RSC prices, market awaits Colt, Cott, Netflix; Virgin slates; CIT up on filing, Ford post-numbers

By Paul Deckelman and Paul A. Harris

New York, Nov. 2 - The junk bond market kicked off a new trading month Monday as RSC Equipment Rental Inc. successfully priced a quickly-shopped $200 million offering of 10-year notes. The Scottsdale, Ariz.-based industrial and construction equipment rental company's deal priced way too late in the day for any kind of aftermarket activity.

The primaryside meantime was setting itself up for a busy day on Tuesday, as price talk emerged on a trio of deals that are expected to price during that session - from Cott Beverages Inc., Netflix, Inc. and Colt Defense LLC - syndicate sources saw the Connecticut gun manufacturer's deal moved up from the originally anticipated Wednesday pricing.

Meantime, Viasystems Group Inc. was heard by the sources to be hitting the road starting Tuesday to market its $200 million offering of senior secured notes.

And Virgin Media Inc. announced that its Virgin Media Finance PLC subsidiary plans to offer £500 million of 10-year notes in a two-part offering.

Among recently priced issues, traders saw some activity in the new Reynolds Group mega-deal which priced on Thursday, and the Cequel Communications Holdings I LCC offering which came to market on Friday, both deals trading near their respective issue prices.

In the secondary realm, CIT Group Inc.'s bonds were seen having moved up several points in the wake of the long-expected weekend news that the troubled New York-based commercial lender had, finally, filed for bankruptcy protection as it attempts to restructure its finances.

Ford Motor Co.'s bonds were better after the Number-Two domestic carmaker surprised Wall Street by posting a nearly $1 billion third-quarter profit and predicting that it will be back in the black by 2011.

YRC Worldwide Inc.'s bonds moved higher after the Overland Park, Kan.-based trucking company unveiled plans for a big debt exchange would leave them in control of 95% of the company - while its steadily deteriorating shares lost about two-thirds of their little remaining value on the news.

RSC brings $200 million

RSC Equipment Rental, Inc. priced Monday's sole high-yield issue, a $200 million issue of 10¼% 10-year senior notes that came at 98.477 to yield 10½%, on top of price talk.

Deutsche Bank Securities, Morgan Stanley, Bank of America Merrill Lynch, JP Morgan, Wells Fargo Securities and Barclays Capital were the underwriters for the quick-to-market deal.

Proceed will be used to repay the Scottsdale, Ariz.-based equipment rental company's second lien loan.

A busy Tuesday

Meanwhile the stage was set for what figures to be a busy Tuesday session.

Norwegian Cruse Line set price talk for its $450 million offering of seven-year senior secured notes (B3/B+) at 11% area with 2 to 3 points of original issue discount.

Books close at 3 p.m. ET on Tuesday, with pricing expected shortly thereafter.

Deutsche Bank Securities Inc., Barclays Capital Inc., Citigroup Global Markets Inc. and J.P. Morgan Securities Inc. are joint bookrunners for the debt refinancing.

Meanwhile Colt Defense LLC talked its $225 million offering of eight-year senior unsecured notes (B2/B) at 9% to 9¼%, with up to 2 points of original issue discount.

Pricing was moved up to Tuesday morning. Originally the deal was expected to price Wednesday.

J.P. Morgan Securities Inc. and Morgan Stanley & Co. are joint bookrunners for the debt refinancing.

Although Colt was the only deal to move up timing, officially, issuers, with an eye on present capital markets volatility, are keen to get in and out of the primary market, a debt capital markets sell-side source conceded.

Elsewhere on Monday Cott Beverages Inc. talked its $200 million offering of eight-year senior unsecured notes to yield 8¾% area, including 1 to 2 points of original issue discount.

Pricing is set for mid-morning, New York time, on Tuesday.

Barclays Capital Inc. is the left bookrunner. Deutsche Bank Securities Inc. and J.P. Morgan Securities Inc. are joint bookrunners for the debt refinancing.

And Netflix, Inc. set price talk for its $200 million offering of eight-year senior unsecured notes (Ba2/BB-) at 8½% area with hp to 2 points of original issue discount.

Pricing is set for Tuesday morning.

J.P. Morgan Securities Inc. has the books for the bank debt refinancing and general corporate purposes deal.

Virgin Media £500 million

Elsewhere on Monday Virgin Media Finance plc intends to price a £500 million equivalent offering of 10-year senior unsecured notes in dollar- and sterling-denominated tranches (B2/B) on Wednesday.

