CIT Group, Griffon drive by; new CIT paper heavily traded; overall market seen firmer

By Paul Deckelman and Paul A. Harris

New York, Feb. 12 - The domestic high-yield primary segment came back to life on Wednesday, syndicate sources said, in contrast to Tuesday's session, which had been dominated by issuers based in Europe.

Some $1.6 billion of new fully junk-rated, dollar-denominated new paper came to market in a pair of quickly shopped deals, including $1 billion of five-year notes from New York-based commercial lender and banking concern CIT Group Inc.

The new bonds saw heavy trading, market participants said, ending the day marginally higher in the aftermarket. CIT's existing issues were also among the busier Junkbondland credits.

The day's other deal, New York-based diversified management and holding company Griffon Corp.'s upsized $600 million of eight-year paper, came to market too late in the day for any secondary action, traders said.

Amid a generally firmer market, the traders saw Tuesday's new deals from Fresenius US Finance II Inc., Ineos Group Holdings SA and Stena International SA trading at better levels.

They also saw continued busy trading in Monday's offering from Meritor Inc.

Statistical market performance measures improved for a fifth consecutive session.

CIT $1 billion drive-by

Trailing a highly active Tuesday in the primary market, the news flow moderated on Wednesday.

Two issuers brought single-tranche drive-by deals to raise a combined total of $1.6 billion.

CIT Group priced a $1 billion issue of non-callable five-year senior notes (expected ratings Ba3/BB-) at par to yield 3 7/8% in a quick-to-market transaction.

The yield printed on top of yield talk.

BofA Merrill Lynch, Credit Suisse and Morgan Stanley were the joint bookrunners for the general corporate purposes deal.

Griffon upsizes

In another Wednesday drive-by, Griffon priced an upsized $600 million issue of eight-year senior notes (B1/BB-) at par to yield 5¼%.

The deal was upsized from $550 million.

The yield printed at the tight end of the 5¼% to 5 3/8% yield talk.

Deutsche Bank ran the books for the debt refinancing.

Diamond Foods talked 7% to 7¼%

Looking toward the Thursday session, Diamond Foods, Inc. talked its $230 million offering of five-year senior notes (Caa2/CCC+) to yield 7% to 7¼% on Wednesday.

Books close at 9 a.m. ET on Thursday, and the deal is set to price thereafter.

Credit Suisse, Wells Fargo, Barclays, BMO and SunTrust are the joint bookrunners.

Norshore Atlantic sets talk

Norshore Atlantic BV talked a restructured $150 million offering of senior secured notes due Dec. 21, 2018 to price at par and yield 11% to 12%.

The maturity of the bond decreases to 4.8 years from five years.

The books are expected to close on Thursday.

The deal is shored up with covenant changes and added security features, and there are concessions to investors (see related story in this issue).

Arctic Securities ASA and ABG Sundal Collier are the joint lead managers.

CIT edges up

In the secondary arena, CIT Group's new 3 7/8% notes due 2019 were easily the most active issue of the day, with a trader seeing those bonds having firmed slightly, to 100 1/8 bid, 100 3/8 offered, from their par issue price.

He said that over $60 million of the new bonds had traded.

However, he added that "you didn't have too many traditional high-yield shops buying it" because of the sparse, un-junk-like coupon. "There was not a lot of juice there," he said.

A second trader said that "CIT didn't go anywhere," seeing the bonds up by perhaps 1/8 to ¼ point.

A third trader also pegged the bonds at 100 1/8 bid, 100 3/8 offered.

While those bonds were heavily traded, the commercial finance company's existing issues were also seen moving around in active dealings.

A trader said that its 5% notes due 2023 moved up to the 102½ bid level, before going home quoted at 102 1/8 - still a gain of more than 5/8 point, with over $12 million of the notes having traded.

He also saw its 4¼% notes due 2017 up around the 104¼ bid level, although that was little changed on the day. A market source said over $12 million of the bonds traded.

Griffon a no-show

Traders said that the day's other new deal - Griffon's 5¼% notes due 2022 - priced too late during the session for any immediate aftermarket activity.

