International Lease Finance, Clearwire, Digicel drive-bys pace primary; movie bonds trade up

By Paul Deckelman and Paul A. Harris

New York, Dec. 2 - For a second consecutive session, a revived high-yield primary market saw more than $2 billion of new paper price, with a $1 billion offering again leading the way. This one came in the form of International Lease Finance Corp.'s quickly shopped 10-year deal. TransDigm Inc.'s sharply upsized eight-year megadeal had set the pace for Wednesday's nearly $3 billion borrowing binge.

Meanwhile, the latter company's new notes, which had struggled in the aftermarket on Wednesday after pricing at par, were seen by traders to have managed to push up modestly on Thursday.

Two other "drive-by" deals also priced during the session from the telecom sector, with Kirkland, Wash.-based Clearwire Communications LLC - a broadband provider subsidiary of Sprint Nextel Inc. - doing a $675 million two-part offering of secured paper, one tranche being an add-on to some existing notes, while Jamaica-based wireless operator Digicel Group Ltd. sold a $300 million add-on to its existing seven-year notes.

The only deal to price off the forward calendar was NAI Entertainment Holdings, LLC, which came to market with a slightly upsized $400 million issue of seven-year secured notes. There was wild applause in the market for the Norwood, Mass.-based parent of the National Amusements Theatres movie-house chain's new deal, which traded up smartly after it broke. And rival cinema operator AMC Entertainment Inc.'s new 10-year notes, which priced too late on Wednesday for any secondary dealings, also firmed by several points when those bonds began trading around on Thursday.

The aftermarket also saw hefty gains for the Digicel deal and at least respectable improvement in the new ILFC paper.

Away from the new-deal world, Junkbondland saw a second straight day of solid gains in most names. The star of Wednesday's secondary market, Realogy Corp., was seen again better by several points on news of its exchange offer.

Junk funds lose $723 million

But as the day's trading was winding down, market participants familiar with the weekly AMG high-yield mutual fund flow numbers compiled by Lipper/FMI - considered a reliable barometer of overall market liquidity trends - said that in the week ended Wednesday, $723 million more left those weekly reporting funds than came into them.

It was the third consecutive outflow following the $86.97 million cash loss seen the previous week ended Nov. 24, which oddly had followed another $723 million hemorrhage in the week ended Nov. 17.

According to a Prospect News analysis of the figures, it was the first time back-to-back-to-back outflows over three straight weeks have been observed since the week ended June 9, which was actually the final week of an outflow binge that went on for six weeks dating back to early May.

Over the latest three weeks, the losses from the funds have totaled some $1.532 billion, according to the analysis.

The sudden outflow outbreak had been pretty much expected by many junk market players, given the way the market has clearly struggled since returning from the Veterans' Day holiday, although the strong surge seen on Wednesday gave some hope that there would not be an outflow this week - or at least not such a large one.

The three weeks of outflows followed and abruptly halted a 10-week winning streak, stretching from early September through the week ended Nov. 10, during which time net inflows to the funds totaled some $5.639 million, the analysis indicated.

The latest week's outflow brought the year-to-date cumulative total for the weekly reporting funds down to some around $10.9 billion from the previous week's $11.624 billion and down as well from the $12.434 billion recorded in the Nov. 10 week, the peak inflow level for 2010, according to the analysis.

Cumulative fund-flow totals may be revised upward or downward and could include unannounced revisions and adjustments to figures from prior weeks.

Inflows have now been seen in 33 out of the 48 weeks since the beginning of the year, while there have been 15 outflows, the analysis indicated.

EPFR sees $639 million outflow

Another fund-tracking service - Cambridge, Mass.-based EPFR Global, whose methodology differs somewhat from AMG - meantime reported a $639 million outflow in the latest week, which the service called the biggest cash loss since an $816 million hemorrhage seen in the week ended June 2.

That followed a modest inflow seen last week, which in turn had come after a $564 million cash loss in the Nov. 17 week, which, like the AMG figure, broke a stretch of 10 straight weeks during which inflows had been seen.

Reflecting the difference between the ways AMG and EPFR calculate their respective fund-flow totals, although the two services' numbers generally point toward the same trends - EPFR includes results from certain non-U.S. domiciled funds as well as the domestic funds - its year-to-date net inflow total now stands at some $26 billion, down from the peak level for the year of $27.5 billion seen in the Nov. 10 week.

