Upsized Clear Channel mega-deal prices, firms in quiet market; Key Energy up on tender news

By Paul Deckelman and Paul A. Harris

New York, Feb. 15 - Clear Channel Communications, Inc.'s upsized offering of 10-year notes was heard by high-yield syndicate sources to have priced on Tuesday.

The San Antonio-based media and entertainment company's $1 billion offering was about the only thing really going on in the domestic high-yield primary sphere, with no other new deals pricing or even just emerging, and no price talk or timing heard on any of the several deals currently being shopped around to investors.

Across the pond, Premier Foods plc, a producer of name-brand grocery items in the United Kingdom, was heard by primaryside sources to be getting ready to do a junk deal, perhaps as soon as the week ahead.

When the Clear Channel deal was freed for secondary dealings, traders saw the new bonds initially quoted up at least a point or more before coming off those early peaks to end modestly higher.

They saw no activity in the sole deal that priced on Monday, which was from Cambium Learning Group, Inc.

Away from the new-deal realm, traders saw some upside movement in Key Energy Services Inc.'s 2014 bonds, which firmed smartly on the late-Monday announcement that the Houston-based oilfield services company is tendering for all of that paper.

Dean Foods Co.'s bonds were seen lower in active trading ahead of an anticipated sharp slide in the Dallas-based dairy and foods processor's fourth-quarter and full-year earnings, which will be reported on Wednesday.

Clear Channel upsizes

A single $1 billion tranche of junk sold Tuesday during an otherwise muted primary market session.

Clear Channel Communications priced an upsized $1 billion issue of 10-year priority guarantee notes (Caa1/CCC+/) at par to yield 9%, which was at the wide end of the 8¾% to 9% price talk.

Goldman Sachs & Co. was the left bookrunner for the issue, which was upsized from $750 million.

Citigroup Global Markets Inc., Credit Suisse Securities, Deutsche Bank Securities Inc., Morgan Stanley & Co. Inc., RBS Securities Inc. and Wells Fargo Securities were the joint bookrunners.

The company plans to use the proceeds, together with cash on hand, to repay $500 million of bank debt and to repay at maturity $250 million of its 6¼% senior notes due 2011.

Proceeds will also be used to pay fees and expenses in connection with concurrent amendments to the company's senior secured credit facilities and its receivables-based credit facility, the receipt of which is a condition to the completion of the notes offering.

Pick-up expected in Europe

Earlier Tuesday, England-based Premier Foods said it obtained three credit ratings, which will enable it to access the high-yield bond market.

A deal could materialize as early as the week ahead, market sources said. The size and structure remain to be announced.

No underwriters had stepped forward by Tuesday's close. However, Royal Bank of Scotland is expected to be involved, according to a debt capital markets banker in London who is monitoring the situation (see related story in this issue).

Apart from Premier Foods, the Feb. 21 week should see a good amount of European issuance, a syndicate banker said.

Should that issuance materialize, it might provide at least a modicum of relief to cash-burdened European buyside accounts, the banker remarked.

"The accounts in Europe are getting in far more cash than they can put to work, and people have been hoping that inflows would have slowed down by now," the sellsider said.

With high-yield bond prices soaring in the secondary market, investors are averse to putting cash to work there.

But there has not been enough primary supply, the banker said.

"If we see €45 billion to €50 billion of issuance this year, as expected, it won't be nearly enough," the source added.

Likewise in the States

Later Tuesday, a banker on the East Coast of the United States painted a similar scenario.

"It has become abundantly apparent that there is just not enough supply to meet the demand that we're seeing," the banker said.

This source actually looks for a lull in issuance over the next couple of weeks.

Should that lull materialize against a backdrop of continued cash inflows to the high-yield funds, it will create a very interesting scenario, the sellsider observed.

"You have to wonder how much tighter the market can get," the banker said.

"Yields are at all-time lows, and deals are coming at the low end of guidance and still trading up a point or two on the break.

"If I was an issuer, I would hit the market right now."

Deal revival

In the near term, the market could see a continuation of a theme that has surfaced in mid-February: the revival of deals pulled out of the market in late 2010 because issuers were dissatisfied with prospective rates, the banker said.

