Giant CIT drive-by deal closes out July, trades firmer; Jabil prices; West slates bond issue

By Paul Deckelman and Paul A. Harris

New York, July 31 - The high-yield primary sphere closed out the month of July on Tuesday with one of the biggest deals of the year, as commercial lender CIT Group Inc. priced a quickly shopped $3 billion offering of five- and 10-year notes.

It was believed to have been the biggest junk bond offering since late March, when chemical maker LyondellBassel Industries NV also did a $3 billion two-part deal - and only CIT's own $3.25 billion two-parter back in early February was bigger.

Tuesday's deal priced late in the session, so aftermarket trading was limited and had a firmer tone.

Overshadowed by the CIT megadeal, electronics manufacturer Jabil Circuit Inc. came to market with a $500 million offering of 10-year notes. Those bonds appeared too late for any kind of aftermarket dealings.

Monday's $300 million add-on deal from HD Supply Inc. was quoted a little higher.

Away from issues actually pricing, the forward calendar gained a name as telecommunications services provider West Corp. was heard by syndicate sources to be readying a $250 million transaction.

In the secondary market, activity was seen as relatively thin and featureless, although several names did rise, including SuperValu Inc., following Monday's ouster of its chief executive officer, and Nokia Corp.

Statistical indicators of junk market performance were mixed for a second consecutive session.

CIT prices $3 billion

Crossover investors kept busy during the Tuesday session.

Two companies brought a total of three tranches of junk, raising a total of $3.5 billion.

All three tranches came with investment-grade-style executions.

CIT Group priced $3 billion of non-callable senior notes (existing ratings B1/BB-) in two tranches.

The deal included a $1.75 tranche of five-year notes, which priced at par to yield 4¼%. The notes launched at 4¼%, 12.5 basis points tighter than price talk that had been set in the 4 3/8% area.

CIT also priced a $1.25 billion tranche of 10-year notes at par to yield 5%. The 10-year notes launched at 5%, again 12.5 bps tighter than price talk in the 5 1/8% area.

The order book for the combined two tranches built to $5 billion, according to a high-yield mutual fund manager, who added that the tranche sizes reflected the demand, the greater amount of which was focused on the five-year notes.

The investment-grade-style execution notwithstanding, there seemed to be more-high yield investors than high-grade investors in the deal, the manager said.

Joint bookrunner Bank of America Merrill Lynch will bill and deliver for the debt refinancing deal. Deutsche Bank, Goldman Sachs and J.P. Morgan were also joint bookrunners.

Jabil Circuit 10-year deal

Elsewhere, Jabil Circuit priced a $500 million issue of 4.7% 10-year senior notes (Ba1/BB+/BBB-) at 99.992 to yield 4.7%.

The deal had been launched at a size of $500 million with a yield of 4.7%

"That's a yield for a quality credit, versus comparables in high-grade land," a trader who focuses on the crossover space asserted, adding there were a lot of high-yield investors in the deal who were not extensively experienced with crossover names.

RBS, Citigroup, J.P. Morgan and Bank of America Merrill Lynch were the joint bookrunners for the debt refinancing and general corporate purposes deal.

Ford crossover deal

Ford Motor Credit Co. LLC priced $750 million of split-rated 2½% notes due January 2016 (Baa3/BB+/BBB-) at a 230 basis points spread to Treasuries.

The spread came on top of guidance.

The deal came a lot tighter than most people imagined, said the crossover traders, who added that because of the Baa3 rating from Moody's Investors Service, there is a whole new high-grade investor base that wants to own Ford.

Some people were expecting a bigger size than $750 million, the trader added.

However, a syndicate source said that there was never any question of upsizing the deal and added that the order books were two-times oversubscribed.

Barclays, Citigroup, Goldman Sachs, Morgan Stanley and RBC were the bookrunners.

A look at the calendar

Apart from the deals that priced on Tuesday there was little news. No roadshow starts were announced.

Three dollar-denominated deals are on the calendar as business expected to clear before Friday's close.

Price talk is expected on Wednesday on Crescent Resources, LLC's $325 million offering of seven-year senior secured notes (confirmed Caa2/expected B+) via Jefferies, Credit Suisse and J.P. Morgan.

TRAC Intermodal LLC is roadshowing its $325 million offering of seven-year senior secured second-lien notes (B3/B-), which is also expected to price late in the present week via J.P. Morgan, Bank of America Merrill Lynch, Deutsche Bank, DVB Bank, RBC and Wells Fargo.

And Peninsula Gaming announced is in the market with a $350 million offering of 5.5-year senior notes (Caa1//) via Bank of America Merrill Lynch, J.P. Morgan, Deutsche Bank and UBS.

CIT seen firmer

When the new CIT Group bonds were freed for secondary dealings, a trader quoted both halves of the New York-based commercial lender's drive-by megadeal at par bid, unchanged from their issue price.

At another desk, a trader saw the $3 billion bond offering creep up slightly from issue, with both the five-year piece and the 10-year tranche at 100 1/8 bid, 100 3/8 offered.

Jabil Circuit's new 4.7% notes due 2022 were said to have priced too late in the session for any kind of aftermarket activity in the St. Petersburg, Fla.-based electronics manufacturer's $500 million deal.

