Schaeffler, Gestamp, DriveTime slate through pricing lull; new Charters firm; AK Steel trades off

By Paul Deckelman and Aleesia Forni

New York, April 22 - The high-yield primary market - fresh from big sessions on Thursday and Friday - took a breather on Monday, with syndicate sources seeing no new dollar-denominated, junk-rated deals from domestic or industrialized-country issuers priced during the session.

However, the sources did hear of several prospective deals that emerged and joined the Junkbondland forward calendar.

Two of them were big dual-currency deals from European borrowers. German ball-bearing manufacturer Schaeffler AG announced plans for €1 billion-equivalent of dollar- and euro-denominated senior secured bonds, with the dollar paper having an eight-year maturity. That quick-to-market deal is expected to price on Tuesday.

Timing was unclear at this point on Spanish automotive parts supplier Gestamp Automoción SA's €750 million equivalent of dollar- and euro-denominated seven-year notes.

But a purely dollar deal - used vehicle retailer DriveTime Automotive Group, Inc.'s $50 million add-on to its existing 2017 notes - will be shopped to investors on a Tuesday conference call, with pricing seen at mid-week, the sources said.

Among recently priced bond transactions, Charter Communications, Inc.'s $1 billion Friday offering of 10.75-year notes hit the aftermarket on Monday, recording modest gains. Wind Acquisition Finance SA's dollar-denominated seven-year notes - part of a big dual currency deal - firmed a little from the initially better levels at which that deal was quoted on Friday after it priced. And SoftBank Corp.'s seven-year Thursday megadeal continued to move up as well.

Among established issues, Sprint Nextel Corp.'s bonds firmed smartly in continued brisk trading, as the wireless provider officially appointed a directors' committee and hired advisors to evaluate Dish Network Corp.'s $25.5 billion acquisition proposal and see whether it offers more value than SoftBank's $20 billion bid to buy 70% of Sprint, to be funded in part by the Japanese telecom company's big new bond deal.

On the downside, AK Steel Corp.'s bonds slid ahead of Tuesday's earnings report, which is expected to show a wider loss and lower revenues than a year ago for the steel-alloy manufacturer.

Overall, though, activity was quiet, with statistical measures of junk secondary market performance turning mixed on Monday after having been better across the board on Friday.

Schaeffler eyes €1 billion

A muted high-yield primary session saw no pricings on Monday, though a new deal was announced from Schaeffler Finance BV.

The company is planning to sell a €1 billion equivalent offering of dollar-denominated and euro-denominated senior secured notes on Tuesday, according to a market source.

The euro tranche will mature in five years, and the notes will be non-callable for two years.

The dollar-denominated notes will have a tenor of eight years and will be non-callable for three years.

The Regulation S and Rule 144A without registration rights notes will feature a 101% poison put.

Proceeds will be used to repay part of the company's outstanding amount under its senior facilities agreement.

Citi will bill and deliver the dollar-denominated notes, and Barclays will bill and deliver the euro tranche.

BayernLB, BNP Paribas Securities Corp., CBK, Deutsche Bank Securities Inc., HSBC Securities, J.P. Morgan Securities LLC, Landesbank Baden-Württemberg and UC are also banks on the deal.

DriveTime investor call

Another new deal announcement came from DriveTime Automotive and DT Acceptance Corp., as the companies have set an investor call ahead of a planned $50 million add-on to DriveTime's existing 12 5/8% notes due 2017.

The investor call is set for Tuesday, and pricing is expected mid-week during the April 22 week.

Jefferies & Co. and Wells Fargo Securities LLC are the joint bookrunners for the Rule 144A and Regulation S with registration rights transaction.

Proceeds will be used to repay a portion of the company's outstanding warehouse facilities.

The notes will be fungible upon registration.

The original $200 million issue priced on May 27, 2010 at 98.854 to yield 12 7/8%.

DriveTime is a Phoenix-based used vehicle retailer. It focuses solely on sales and financing services to the subprime market.

Gestamp €750 million deal

Also in the pipeline, Gestamp is planning a €750 million-equivalent note offering due 2020, according to a market source.