Analysts say the continued flow of fresh cash into Junkbondland - and the mutual funds represent but a small, though quantifiable, percentage of the total amount of money coming in - has fueled the sustained new-deal borrowing binge seen this year and last, as well as the robust secondary market.

ILFC $1 billion

The primary market saw four high-yield issuers price $2.375 billion of junk.

Although issuance pushed north of the $2 billion-mark for the second straight session, after beginning the week quietly amid turbulence in the capital markets, the junk market received cautionary news late in the day.

One syndicate banker chalked up the most recent $723 million outflow to profit-taking.

A high-yield mutual fund manager suspects that some of the cash lately flowing out of high yield is moving into equities, adding that the post-Thanksgiving week was rife with economic data suggesting that the U.S. economy is indeed in recovery, which would make stocks more attractive.

In Thursday's primary market action, International Lease Finance, the aircraft leasing unit of American International Group, priced a $1 billion issue of 8¼% 10-year senior notes (B1/BB+) at 99.16 to yield 8 3/8%, at the tight end of the 8½% area price talk.

Barclays Capital, Deutsche Bank Securities and J.P. Morgan and UBS Investment Bank were the joint bookrunner for the quick-to-market deal.

Proceeds will be used for general corporate purposes, including debt repayment.

Clearwire drives by

Clearwire priced $675 million of secured notes in two tranches late Thursday.

The company priced a $175 million add-on to its 12% first-priority senior secured notes due Dec. 1, 2015 (B2/CCC+) at 105.182 to yield 10 3/8%.

The yield printed on top of the price talk.

Clearwire also priced a $500 million tranche of seven-year second-priority senior secured notes (Caa3/CCC-) at par to yield 12%, at the tight end of the 12% to 12¼% price talk.

J.P. Morgan Securities LLC, Bank of America Merrill Lynch and Deutsche Bank Securities were the joint bookrunners for the quick-to-market deal.

The Kirkland, Wash.-based wireless broadband services provider will use the proceeds to provide working capital and for general corporate purposes.

National Amusements tight

Meanwhile, National Amusements, Inc. priced an upsized $400 million issue of seven-year senior secured notes (B1/BB) at par to yield 8¼%, at the tight end of the 8¼% to 8½% price talk.

Again, Barclays Capital ran the books for the issue, which was upsized from $390 million.

The Norwood, Mass.-based privately held media and entertainment company will use the proceeds to refinance its credit facility.

The deal was three-times to four-times oversubscribed, according to a high-yield portfolio manager who was cut back on allocations.

Digicel taps 8¼% notes

Jamaica's Digicel priced a $300 million add-on to its 8¼% senior notes due 2017 (B1/) at 102.75 on Thursday, resulting in a 7.544% yield.

The reoffer price came on the rich end of price talk that was set at 102.50, plus or minus 0.25 points.

Credit Suisse, Citigroup, J.P. Morgan Securities LLC, Deutsche Bank Securities and Barclays Capital were the joint bookrunners for the quick-to-market general corporate purposes deal.

American Tower split-rated

In the crossover market, American Tower Corp. priced an upsized $1 billion of split-rated 4½% seven-year senior notes (Baa3/BB+/BBB-) at a spread of Treasuries plus 215 basis points.

The size was increased from $500 million at the launch. The notes were whispered in the 230 bps area and then talk was revised to the 225 bps area. The deal priced tighter than that.

The notes priced at 99.921 to yield 4.512%.

Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., J.P. Morgan Securities Inc. and RBS Securities Inc. were bookrunners.

Citadel downsizes, sets talk

Citadel Broadcasting Corp. downsized its senior notes offer to $400 million from $500 million and shifted $100 million of proceeds to its bank loan on Thursday.

The Las Vegas-based radio company talked the eight-year notes (Ba3/BB-) with a 7¾% to 8% yield.

The deal is set to price on Friday.

J.P. Morgan Securities LLC and Credit Suisse Securities are managing the sale.

Talking the deals

The Friday session in the primary figures to be a busy one.

In addition to Clearwire and Citadel, CDW Corp. talked its $300 million offering of eight-year senior secured notes (B2/B-) with an 8½% area yield.

J.P. Morgan Securities LLC, Deutsche Bank Securities Inc., Barclays Capital Inc. and Morgan Stanley & Co. Inc. are the joint bookrunners.

