Ally $1 billion drive-by leads $2.4 billion session, falls in trading; GM gains as IPO looms

By Paul Deckelman and Paul A. Harris

New York, Nov. 15 - Ally Financial Inc. - the former automotive financing arm of General Motors Corp. - drove by the junk bond market with a $1 billion offering of seven-year notes on Monday. It was the biggest piece of the more than $2 billion of new bonds that came clattering down the chute during the session, as the primary side kept up its frantic issuance pace, following last week's $11 billion of new junk that came to market.

But Ally had few allies in the aftermarket, where traders saw the new bonds - which had already priced at a stiff discount to par - fall as much as 1½ points from issue.

Traders suggested that the market was getting glutted with new paper, causing some of those deals to start backing up.

Besides Ally, firms bringing new deals on Monday included packaging maker Ball Corp. with a $500 million issue of 101/2-year notes and Avis Budget Group Inc. with a $200 million add-on to the bond deal the Parsippany, N.J.-based vehicle-rental company priced just last month. Both of those quickly shopped offerings traded at or a little below their respective issue prices.

However Dunkin' Finance Corp. and Spirit AeroSystems Inc. priced deals, which actually firmed a little in the secondary. Affinity Group Inc. also came to market, but too late in the session for its senior secured bonds to trade.

While those deals were pricing, talk emerged on Covanta Holding Corp.'s 10-year issue, expected to come to market Tuesday. Other previously mentioned deals considered off on the horizon began moving to the forefront, including Gymboree Corp. and Paetec Escrow Corp.

Endo Pharmaceuticals Holdings Inc. announced a bond deal expected to price Thursday, and deals were heard being shopped by Northern Tier Energy LLC, Performance Foods Group, Inc., Brightstar Corp. and overseas borrowers Ship Finance International Ltd. and Europcar Group SA.

Away from the primary, GM's bonds were busily traded, at mostly higher levels, as the carmaker's much-anticipated midweek IPO drew nearer - amid reports that the price of the shares might be increased from levels estimated last week, or the size of the stock offering increased, to meet the brisk demand investors have expressed.

But away from GM, junk was lower pretty much across the board

Ally Financial drive-by

The hard-charging primary market's throttle remained full open on Monday, with $2.43 billion of new issuance, and a massive buildup of the new deal calendar.

Ally Financial priced a $1 billion issue of 6¼% seven-year senior guaranteed notes (expected ratings B3/B/B) at 98.602 to yield 6½%, at the wide end of the 6 3/8% to 6½% price talk.

Barclays Capital, Citigroup, J.P. Morgan Securities LLC and Bank of American Merrill Lynch were joint bookrunners for the quick-to-market deal, which launched earlier Monday at benchmark size.

The automotive lender, previously known as GMAC Inc., will use the proceeds for general corporate purposes.

Dunkin' sells $625 million

Meanwhile, Dunkin' Brands, Inc. priced a $625 million issue of 9 5/8% eight-year senior notes (Caa2/CCC+) at 98.50 to yield 9.9%.

J.P. Morgan Securities LLC, Barclays Capital, Bank of America Merrill Lynch and Goldman Sachs & Co. were joint bookrunners for the debt refinancing and dividend-funding deal.

Ball Corp. prints 5¾% yield

Ball Corp. priced an upsized $500 million issue of 10.5-year senior notes at par to yield 5¾%, at the tight end of the 5 7/8% price talk.

Bank of America Merrill Lynch, Goldman Sachs & Co., Deutsche Bank Securities, JP Morgan and Barclays Capital were the joint bookrunners for the debt refinancing and general corporate purposes deal.

Affinity on top of talk

Affinity Group priced a $333 million issue of 11½% six-year senior secured notes (B3/B-) at 97.902 to yield 12%.

The yield printed on top of yield talk, and the reoffer price came in line with discount talk of approximately 2 points.

Jefferies & Co. ran the books for the debt refinancing deal.

Spirit sells 10-year deal

Spirit AeroSystems priced a $300 million issue of 10-year senior notes (Ba3/BB-) at par to yield 6¾%, on the wide end of the 6 5/8% area price talk.

Bank of America Merrill Lynch, Citigroup, RBC Capital Markets and RBS Securities were the joint bookrunners for the bank debt refinancing and general corporate purposes deal.

Avis taps 8¼% notes

Finally, Avis Budget Car Rental, LLC and Avis Budget Finance, Inc. priced a $200 million add-on to their 8¼% senior notes due Jan. 15, 2019 (B3/B) at 101.00.

The reoffer price came on top of the price talk.

The pricing of the add-on notes results in an 8.039% yield to worst, and an 8.082% yield to maturity.

Citigroup, Morgan Stanley, Credit Agricole CIB and RBS Securities were the joint bookrunners.