The notes will be issued in dollar- and euro-denominated tranches by Gestamp Funding Luxembourg SA and will be non-callable for three years.

Deutsche Bank Securities Inc. is the bank on the deal.

The Abadino, Spain-based company manufactures metal components and structural systems for the automotive industry.

A slower session

A trader in the secondary market said that he was "not seeing anything today at all - I would say the market was kind of unched [unchanged] and firm."

He added, "It seems kind of muted today." The junk market took a pause after two very busy sessions Thursday and Friday, which had seen pricings of over $3.5 billion and $1.5 billion of new issuance, respectively.

Earlier in the session, another trader noted that the "existing home sales number [that came early in the out on Monday morning] knocked stocks down - but we did not follow."

The main U.S. real-estate industry group, the National Association of Realtors, reported that existing home sales slipped by 0.6% last month to a seasonally adjusted annual rate of 4.92 million units, well under the roughly 5.01 million-unit rate that Wall Streeters on average were expecting.

Stocks were lower in the morning in response but recovered in the afternoon as buyers came in to take advantage of bargain prices following last week's broad equity downturn, analysts said.

Charter churns upward

Back in the high-yield space, traders saw Charter Communications' new $1 billion offering of 5¾% notes due 2024 as having firmed from Friday's par issue price once they were freed for trading on Monday.

During the morning, a trader quoted those notes at 100¼ bid, 100¾ offered.

A second pegged the bonds at 100½ bid, 100¾ offered, while a third said the bonds were trading into a 100¼ bid, after having been in a 1001/4-to100½ bid range earlier.

By the afternoon, a trader was quoting the new Charter paper at 100 7/8 bid, 101¼ offered.

"It was a huge deal, and a lot of people played it," he said.

At another desk, a market source, who also saw the Charter bonds going out around the 100 7/8 bid level, estimated that by just mid-afternoon, over $20 million of those bonds had changed hands, a volume figure he said was likely to have risen during the final hour or so of trading.

That made the new issue the busiest purely junk-rated credit on the high-yield most-actives list.

Charter, a Stamford, Conn.-based provider of cable television, phone and broadband service -- the company moved to Stamford late last year from its longtime base in St. Louis - priced its drive-by megadeal at par on Friday afternoon, but it came too late in the day for any aftermarket dealings at that time.

The company is issuing the bonds through its COO Holdings, LLC and COO Holdings Capital Corp. subsidiaries and is planning to use the proceeds to redeem its 7 7/8% notes due 2018 and for general corporate purposes.

While Charter's new paper was improving, one of the market sources quoted the company's existing COO Holdings 7% notes due 2019 as having eased about a quarter-point to finish at 108¼ bid, on brisk volume of more than $14 million.

Wind improves

Friday's other new issue, from Italian telecommunications operator Wind Telecomunicazioni SpA, was heard to have improved from the stronger initial level at which those bonds had been quoted after they priced at par.

During the morning, a trader saw those 6½% senior secured notes due 2020 opening at 102⅜ bid, 102¾ offered, but added, "I'm not being posted on any trades taking place in the Street."

A second trader said at that time that the new Wind bonds were basically trading between 102½ and 102¾ bid and were "not very active."

Later on in the day, yet another trader placed the Wind bonds at 102 7/8 bid, 103 1/8 offered going home.

The company's Wind Acquisition Finance SA unit priced $550 million of the notes on Friday at par, after upsizing the issue from $400 million initially. The bonds had been quoted bid at 102¼ late Friday, but with no right side immediately seen.

That dollar tranche was part of a quick-to-market, two-part dual currency deal that also included €150 million senior secured floating-rate notes due 2019, which priced to yield 525 basis points over Libor.

Proceeds were slated to repay bank debt.

SoftBank seen better

Elsewhere among the recently priced deals, a trader said that SoftBank's 4½% notes due 2020 were finishing up Monday at 103 3/8 bid, 104 3/8 offered.