Deutsche Bank, BNP Paribas, Calyon Securities, Goldman Sachs, HSBC, JP Morgan, RBS Securities and UBS Investment Bank are the underwriters for the debt refinancing.

Viasystems starts roadshow

Finally, Viasystems, Inc. will start a roadshow on Tuesday for its $220 million offering of senior secured notes due January 2015.

Goldman Sachs & Co. and Wells Fargo Securities will lead the five-year deal.

Proceeds will be used to fund the tender for Viasystems' $200 million of 10½% senior subordinated notes due 2011 and to redeem or otherwise repurchase any 2011 notes that remain outstanding after the expiration of the tender.

RSC comes too late

The new RSC Equipment Rental 10 ¼% notes due 2019 priced well after trading had wound down for the day and saw no aftermarket action, a market source said.

New Cequel trades around issue price

A trader said that Cequel Communications' new 8 5/8% notes due 2017 were "right in a 98 5/8-98 7/8 context for most of the day," although he saw the $600 million issue - upsized from the originally envisioned $400 million - going out at 98½ bid, 98¾ offered.

That was not far from the 98.58 level at which the St. Louis-based broadband operator - which sells its cable, phone, internet and other services under the Suddenlink brand name - priced the deal on Friday to yield 8 7/8%.

Another trader saw the bonds on Monday at 98 ½ bid, 99 offered.

Reynolds holds recent gain

A trader saw Reynolds Group's recently priced 7¾% senior secured notes due 2016 at 99½ bid, par offered, about where the bonds had been on Friday after having moved up a little from Thursday's pricing level at 98.695, which yielded 8% on the $1.125 billion dollar-denominated portion of the two-part deal.

Another trader saw the Reynolds bonds opening the session at 99 5/8 bid, 99 7/8 offered, and then tightening up to 99¾ bid, 99 7/8 offered; he observed that "it doesn't get much tighter than this."

Navistar notes still trading around

Navistar International Inc.'s 8¼% notes due 2021 "still seems to be active," a trader said, noting that the $1 billion behemoth offering is "a large and liquid issue" - in contrast with some of the recent deals which priced after Navistar, but which did not have much of a footprint in the secondary arena, such as Associated Materials LLC,, which priced last Thursday, firmed smartly in the initial aftermarket, and then dropped off the radar screens .

He saw Navistar's bonds around 97 3/8 bid, 97¾ offered - continuing to hold above the 96.328 level at which the Warrenville, Ill.-based bus and truck maker's $1 billion issue priced on Oct. 23.

However, while there was some activity in the bonds, he noted that with just $6.5 million traded on the day, according to the Trace, "it's nowhere near the top, volume-wise - not even in the top 50." Over several previous sessions, he said, Navistar's new deal had been the most active issue, or almost the most active. The day after the pricing, turnover in the notes was a startling $91 million, as investors scrambled to get hold of some of the paper that had not gone to the bank loan holders moving out of one Navistar instrument and into another.

Crown Castles get busy

One of the traders also saw the recently priced 7 1/8% notes due 2019 of Crown Castle International Inc. as "fairly active," quoting those bonds at 99 bid, 99½ offered.

The Houston-based communications antenna tower operator priced its $500 million of new paper back on Oct. 20 at 99.5, to yield 7.195%

At another desk, a market source said the Crown Castle issue was among the busiest bonds in Junkbondland on Monday, with almost $30 million having changed hands by mid-afternoon at levels around 99.

Market indicators' slide continues

Back among the existing bonds not connected with the new-deal market, a trader saw the CDX Series 13 index down ¼ point on Monday at 91 5/8 bid, 91 7/8 offered, after having plunged 1 5/8 points on Friday.

Meanwhile, the KDP High Yield Daily Index dropped by 12 basis points on Monday to end at 69.32, after having fallen by 19 bps in Friday's dealings. Its yield widened by 2 bps to 8.72%, continuing the trend seen on Friday when it had gapped out by 8 bps.

In the broader market, though, advancing issues held their lead over decliners for a third consecutive session on Monday, although as had been the case on Friday, and on Thursday, they were in front only a relatively narrow margin of a couple of dozen issues out of more than 1,500 tracked.

Overall market activity, as measured by dollar-volume levels, was down 7% from Friday's pace.

The market, a trader said, was "a little boring." He said that CIT "absolutely" dominated the proceedings, relegating everything else to the sidelines.

"Outside of CIT and Ford," another said, "it was a painful day."