Darling International Inc. talked its $250 million offering of eight-year senior notes (B2/B) with an 8½% to 8¾% yield.

J.P Morgan Securities LLC and Goldman Sachs & Co. are managing the deal.

Boardriders SA, a wholly owned European subsidiary of Quiksilver, Inc., talked its €200 million offering of seven-year senior notes (Ba3/B) with an 8¾% to 9% yield.

The deal, which is being transacted on the syndicate desk in London, is expected to price on Friday.

Bank of America Merrill Lynch and UBS Investment Bank are the joint bookrunners.

And Mark IV Industries Inc. talked its €200 million offering of seven-year senior secured notes (Ba2/BB-) with a 9% area yield.

J.P. Morgan Securities LLC and Deutsche Bank Securities Inc. are leading the deal.

Trinidad Drilling starts Friday

Meanwhile, Canada's Trinidad Drilling Ltd. will begin a roadshow on Friday for its $450 million offering of eight-year senior notes.

The deal is expected to price late in the week ahead.

Wells Fargo Securities is the left bookrunner for the debt refinancing deal. RBC Capital Markets and TD Securities are joint bookrunners.

Cinema bonds get two thumbs up

When the new NAI Entertainment Holdings seven-year secured notes were freed for aftermarket dealings, traders saw the movie theater chain and broadcasting company's new paper getting rave reviews from investors.

One saw the bonds having firmed to 102¾ bid, 103¼ offered, well up from their par issue price earlier in the session, while a second saw them even a little better than that, at 103 bid, 103¼ offered.

At another desk, a trader queried a little later on saw the bonds as having come off those peaks, but still sporting a respectable 2-point gain on the day at 102 bid, 103 offered.

And playing on the same bill during Thursday's session were the new bonds of NAI's Kansas City, Mo.-based rival, AMC Entertainment, which brought a quickly shopped $600 million offering of 9¾% senior subordinated notes due 2020 to market on Wednesday, pricing them at par. Those bonds priced too late in the day for any trading that day, but broke into the aftermarket on Thursday and promptly moved up.

A trader said that "they were fairly active." He noted that "a lot" of the bonds were trading around at bid levels between 101¾ and 101 7/8. Several traders heard the offering side as good as 102.

TransDigm trades better

Another Wednesday deal seen prominently in Thursday's market was Cleveland-based aircraft systems maker TransDigm's $1.55 billion behemoth of an offering of 7¾% notes due 2018. Those bonds had priced at par and, after that, struggled just to stay at that level, with one trader on Wednesday declaring that they "couldn't get out of their own way."

On Thursday, said another trader, the new deal, which had been nearly doubled in size from the $780 million originally announced, continued to just tread water early on and "actually, they did trade under par" for a while.

However, he said that "then they got cleaned up this morning and began to move up." He saw the bonds going home at 100½ bid, 100 7/8 offered. Another trader saw the new bonds at 100½ bid, 100¾ offered and yet one more saw them get as good at 100¾ bid, 101 offered.

Other Wednesday deals little traded

Among other bonds which had priced on Wednesday, a trader saw BBHI Acquisition LLC/Bresnan Broadband Holdings, LLC's new 8% notes due 2018 quoted during the morning at 101 7/8 bid, although he did not see any other markets in the bonds.

The Purchase, N.Y.-based cable operator, whose bonds will help finance the company's acquisition by larger sector peer Cablevision Systems Corp, priced its $250 million issue on Wednesday at par, and the paper was seen having moved up later that session to 100¾ bid, 101¼ offered.

A trader meantime saw Bellevue, Wash.-based utility operator Puget Energy Inc.'s new 6½% notes due 2020 at par bid, 101 offered, only up slightly from the 99.997 level at which the upsized $450 million deal had priced on Wednesday and actually down from peak levels above par where the bonds had gone out during that previous session.

"I didn't see much doing in them," another trader said. "A couple of people asked us about it." He saw some offers around 1001/2, but no bid side.

AIG unit gains altitude

Back among Thursday's deals, a trader said that "lots" of International Lease Finance Corp. 10-year bonds were trading after the megadeal was freed for secondary dealings and quoted the Century City, Cal.-based aircraft leasing company's deal at 101 bid, 101 1/8 offered, a nice break off their 99.16 pricing level.

At another desk, a trader quoted the AIG subsidiary's new deal at 100 5/8 bid, 101 1/8 offered.