He said that was up from 103 bid, 103½ offered on Friday and well up from the 102ish levels that the paper had initially reached on Thursday after its pricing.

SoftBank, a Tokyo-based telecommunications company, had priced $2.485 billion offering of those dollar notes at par on Thursday as part of a larger $3.3 billion equivalent two-tranche deal that also included a €625 million tranche of euro-denominated 4 5/8% notes due 2020, which, like the dollar paper, had priced at par.

The company massively upsized the deal from an originally planned $2 billion to meet investor demand, with the dollar tranche seen before the upsizing and pricing to have generated more than $3 billion of orders from potential investors.

SoftBank was doing its bond deal primarily to help fund its $20.1 billion acquisition of a 70% stake in SprintNextel, although the fate of that deal was up in the air in the wake of a rival $25.5 billion cash-and-stock offer for all of Sprint, which was announced last week by satellite television broadcaster DISH Network Corp.

Sprint bonds better

Sprint's existing bonds, which had gyrated around in very active trading last week following that DISH news, were seen by traders to be solidly better on Monday, likely reacting to the news that the Overland Park, Kan.-based No. 3 U.S. wireless carrier had officially designated a committee of independent directors to review the DISH buyout offer and compare it with SoftBank's proposal, which Sprint's directors had already agreed to last fall.

The committee, in turn, has retained Bank of America Merrill Lynch to act as its financial adviser and will provide an assessment to the full board, the company said Monday.

The 8¾% bonds due 2032 issued by the wireless operator's Sprint Capital Corp. financing subsidiary shot up by 1¼ points on Monday to close at 116½ bid, a market source said, with round-lot volume a healthy $15 million.

Sprint Capital's 6 7/8% notes due 2028 were seen a point better at 1011/2, with over $14 million having changed hands.

Parent Sprint's 7% notes due 2020 gained about a quarter-point on the day, finishing just above the 108 mark, though on lackluster volume of around $5 million.

Englewood, Colo.-based DISH's 7 7/8% notes due 2019, issued by its DISH DBS Corp. subsidiary, eased by 1/8 of a point on the session to finish at 113 bid, on volume of over $6 million.

AK off ahead of numbers

Elsewhere, AK Steel's 7 5/8% notes due 2020 were seen down by as much as 2¾ points during the session before closing at 83 1/8 bid - down nearly 2 points on the day.

However, volume was a sedate $4 million.

The West Chester, Ohio-based producer of steel alloys, such as stainless steel and carbon steel for the automotive and home appliance industries and other industrial manufacturers, is scheduled to report its first-quarter results on Tuesday.

Analysts on average are expecting a net loss of 11 to 12 cents per share, around or slightly greater than the 11 cents of red ink seen a year ago.

They also expect revenues to have fallen to about $1.39 billion, down from $1.51 billion in the year-earlier quarter.

Market indicators turn mixed

Overall, statistical junk performance indicators turned mixed on Monday, after having firmed across the board on Friday.

The Markit Series 20 CDX North American High Yield index was up by 11/32 of a point on Monday to end at 104 13/32 bid, 104 17/32 offered, its second straight gain. On Friday, it had risen by 5/16 of a point.

But the KDP High Yield Daily index, meanwhile, lost 3 basis points to end at 75.63, its first downturn after two previous sessions on the upside. On Friday, the index rose by 2 bps.

The yield was unchanged at 5.43% on Monday, after having declined by 2 bps on Friday.

However, the widely followed Merrill Lynch High Yield Master II index posted its third consecutive advance on Monday, rising by 0.121%, on top of Friday's 0.031% gain.

That lifted its year-to-date return to 3.732% from Friday's 3.607% reading. Monday's finish marked a new peak level for the year so far, eclipsing the old market of 3.71%, which had been set on its peak level for the year so far.

The index's yield to worst declined to 5.455% on Monday, a new all-time low. It was down from the previous low mark of 5.494%, which had been set on Friday

The spread-to-worst tightened to 474 bps over comparable Treasuries from 477 bps on Friday. Monday's spread matched the tightest spread for the year, which had been set back on Jan. 28.

© 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.