The Parsippany, N.J.-based vehicle rental company plans to use the proceeds either to partially fund the acquisition of Dollar Thrifty or to repay outstanding corporate debt.

Talking the deals

Among upcoming offerings, Covanta talked its $400 million offering of 10-year senior notes (existing ratings Ba3/B) with a 7% to 7¼%.

The deal is set to price on Tuesday.

J.P. Morgan Securities LLC, Bank of America Merrill Lynch and Citigroup Global Markets Inc. are the joint bookrunners.

Elsewhere AMO Escrow Corp. and American Media Operations, Inc. talked their $385 million tranche of seven-year first-lien senior secured notes with an 11% area yield.

That deal is also set to price on Tuesday.

The $475 million two-part offering also includes a $90 million tranche of second-lien senior secured notes. However no price talk surfaced on the second-lien notes, the source said.

J.P. Morgan Securities LLC has the books.

Performance Foods roadshow

The active forward calendar saw a phenomenal build-out on Monday.

When the session ended the active calendar sported $6.675 billion and €3.725 billion of deals, all of which could price during the run-up to the four-day Thanksgiving holiday in the United States, which gets underway on Nov. 28 - a week from Thursday.

Performance Foods Group began a roadshow on Monday for its $550 million offering of seven-year senior notes.

Credit Suisse, Wells Fargo Securities, Bank of America Merrill Lynch and Macquarie are the joint bookrunners for the debt refinancing and dividend-funding deal.

Petco to bring $500 million

Petco Animal Supplies Inc. plans to price a $500 million offering of eight-year senior notes (Caa1/CCC+) before the end of the present week.

JP Morgan Securities LLC, Credit Suisse, Bank of America Merrill Lynch, Wells Fargo Securities, Morgan Stanley and Goldman Sachs & Co. are the joint bookrunners for the debt refinancing and dividend-funding deal.

Paetec starts roadshow

Paetec Escrow Corp. began a roadshow on Monday for its $420 million offering of eight-year senior notes (existing ratings Caa1/CCC+).

Deutsche Bank Securities and Bank of America Merrill Lynch are joint bookrunners for the acquisition financing.

Endo to raise $400 million

Endo Pharmaceuticals plans to price a $400 million offering of 10-year senior notes.

JP Morgan, RBC Capital Markets and Barclays Capital are the joint bookrunners.

Gymboree eight-year deal

Gymboree Corp. kicked off its $400 million offering of eight-year senior notes with a Monday investor call.

Morgan Stanley and Credit Suisse are the joint bookrunners for the LBO financing.

Ship Financing sets sail

Ship Finance International began a roadshow on Monday for its $400 million public offering of non-callable 10-year senior notes (expected ratings B1/B+).

The roadshow wraps up on Friday.

Jefferies & Co. and Goldman Sachs & Co. are the joint bookrunners for the debt refinancing and general corporate purposes deal.

Northern Tier markets notes

Northern Tier Energy LLC and Northern Tier Finance Corp. began a roadshow on Monday for their $290 million offering of seven-year senior secured notes (B1//), via Goldman Sachs & Co.

Macquarie, RBC Capital Markets and SunTrust Robinson Humphrey are the joint bookrunners.

The Houston-based energy company will use the proceeds to finance the purchase of assets from Marathon Oil Corp.

Brightstar plans $250 million

Brightstar began a roadshow on Monday for its $250 million offering of six-year senior notes, via left bookrunner Jefferies & Co.

Goldman Sachs & Co., J.P. Morgan Securities LLC, Barclays Capital and Credit Suisse are the joint bookrunners.

Proceeds will be used to refinance existing debt.

Flakeboard to sell notes

Canada's Flakeboard Co. Ltd. plans to price a $225 million offering of seven-year senior secured notes (/B/) late in the present week.

J.P. Morgan Securities LLC and Goldman Sachs & Co. are leading the debt refinancing deal.

The European primary

Activity was not confined to the western side of the Atlantic.

Europcar Group will start a roadshow on Tuesday for its €400 million offering of senior subordinated notes due April 2018.

Deutsche Bank, Credit Agricole CIB, Royal Bank of Scotland and SG CIB are joint bookrunners for the debt refinancing deal.

Elsewhere 3W Power Holdings SA the holding company for Netherlands-based electronics company, AEG Power Solutions, announced in a Monday press release that it plans to issue up to €125 million of 9¼% notes due 2015.

The order books will open to retail investors beginning Thursday.

The books are scheduled to close on Nov. 24.

Close Brothers Seydler Bank AG is the bookrunner.

Proceeds will be used to secure long-term funding for AEG Power Solutions' external growth strategy and business realignment.

Europcar and 3W join Italy's Wind Telecommunicazioni SpA, which started a global roadshow on Monday for its €3.2 billion equivalent of seven-year senior secured notes (expected ratings Ba2/BB-) - a deal that was announced late last week.