Tuesday deals trade up

Among the new issues that came to market on Tuesday, a trader said that the Fresenius US Finance 4¼% notes due 2022 had moved up by 1/8 point on the session to 100 3/8 bid, 100 5/8 offered.

A second trader also saw the bonds 1/8 point higher, although he located them at 100¼ bid, 100¾ offered.

A third trader saw the paper get as good as 100½ bid, 100¾ offered.

The company - a financing subsidiary of the Germany-based kidney dialysis and services company Fresenius SE & Co. KgaA - priced $300 million of the notes at par. They were quoted late in the day on Tuesday around the 100 1/8 bid level.

Ineos Group Holdings' 5 7/8% notes due 2019 were seen up by ¼ point on Wednesday, at 100 7/8 bid, 101¼ offered.

A second trader saw the bonds at 100¾ bid, 101 offered.

The Swiss chemical manufacturer priced $590 million of the notes at par on Tuesday, and they were seen having moved up in the initial aftermarket dealings to around 100 5/8 bid.

Those bonds were part of a larger two-part deal totaling some €1.037 billion equivalent; the other half of the offering was a €600 million tranche of 5¾% notes due 2019 that priced at par.

Swedish shipping and energy exploration company Stena AB's 5¾% senior secured notes due 2024 were seen by a trader offered at 100 7/8.

At another desk, those bonds were quoted at 100½ bid, 100¾ offered.

Stena priced $350 million of the notes at par on Tuesday, but they came too late in the session for any kind of trading at that time.

Meritor stays busy

Going back a little further, Meritor's new 6¼% notes due 2024 were active for a third consecutive session, with a market source seeing more than $14 million of the notes having traded Wednesday, once again putting it near the top of the Most Actives list. He quoted the notes at 100 5/8 bid, up 1/8 point.

A second trader said that as much as $16 million might have changed hands, also around 100 5/8.

The Troy, Mich.-based automotive components manufacturer's quick-to-market $225 million issue has been racking up hefty volume totals ever since it priced at par on Monday, when more than $51 million traded once it was freed for secondary market dealings. The bonds rose by about 3/8 points at that time, and then tacked on another ¼ point on Tuesday, when volume totaled a still-formidable $23 million.

Monday's other deal, B Communications Ltd.'s 7 3/8% senior secured notes due 2021, continued to trade at a handsome premium to its issue price, with a trader quoting those bonds on Wednesday at 102 3/8 bid, 102¾ offered.

The Israeli telecommunications company's $800 million deal had priced on Monday at par after having been increased from an originally planned $775 million. After pricing, they jumped to around a 101½ bid, 102 offered context, and they continued to firm on Tuesday and Wednesday.

Market indicators move up

A trader characterized Wednesday's market as "rather uneventful," although he did allow that "the new and recent deals did well."

Overall, he said, "the market was pretty firm, but quiet. There were more buyers around than there were sellers."

Statistical junk-market performance indicators were predominantly higher for a fifth consecutive session on Wednesday, after having been mixed the two sessions before that.

The KDP High Yield Daily index rose for a fifth straight session, improving by 6 basis points to finish at 74.7, after climbing by 8 bps on Tuesday.

Its yield declined by 2 bps, to 5.47%, after having fallen by 3 bps on Tuesday.

And the widely followed Merrill Lynch High Yield Master II index meanwhile notched its sixth consecutive gain on Wednesday, rising by 0.121%, on top of Tuesday's 0.178% advance.

The gain raised its year-to-date return to 1.442%, its second consecutive new high for the year so far, up from its previous zenith of 1.32%, set on Tuesday.

The index's yield to worst declined to 5.505% from Tuesday's 5.55% and from last Tuesday's 5.735%, its peak level for the year so far. Those levels remained well above the low yield for the year, 5.386% on Jan.22.

Its spread to worst came in to 416 bps over comparable Treasuries, versus 423 bps on Tuesday and last Tuesday's 444 bps, the wide point for the year so far. Those levels remained well above the tight spread for the year, 398 bps, on Jan. 22.

However, the Markit Series 21 CDX North American High Yield index was unchanged on the day at 107½ bid, 107 5/8 offered, after having gained 5/16 point on Tuesday.

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