Hertz mega-deal emerges from quiet primary; ATP active; Nokia gains on Apple verdict

By Paul Deckelman and Paul A. Harris

New York, Aug. 27 - Monday was another quiet day in Junkbondland's primary arena - but unlike the past several sessions that only saw European deals pricing, there was some activity on the domestic side of the fence with syndicate sources indicating that Hertz Global Holdings Inc. will soon bring a big bond deal to replace the nearly $2 billion in bridge financing it arranged to fund its pending acquisition of Dollar Thrifty Automotive Group Inc.

Although that bond deal is not likely to come before late September.

For a third straight session, there was a pricing out of Europe. Stora Enso was heard to have completed a two-part SEK 1 billion offering.

Another Finnish company was making headlines in the secondary market, as Nokia Corp.'s two bond issues were each seen firming smartly in active trading, along with the company's shares, after an analyst suggested that Friday's news of Apple Corp.'s courtroom victory over rival Samsung in a patent infringement case could be good news for Nokia.

Elsewhere in the secondary market, ATP Oil & Gas Corp.'s bonds once again led all other names in volume, but the company's price was little changed despite all of that activity.

There also was no price change seen in Navistar International Corp.'s bonds, investors showing little response to Monday's abrupt announcement that embattled chairman, president and chief executive officer Daniel Ustian had resigned, effective immediately.

Secondary market performance indicators were mixed on the session.

Quiet primary

The high-yield primary market remained quiet Monday, as expected, with no issues pricing and none announced.

However, behind the scenes syndicate bankers worked to pave the way for a post-Labor Day new issue market, which is expected to be busy.

Estimates for $20 billion of September issuance were predicted Monday from three officials from three different high-yield syndicates.

One of the three gave $20 billion as the low end of an estimated $20 billion to $25 billion range.

However, even if September came in at the high end of that range it would end up short of 2012's monthly issuance average, which is $26.2 billion, according to data compiled by Prospect News.

Pressed for a forecast for 2012 all-in high-yield issuance volume, one of these officials said $250 million.

That total would bring 2012 up short of both 2011's $255.2 billion and 2010's record-setting $291.8 billion.

Another syndicate source forecasted that from the time the primary market resumes following the upcoming Labor Day holiday weekend (Sept. 4), to the end of the year, the market could see $80 billion of additional issuance.

Given that there has been $208.8 billion of issuance year-to-date, 2012 would surpass the 2011 total, but still come up short of 2010's all-time record.

Staring at September

As the pre-Labor Day week got underway, there were no announcements regarding the early September new-issue market.

However, by means of insight and intuition, sources came up with a couple of names.

Lin Television Corp. could be one of the early issuers out of the gate with a $265 million offering of senior notes via J.P. Morgan, one sellsider said.

The interest rate on Lin's Libor plus 650 bps bridge loan, backing the purchase of assets of network affiliates owned by New Vision Television, is due to step up soon, the source said, and added that the company will be keen to take out the bridge with bonds so it does not have to pay the higher rate.

Another name that came into play Monday was Hertz Global Holdings, which is expected to hit the leverage markets in late September or early October with $1.95 billion of new paper backing its acquisition of Dollar Thrifty Automotive Group Inc.

A $1.95 billion bridge loan, which the company announced during a Monday conference call, will be taken out with high-yield bonds and an incremental term loan.

While the exact breakdown of the new-debt sizes was not disclosed, officials remarked during the call that the majority of the financing will be done in bonds, but a piece will be done as a term loan within the current credit agreement's Most-Favored-Nation language.

Barclays, Bank of America Merrill Lynch and Deutsche Bank are the lead banks on the financing.

Existing Hertz bonds off

News that Hertz will be doing a big new bond deal late next month or early in October to replace its bridge funding for the Dollar Thrifty acquisition pushed the Park Ridge, N.J.-based car-rental giant's existing paper a little lower.

A market source said that Hertz Corp.'s 6¾% notes due 2019 were off by a 1/2-point on Monday, at 105½ bid. Volume was better than $6 million on a round-lot basis.

None of the company's other bonds saw any size trading and one or two issues saw absolutely no trading of any kind.

Recent deals lightly traded

A trader said that he had seen no trace at all of activity in any of the new junk issues that recently priced.

A second opined that those offering "were holding their gains."

For instance, he saw VWR Funding Inc.'s 7¼% notes due 2017 "still trading in that 1011/4- to 1013/4-area. So none of them were losing ground from where they were, but there was not a lot to talk about Monday.

"Nothing stood out."

At another desk, a trader saw the Radnor, Pa.-based laboratory supplies company's $750 million quick-to-market issue - which priced at par a week ago - up 1/8-point, at 101 5/8 bid, 101 7/8 offered.

The trader also saw a half-point gain in Sprint Nextel Corp.'s 7% notes due 2020, pegging them at 102¼ bid, 103¼ offered.

At another shop, the Overland Park, Kan.-based No. 3 wireless carrier's quickly shopped $1.5 billion issue was about unchanged at 102½ bid, on low volume of only about $3 million.