On Monday, Cambium Learning Group priced a $175 million issue of 9¾% six-year senior secured notes (B2/B) at 99.442 to yield 9 7/8%, in the middle of the 9¾% to 10% price talk.

The Dallas-based education services provider pulled a secured bond deal of the same size and tenor from the market in December because it could not get a rate to its liking at that time.

It paid for the company to wait, according to a source close to both the pulled transaction and the completed one.

While declining to furnish a specific rate comparison, the source said that improved financial numbers from the company, and an early 2011 primary market that is even stronger than December's, paved the way for a good execution for Cambium Learning.

Meanwhile, Burlington Coat Factory Warehouse Corp. is expected to price its $400 million offering of eight-year senior notes on Thursday.

The deal is sized $100 million below the similarly structured $500 million offering that the discount retailer pulled in November.

At the time when that original offering was withdrawn, the notes had been talked to yield in the 10% area.

No price talk has been circulated thus far on the new deal, according to market sources.

Other revival candidates include Flakeboard Co. Ltd., which marketed a $225 million offering of seven-year senior secured notes in November; Hunter Defense Technologies Inc., which postponed a $250 million offering of seven-year senior secured notes in mid-December; Performance Foods Group, Inc., which withdrew a $550 million offering of seven-year senior notes in late November; and Spencer Gifts LLC, which postponed a $150 million offering of six-year senior secured notes, also in late November, the banker recounted.

Calendar, possible surprises

Aside from the above-mentioned Burlington Coat Factory deal, two other transactions are parked on the forward calendar as business that is expected to clear ahead of the pre-Presidents Day holiday weekend.

Claire's Stores, Inc. is roadshowing a $400 million offering of eight-year second-lien notes via Credit Suisse, J.P. Morgan Securities LLC and Goldman Sachs. Palace Entertainment Holdings, LLC plans to price a $430 million offering of six-year senior secured notes via Morgan Stanley and Credit Suisse Securities.

And Tuesday's dearth of primary market activity notwithstanding, there could still be drive-by deals ahead of Friday's early close, a sellside source said.

One of the big dealers is believed to have a pair of such transactions that it could elect to roll out with the expectation that investors - against the unusually quiet backdrop in the primary market - are almost certain to sit up and take notice.

Clear Channel up after pricing

A trader saw the new Clear Channel 10-year bonds offered at 102 shortly after that paper priced at par.

A second trader also saw the bonds trade at par bid, 102 offered and then saw the bonds narrow to 101 bid, 102 offered.

After that, he saw the bonds narrow still further to 100 5/8 bid, 101¼ offered.

At another desk, a trader saw the bonds going out at 100 7/8 bid, 101 3/8 offered.

Cambium a secondary no-show

Monday's offering of 9¾% notes due 2017 by Cambium Learning Group was a complete non-event in Tuesday's market, traders said.

One trader said he had seen "not a thing" in it, while a second reported "nothing" was going on.

"Nada," he added for emphasis. "That's weird."

Market participants theorized that there was not much aftermarket action in the Dallas-based education services provider's $175 million issue owing to its relatively small size and the fact that the company - not a big name and not considered a core name in anyone's portfolio - is probably not all that well known in Junkbondland.

"I never heard of them before they got on the calendar," one of the traders said.

On Monday, Cambium had priced its quickly shopped issue of bonds at 99.442 to yield 9 7/8%.

A trader saw the bonds reach 100½ bid, 101½ offered.

Traders saw no activity, meanwhile, in any of the vast array of bonds that had priced the previous week.

Secondary data mostly steady

Away from the new-deal world, a trader saw the CDX North American Series 15 HY index unchanged on Tuesday to end at 104 7/16 bid, 104 11/16 offered after having eased by 1/8 point on Monday.

The KDP High Yield Daily index meantime rose by 6 basis points on Tuesday to finish at 75.95 after having gained 2 bps on Monday. Its yield came in by 1 bp on Tuesday to 6.67% after having narrowed by 2 bps on Monday.

Advancing issues edged cautiously ahead of decliners on Tuesday, leading them by a couple dozen issues out of the more than 1,400 that traded, versus the virtual dead heat in which the two groups ended on Monday.

Overall activity, represented by dollar-volume levels, rose by 34% on Tuesday after having slid by 22% on Monday from the previous session's level.