HD heads higher

A trader said that HD Supply's new 8 1/8% senior secured first-priority notes due 2019 trading at 109 bid on Tuesday, saying he had seen that level "a couple of times."

The Atlanta-based wholesale distributor of tools and building products priced its quick-to-market $300 million add-on offering at 107.5 on Monday to yield 6.525%, after upsizing it from an originally shopped $200 million.

The company had sold $950 million of those notes back in April as part of a $1.625 billion two-part deal.

Toys 'R' Us holds steady

A trader said that Toys 'R' Us, Inc.'s new 10 3/8% senior notes due 2017 were holding steady at 100¾ bid on Tuesday - the same level to which those bonds had moved on Monday.

The Wayne, N.J.-based toy, game and children's product specialty retailer's quickly shopped $450 million deal priced late in the session last Thursday, after upsizing it from an originally announced $350 million.

The bonds priced at 99.033 to yield 10 5/8%, then moved up to around a 100½ bid level on Friday and to 100 ¾ bid on Monday.

Secondary names scattered

Away from the new deals, statistical indicators were mixed for a second straight session on Tuesday. As had been the case on Monday, the cash market signposts held their own but derivatives retreated.

A trader saw the Markit Group CDX North American Series 18 High Yield Index fall by a half-point Tuesday to end at 96 5/8 bid, 96 7/8 offered, after having dipped by 1/8 point Monday.

But the KDP High Yield Daily Index scored its fourth straight advance on Tuesday, rising by 9 basis points to end at 73.69, after zooming by 17 bps on Monday. Its yield contracted for a fifth straight session Tuesday, coming in by 6 bps to 6.26%, after having declined by 5 bps on Monday.

A trader said that outside of waiting around for the CIT bonds to price and then for the new bonds to start trading, "that was about it."

He saw some scattered activity in the secondary market, but on "pretty light" volume and with no overriding theme or conviction, with some bonds up and others off.

SuperValu strengthens

The trader did see some follow-through dealings in SuperValu, whose bonds had been higher on Monday along with its shares, on the news that the troubled Eden Prairie, Minn.-based supermarket operator had fired its president and chief executive officer, Craig R. Herkert, who was blamed by some investors for the company's recent troubles.

The trader said that SuperValu's 8% notes due 2016 gained three-quarters of a point, to 86½ bid, on volume of about $10 million.

He saw the company's 7½% notes due 2014 up by three-eighths of a point, at 95 3/8 bid, on volume of $5 million.

On Monday, the 8s had risen some 1¾ points, though only on volume of about $8 million, while the 71/2s had been a half-point better, though only $4 million traded.

At another desk, a second trader also saw the 8% notes trading between 85 and 86 during the day and going out at 86½ bid, estimating volume at $11 million, but he opined: "That wasn't that big a deal."

He said that the 8s "was the only issue [among SuperValu's bonds] I saw in real size trading - and that wasn't even that much."

However, yet another market participant said that the 7½% notes, trading at 96 5/16 bid, were up by more than 1¾ points on the day.

Besides making Herkert walk the plank, with chairman Wayne Sales assuming both of Herkert's old positions, SuperValu also reiterated its previously announced plans to lower prices in order to lure shoppers back to its stores and continue to review possible strategic options.

Senior analyst Evan Mann of the Gimme Credit independent investment advisory service said in a research note that the company's moves suggest "a growing urgency to pursue the possible sale of the company or divestiture of select assets."

He added that until there is some "clarity on 'strategic options' and related credit implications, we maintain our rating of underperform" on the company's bonds.

Over on the equity side of the aisle, SuperValu's New York Stock Exchange-traded shares, which were up more than 12% on Monday, with volume increased by one third from its usual levels, continued to gain on Tuesday, rising by 23 cents, or an additional 10.27%, to end at $2.47. Volume of 19 million shares was about double the norm.

Nokia makes some noise

Elsewhere, a trader said: "Nokia is something that's starting to trade more." He saw the Finnish cellphone producer's 5 3/8% notes due 2019 trading between 78 and 79 on Tuesday, with most of the trades going off within a 78-to-78½ context.

He saw $15 million of the bonds changing hands, making the issue one of the busier performers on the day.

He said that the 78ish finish was up by around a point higher on the day, "so there's a name to add to the list."

Another market source saw those same bonds going out at 78¼ bid, but called it a better than 21/2-point gain.

Nokia was said to have been given a boost on the Tuesday news that management had given a clear sign that it has confidence in its company. CEO Stephen Elop and several board members reported purchasing 1 million shares of stock.

"The purchases underscore the board and our leaders commitment to Nokia and confidence in our future," Nokia spokeswoman Susan Sheehan said in an email to The Wall Street Journal.

MEG Energy rises

Elsewhere, MEG Energy Corp.'s 6 3/8% notes due 2023 were trading stronger, seen going out at 102 bid, 103 offered on Tuesday, a trader said.

The Calgary, Alta.-based oil sands development company sold the notes at par on July 16.

It plans to use the proceeds for general corporate purposes, including funding capital investments.

Stephanie N. Rotondo and Cristal Cody contributed to this report

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