ATP activity continues

Away from the new deals, ATP Oil & Gas' 11 7/8% second-lien senior secured notes due 2015 were the busiest junk bonds for a sixth consecutive session Monday, although the bonds were seen pretty much holding steady, their recent slide apparently bottoming out for now.

A trader said the recently bankrupt Houston-based offshore energy company's beleaguered bonds "held to the same levels where they've been."

A second trader said the issue was unchanged or perhaps down 1/8-point, at 26¼ bid.

He saw more than $30 million of the bonds changing hands, tops among the purely junk-rated issues.

Those notes, which slid for months amid the company's mounting and well-publicized problems, were seen jumping around all last week, on market-leading heavy volume, even amid relatively less busy activity elsewhere.

The catalyst for the activity was the company's Chapter 11 filing with the U.S. Bankruptcy Court in Houston late in the day Aug. 17; after that filing, the bonds shot up by several points to about 31½ bid last Monday, the first full trading session after that filing. More than $75 million traded at that time.

On Tuesday, the bonds mostly held to those levels before edging up later in the session to end above 32 bid.

However, on Wednesday after their big burst of upside movement in immediate response to the bankruptcy filing, the bonds slid by about 4 points to about the 28½ level and continued retreating on Thursday, falling to a 271/4- to 273/4-context.

And by Friday, the bonds were seen dipping below 261/2.

Nokia does nicely

A trader said that ATP's bonds were "pretty much it, volume-wise."

To prove his point, the trader noted that the next most active issue that he saw, Finnish cell phone manufacturer Nokia's 5 3/8% notes due 2019 were up 2½ points, to 86 bid, on volume of $17 million.

He also saw its 6 5/8% notes due 2039 gaining 2¼ points, to close at 81¼ bid, on volume of $12 million.

The Nokia bonds rose in tandem with the company's New York Stock Exchange-traded shares, which shot up by more than 10% during the session, before finally going home up 17 cents, or 5.52%, ending at $3.25. Volume of 86.99 million shares was 90% more than its usual daily turnover.

The Nokia bonds and shares rose in the wake of last Friday's decision by a federal court jury to award $1 billion to Apple Corp. over claims that Samsung Electronics Co. poached some of Apple's patented iPhone technology for Samsung's rival Android-based phones.

In the wake of that decision, which was clearly a setback for Samsung, tech analyst Matthew Robison of Wunderlich Securities said in a research note to clients that the verdict could slow or postpone Android innovation, which Robison said would be a good thing for Samsung competitors like Nokia, which bases its phone technology on Microsoft Corp.'s Windows platform.

Robison also does not believe that Apple will sue makers of Windows-based phones like Nokia on the same patent infringement grounds it sued Samsung on, noting that Apple and Microsoft have reached agreements on some patents.

"This implies a significant positive shift in application-developer sentiment toward Windows Phone," Robison said.

Navistar a no-show

A trader said he saw little movement and little volume in Navistar International's 8¼% notes due 2021. He pegged the bonds at 953/4, calling that unchanged, on volume of just $2 million.

Those Naivstar bonds also traded around that level Friday, on turnover of $13 million, one of the most active issues that session.

Those bonds saw increased volume - though no movement - following the late-Thursday news that the U.S. Defense Department dropped Navistar from consideration as a possible bidder on a big new contract to supply the Pentagon with a new generation of military vehicle.

Analysts said the contract was important to Navistar, which was having great trouble selling its heavy-duty engines to civilian buyers due to hassles with federal environmental officials, causing the company to decide to scrap the whole engine project. The analysts theorized that Navistar might use the anticipated revenues from its military sales to tide the company over while it tries to get its engine business back up to speed.

On top of that bad news, the company announced today that Daniel Ustian - blamed by many shareholders for the engine fiasco -resigned as president, chairman and chief executive officer effective immediately. The Lisle, Ill.-based Navistar announced that it hired Lewis Campbell, the former chairman, president and CEO of Textron Inc., as its interim CEO and executive chairman.

While the bonds went nowhere, the company's NYSE-traded shares rose 34 cents, or 1.48%, to end at $23.32. Volume of 2.4 million shares was actually down about 25% from the norm.

Indicators turn mixed

Statistical indicators of junk-market performance were mixed Monday for the fourth time in five sessions.

The Markit Group CDX North American Series 18 High Yield Index rose by 1/8-point on for a second straight session to close at 98 3/16 bid, 98 5/16 offered.

But the KDP High Yield Daily Index, which on Friday broke out of a two-session slump - was back on the downside Monday, losing 2 basis points to end at 73.86. That contrasted with its 6 bps rise Friday.

Its yield was unchanged at 6.22%, after coming in by 1 bp on Friday.

And the widely followed Merrill Lynch U.S. High Yield Master II Index made it a lucky seven sessions in a row that it posted gains, finishing up by 0.102% on Monday, on top of Friday's 0.014% advance.

That lifted its year-to-date return to 10.256%, a fifth consecutive new high for the year, eclipsing the old peak level of 10.143%, which was just set Friday. The index is now at its highest level since the last session of 2010, when it closed that year with a 15.19% return.

Its yield-to-worst, meanwhile, tightened to 6.71%, a new low for the year, coming in from the previous low point, the 6.737% seen Friday.

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