New Digicel does better

When the new Digicel Group seven-year notes came to market, traders saw the Caribbean and South Seas wireless provider's new bonds better.

A trader quoted the issue as having gotten up to 103¼ bid, 103¾ offered, after the add-on issue had earlier priced at 102.75.

Junk market passes on American Tower

The split-rated (Baa3/BB+/BBB-) $1 billion drive-by deal from American Tower drew mostly yawns from junk market participants, given the very un-junk-like 4½% coupon, which the Boston-based communications antenna tower operator's bonds carried.

"There was nothing going on in them in our market," one trader said, suggesting that the deal played mostly to high-grade accounts.

A second trader echoed that, quoting the bonds as having tightened to a spread of 211 basis points on the bid side, 207 bps on the offered side, after pricing at 215 bps over comparable Treasuries earlier in the day.

Secondary indicators strong again

Away from the new-deal realm, a trader saw the CDX North American Series 15 HY index shoot up by 1 1/8 points on Thursday to close at 101 bid, 101 1/8 offered - its first finish above par since Nov. 22. That followed on the heels of an even more robust 1 3/8-point jump recoded Wednesday, as the junk market pushed strongly higher in tandem with an equities surge.

The KDP High Yield Daily index meantime zoomed by 19 basis points for a second straight session on Thursday, ending at 73.58. Its yield came in by 6 bps to 7.52% after Wednesday's 5 bps tightening.

The Merrill Lynch High Yield Master II index rose by 0.226% on Thursday after having gained 0.172% on Wednesday. That pushed its year-to-date return up to 13.647% from Wednesday's 13.392%, though it was still down considerably from the 2010 peak level of 15.602% recorded on Nov. 9.

Advancing issues topped decliners for a second consecutive session on Thursday, by around the same roughly seven-to-six margin seen on Wednesday.

Overall activity, represented by dollar-volume levels, fell by 10% on Thursday after having risen by 11% on Wednesday from the previous session's levels.

A trader said that the overall market was "a little bit better, but not hugely better," noting that his favorite bellwether issue - Franklin, Tenn.-based hospital operator Community Health Systems Inc.'s 8 7/8% notes due 2015 - was perhaps a ¼ of a point firmer on the day, at 105½ bid.

Among other widely followed junk barometer issues, a trader said that Motors Liquidation Co.'s 8 3/8% bonds due 2033 - the benchmark bonds issued by the "old" General Motors Corp. - were unchanged on the day at 32½ bid, 33½ offered.

He meantime saw GM domestic arch-rival Ford Motor Co.'s 7.45% bonds due 2031likewise steady at 108½ bid, 109½ offered. He had seen both of those credits up more than a point on Wednesday, helped by the combination of a buoyant overall junk market and the news of November auto-sales gains versus year-earlier levels - 20% for Ford and 12.2% for GM.

Realogy gaining more ground

Among other specific issues, Realogy Corp.'s bonds continued to trade actively, though "definitely not as much as [Wednesday]," a trader said just one day after the company announced a debt-for-debt exchange.

The trader saw the 10½% notes due 2014 gaining another point to 94½ on about $25-odd million traded. That was on top of the 7 points earned on Wednesday. The 12 3/8% notes due 2015 were meantime up "almost 2 [points]" at 923/4.

At another desk, a trader called the 10½% notes 1½ points better at 943/4.

Another junk trader pegged the 12 3/8s at 91½ bid, 92½ offered, up 1½ points, while the 101/2s were up by a par at 94 bid, 95 offered. He also saw the company's 11%/11¾% 2014 toggle notes at 94-96, calling them "up a couple" of points

On Wednesday, the Parsippany, N.J.-based real estate services company announced it would exchange three series of its notes - the 10½% notes, the 11%/11¾% notes and the 12 3/8% notes - for new senior notes or new convertible debt. The company said the offer was being done in an effort to "provide the company with a more flexible capital structure through the extension of maturities of its existing notes and by giving eligible holders who receive convertible notes the ability to exchange debt for equity in the future."

Realogy is also soliciting consents from noteholders to remove "substantially all" restrictive covenants and certain default provisions from the existing notes.

The company has already received support from investors such as Paulson & Co. Inc. and Apollo Management VI. Those two investors alone hold about $1.95 billion of notes.

Both Moody's Investors Service and Standard & Poor's cut Realogy's rating after the news, deeming the exchange a default.

Stephanie N. Rotondo contributed to this report.

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