He explained that "we're kind of starting to feel a little bit of pre-Fed" - the central bank's policy-making Federal Open Market Committee is scheduled to meet on Tuesday and Wednesday, and then release a communiqué outlining its near-term plans for the economy - "and earnings season. A lot of accounts are still doing [October] month-end stuff, and year-end is just around the corner, so I think a lot of accounts or dealers who have had good years up to this point are starting to ease off the risk throttle. They're going into the year end and don't want to do anything silly the last seven or eight weeks of the year."

With caution the watchword, he concluded "overall, it was not an easy day."

CIT is star of secondary sphere

A trader said of CIT that "there was plenty of that stuff trading" in the wake of the not-unexpected news of the problem-plagued lending company's bankruptcy filing (see related story elsewhere in this issue).

"It seems like a good size is trading."

He said "most of the CIT bonds" ended up in the high 60s, around 68-69, on "a lot of volume." He said they were "up a few points from the 65ish levels seen on Friday. "They were up 3 points, with plenty of size trading in the names."

He quoted the 4.65% notes due 2010 issued by what used to be CIT's Canadian funding unit (now domiciled in Delaware) at 95½ bid, 96½ offered, "so they were up a couple of points, too from Friday."

CIT, another trader said was definitely "the name du jour."

Yet another trader noted that CIT held most of the top spots on the day's most active issue list, with almost $38 million of the 6.10% notes due 2067 trading between 7 and 81/2. "Most of the volume came between 7½ and an 8-ish , although he saw the bonds going home "right around the 8 level."

Among the more mainstream CIT issues, the trader saw the company's 4¼% notes due 2010 trading in a 68 context, with $37.5 million having traded.

The first couple of hours of Monday's session," he said "it was all CIT," adding that even as other names began to trade around in some size, "that was everyone's focus."

Ford firms on numbers

A trader said that Ford's bonds were "a little higher, based on their numbers," after the Dearborn, Mich.-based carmaker surprised the financial markets by posting a third-quarter profit of $997 million, helped by gains in domestic market share - at the expense of struggling rivals General Motors Corp. and Chrysler LLC -, the government's "cash-for-clunkers" program and internal cost-cutting.

That let the Number-Two U.S. car manufacturer post a profit, excluding one-time items, of 26 cents per share - versus the analysts' expectations that it would lose 10 to 12 cents per share.

Ford also predicted that it will show a "solid" full-year profit in 2011 -- a feat it has not accomplished since 2005.

Fueled by that good news - Ford had previously said that it would likely break even in 2011, or perhaps do a little better than that, considerably less bullish than Monday's forecast - a trader saw its 7.45% bonds due 2031 jump 2 points to 84½ bid, 86½ offered.

A second trader saw the Ford long bonds "up a couple of points" at 85 on the earnings news, but said there was "not a lot trading."

On the other hand, a trader at another shop called Ford "pretty active," seeing the bonds up ½ to ¾ point, depending on what part of the curve you look at." He estimated the 7.45s at 85-86.

Meanwhile, Ford domestic arch-rival GM's benchmark 8 3/8% bonds due 2033 were up a point, at 15½ bid, 16½ offered, a trader said.

Yellow Freight does great

Elsewhere, a trader said that YRC Worldwide's bonds were trucking along at higher levels after the company announced plans to launch an exchange offer for its $150 million of USF Corp. 8½% notes, scheduled to mature in April, as well as nearly $400 million in contingency convertible notes.

"There was a lot of news out on the exchange," he noted, pegging the 8½% notes at 72 bid, 73 offered, well up from prior levels in the 60s. He also saw one of the convertible issues scheduled to be taken out, the 3 3/8% notes due 2023, jumping to 66 bid from the lower 50s earlier.

"There was a lot of activity across the whole capital structure," he declared.

The company's exchange offer, if successful, would give the holders of those bonds common and preferred stock equal to 95% of its common shares, with a provision to give stock options equal to 15% of the company to its union employees.

YRC said that completion of the exchange would let it have open access to the existing $106 million

Reserve under its revolving credit agreement, and would also allow it to begin deferring payment of lender interest and fees of approximately $25 million per quarter under its recently amended credit agreement and asset-backed securitization facility.

But while YRC's bonds were gliding, its Nasdaq traded shares were sliding, falling as much as 66% from Friday's closing level at one point, before finally settling in down $2.33, or 63.84% , at $1.32, on volume of 55 million shares, more than five times the norm.

"That's big news," the trader said, "ugly news for the equity holders."

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.