," a trader enthused, quoting the new bonds at 101¼ bid, 101 3/8 offered. The deal priced at par after upsizing from an originally announced $275 million.

"People like that credit - we love that credit," the trader said.

The Madison, Wis.-based company is known for such iconic consumer products as the George Foreman electric hamburger grills, Remington electric shavers, Rayovac flashlight batteries and Black Flag insecticide.

The deal was "hanging in there," the trader said.

Some deals struggle

Traders saw some of the recent new deals continuing to struggle to stay above, or at least around, their respective issue prices.

"The market, in a lot of cases, is very tired," a trader said.

For instance, the trader saw Air Lease's 5 5/8% notes due 2017 at 99½ bid, 99 5/8 offered.

The Los Angeles-based aircraft leasing company's $1 billion offering priced at par on Tuesday.

After a brief flurry above issue that was helped by Tuesday's overall strong Junkbondland rally, the bonds fell under par by mid-week and never made it back.

"I was really surprised, really surprised," the trader said. "That one faked me out."

He said that "it was ironic that they doubled the size of the issue because of the demand" from an originally announced $500 million to $1 billion.

"So it's really weird, but the market is getting tired," the trader said.

He meantime saw Air Lease's competitor International Lease Finance Corp. (ILFC) also struggling to stay above issue.

ILFC - a unit of insurance giant American International - priced $1.5 billion of bonds on Wednesday in a split-rated deal, its $750 million of 4 7/8% notes due 2015 pricing at 99.65 to yield 5%, while its $750 million of 5 7/8% notes due 2019 priced at 99.28 to yield 6%.

"They didn't do too well," he declared.

Earlier in the session, he said, the 5 7/8s were quoted offered at 99, looking for a bid, while 4 7/8s were at 99 ¾ bid, 99 7/8 offered.

After those early sightings, he said, "Today, you couldn't get quotes. Nobody was updating them. It's amazing how fast they got out of fashion."

Hoop dreams take over

Traders said that as has been the case in most recent sessions, much of the activity in the secondary market, particularly trading in size, centered around newly or recently priced deals.

But on Friday, a trader said things were very quiet for another reason.

"It seems like a lot of folks might be watching or partaking in March Madness, which is turning the trading desks into March sadness."

A second trader agreed. "The market overall has everybody watching the NCAA tournament. Not too much got done," the trader said.

Yet another trader noted that at a few shops, there were pre-holiday St. Patrick's Day parties that further dampened activity.

ATP active, lower

There was no shortage of activity in ATP Oil & Gas's 11 7/8%second-lien senior secured notes due 2015.

A trader saw them down a little on the day at 75¾ bid, 76½ offered.

A second trader said he saw the bonds head lower "right out of the slot this morning."

"I kept seeing them all day," the trader said, with the issue racking up some of the heaviest volume in Junkbondland on Friday.

He saw the bonds going home at 75¾ bid, 76 offered, which he called down 1½ points on a lot of volume. "That was the most obvious one today," he said.

Another market source suggested that as much as $43 million of the bonds changed hands heading into the late afternoon, with the trading levels at just over 76 bid, down a point. Activity was sharply up from the roughly $6 million of the bonds that traded on Thursday.

The company announced a more narrow-than-expected fourth-quarter loss and revenue that topped analysts' estimates. It was scheduled to hold an afternoon conference call with investors.

One of the traders noted the difficulty that some of the junk market's new deals with very stingy coupons below 6% were having in the secondary market. "With that [ATP] coupon trading in the 70s, you go 'What the hell is going on?' " the trader said.

Earlier in the week, the Houston-based offshore energy exploration and production company's bonds had traded as high as a 77-78 context.

The bonds firmed at that time, buoyed by news that one of its Gulf of Mexico wells struck oil with likely yields of 7,000 barrels of oil a day, along with news the company increased its liquidity through asset sales and an expanded credit facility.

Market signs mixed on day

For a second straight session, statistical measures of junk-market performance were seen mixed on Friday.

A market source said the CDX North American Series 17 High Yield index was up by 3/8-point to close at 98¼ bid, 98½ offered after having gained 1/16 point on Thursday.

It also was up from the 96 15/16 bid, 97 3/16 offered level at which the index closed the previous Friday, March 9.

The KDP High Yield Daily Index meantime eased by 6 basis points Friday to close at 74.19, after having risen by 2 bps on Thursday. But its yield still narrowed by 1 bp to 6.50%, after having come in by 2 bps on Thursday.

Those levels compare favorably with the 74.08 index reading and 6.57% yield seen the previous Friday.

But the widely followed Merrill Lynch High Yield Master II Index bounced back on Friday from Thursday's loss, which was the first in seven straight sessions. It gained 0.007% versus Thursday's 0.109% downturn.

The latest gain lifted the index's year-to-date return to 5.109% on Friday versus 5.102% on Thursday. It is still down from its peak level for 2012 of 5.361% recorded on March 2.

That year-to-date figure beat the 4.966% recorded the previous Friday, as the index showed a one-week gain of 0.137% versus its 0.315% loss the week before, which had been its first weekly loss of 2012 after nine gains, and the first weekly loss after an 11-week winning streak that dated back to mid-December.

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