A trader said that much of the day was spent "waiting around for Clear Channel to price." Other than that, he said it was "kind of a lackluster, unexciting day." He saw "a few things trading here and there," but nothing that really jumped out.

As an example of how dull things were, he noted that maybe $1 million of the benchmark 8 3/8% notes due 2033 issued by the former General Motors Corp. - now Motors Liquidation Co. - had traded during the day, "and that's usually a pretty active one."

In that same automotive sector, Ford Motor Co.'s 7.45% bonds due 2031 were seen unchanged on the session at 108¾ bid, 109¾ offered.

Key climbs on tender news

Among specific issues, a trader saw Key Energy Services' 8 3/8% notes due 2014 rise to a shade over 109 bid, up 2 3/8 points on the session from previous levels just under the 107 level.

At another desk, the bonds were seen going home at 109, up 2 3/16 points, on round-lot volume of over $5 million.

The bonds got a boost from the company's announcement, made after the close of trading on Monday, that Key Energy has begun a tender offer for all $425 million of the outstanding 8 3/8s. Key is offering total consideration equivalent to a 109 price to any and all noteholders tendering their bonds and giving consent to proposed indenture changes by the consent deadline of 5 p.m. ET on Feb. 28. The offer is scheduled to expire on March 14.

Dean down ahead of numbers

On the downside, Dean Foods' 7% notes due 2016 dipped to 94 bid, down 1¼ point on the day, a market source said. Another saw the bonds ending at 94 1/8, calling them down 1 1/16. While there was busy trading going on in the bonds at those generally lower levels, most of it was in smallish odd-lots, with just a handful of round-lot transactions.

The downturn precedes Dean's scheduled report of fourth-quarter and full-year results on Wednesday; analysts are expecting Dean to show per-share earnings for the quarter of 14 cents, less than half of its year-earlier 31 cents, even though revenues are expected to have risen to $3.2 billion from $3 billion a year ago.

On a full-year basis, the analysts are looking for 79 cents per share of earnings, almost exactly half of the year-earlier $1.59, even though revenues are seen having risen to $12.9 billion from $11.16 billion a year ago.

CIT active but little changed

Also on the earnings front, CIT Group Inc.'s 7% notes due 2016 were seen actively traded; round-lot volume was over $11 million. However, the bonds were little changed on the day, with one market source seeing them at 101 bid, unchanged, while another had them up 1/16 point at 101¼ bid.

The New York-based commercial lender reported fourth-quarter and full-year 2010 results on Tuesday, recording net income of $74.8 million, or 37 cents per share, for the three months ended Dec. 31 - the fourth consecutive quarterly profit for the company, but well below the $115.8 million, or 58 cents per share, it earned in the third quarter. CIT also missed Wall Street per-share earnings expectations by about a penny or two.

Company executives meantime said on their conference call following release of the results that CIT had paid down over $7 billion of debt in 2010, and they expect continued "significant" reductions in the outstanding 7% notes due between 2013 and 2017, now around $20 billion (see related story elsewhere in this issue).

Hughes holds gains

A trader said that "you had a little activity" in Hughes Network Systems LLC's 9½% notes due 2014, which had risen by more than a point in fairly active trading on Monday on the news that the Germantown, Md.-based broadband satellite services provider had agreed to be acquired by EchoStar Corp. for $1.34 billion; including the refinancing of Hughes' debt, the total transaction is valued at $2 billion.

He saw the bonds on Tuesday trading at bid levels between 104 3/8 and 104 5/8, around where they had gone home on Monday after posting their gains on the acquisition news.

"They shot up a point [on Monday], and now they're just kind of hovering there."

Sprint, First Data active

Elsewhere, a trader said that "a lot of [Sprint Nextel Corp. bonds] traded today for some reason," although there was no fresh news out on the Overland Park, Kan.-based wireless provider.

He saw its 6% notes due 2016 having traded last at 99 1/8 bid, calling that level not really changed from Monday.

"It doesn't look like anything special," he said.

He saw Sprint's and First Data Corp.'s bonds as "the volume leaders."

By late in the session, he saw the Atlanta-based credit card transaction processing company's 11¼% notes in a range between 97½ and 98, which he called "a tad softer."

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