The expected tranche sizes are €2.5 billion and $1 billion.

Credit Suisse and Deutsche Bank are the global coordinators and joint bookrunners.

Banca IMI, Barclays Capital, BNP Paribas, Bank of America Merrill Lynch, Citigroup, Credit Agricole CIB, Goldman Sachs & Co., J.P. Morgan Securities LLC, Morgan Stanley, Natixis Bleichroeder, RBS Securities, UBS and UniCredit are also joint bookrunners.

Choppiness in trading

A trader said that "it looks like quite a few of the new issues, and even the add-ons, are not doing very well."

He further lamented that "there's still too many flippers in all of these deals, and they all try to get out at the same time," pulling the new bonds lower.

However, he said that the weakness has mostly been "reasonably orderly," adding that "I think that we're going to plod along, right into Christmas.

"They'll bring as many deals as they can, and they'll get most of them done, although as we get closer to the end of December, I think the terms will have to get a little more 'user-friendly' again."

All's not well with Ally

When the new Ally Financial seven-year notes started trading around, the Detroit-based automotive financing company's new deal was quickly spinning its wheels and even being pushed backwards.

A trader said just minutes after the issue priced that "this new GMAC deal" - referring to the company's well-known former name - "is already trading a half point, now almost a point below where it came."

A trader saw the new bonds trading at 97¼ bid, 97¾ offered - well down from the 98.602 level at which the mega-deal had priced.

At another desk, a trader saw the new Ally bonds as low as 97 bid, 97 5/8 offered.

Ally;s existing 8% bonds due 2031, meantime, were being quoted as better than 2 point losers on the session, ending at 108 bid.

Primary has a Ball

Apart from Ally, a trader saw the new Ball Corp. 101/2-year bonds trading at 99½ bid, par offered, slightly under the Broomfield, Colo.-based packaging company's par issue price..

Another trader opined that the issue "didn't do that well," quoting the paper at 99 7/8 bid, 99¾ offered.

Avis add-on spins wheels

Another new issue - like Ally and Ball a quickly-appearing, opportunistically timed drive-by transaction - was car-rental kingpin Avis' add-on offering to the issue of 2019 notes which it sold just last Oct. 7.

Unlike the Ally deal, which clearly lost a lot of ground, but more like Ball, the new Avis bonds hovered just under their 101 issue price.

Although one trader said that he saw the Avis bonds offered at 101 with no left side and a second saw the bonds get as low as 99 7/8 bid, 100 7/8 offered, a third trader, queried later in the session, declared that the new Avis bonds "did okay" in managing to climb back to a close around 101 bid, 101¾ offered.

Dunkin' does well

The trader also saw the Dunkin' Finance eight-year notes finishing the day on the upside. The Canton, Mass.-based restaurant franchisor's issue was going out at 99 bid, 99 3/8 offered, up from their 98.5 issue price.

Spirit Aero seen up

Also seen gaining a little aftermarket altitude was Wichita, Kan.-based aircraft structures manufacturer Spirit AeroSystems.

The company's bonds priced at par, but a trader saw them going out at 100¼ bid, 100½ offered.

Affinity Group's new six-year senior secured bonds came too late in the day for aftermarket dealings.

Stater stays strong

Among Friday's offerings, that session's aftermarket star - the new Stater Brothers Holdings Inc. 7 3/8% notes due 2018 - were seen having come off the peak levels they hit after the San Bernardino, Calif.-based supermarket operator's $255 million quick-to-market deal priced.

The bonds had gotten as good as 102¼ bid, 102¾ offered, but by Monday had come in to 101¾ bid, 102¼ offered.

However, they remained well above their par issue price.

Genesis hangs around issue

A trader said that Genesis Energy, LP's 7 7/8% notes due 2018 "held in pretty well."

He quoted the Houston-based energy pipeline company's $250 million deal - upsized from the originally announced $200 million - at 99¾ bid, 100¼ offered, versus their par issue price on Friday.

Recent MetroPCS deal mauled

Other recent deals were meantime seen having come well down from their respective issue levels.

Last week's big aftermarket loser, Affinion Group Inc.'s $475 million of 7 7/8% notes due 2018, had not improved at all after having taken its lumps. The Norwalk, Conn.-based marketing and consumer loyalty program provider's drive-by deal, which had priced at 99.247 on Oct. 8 to yield 8% but which then started to move downward as soon as it was freed to trade, were seen on Monday at 96 bid, 96½ offered.

However, a trader said that the company's new bonds were "no worse" than MetroPCS Communications Inc.'s $1 billion offering of 6 5/8% notes due 2020.

He saw the latter issue lose "nearly 2 points" in just Monday's session, bringing the Dallas-based pre-paid wireless telecommunications company's bonds down to 961/2.

That was well down from the par level at which the deal had priced on Nov. 5.

Another recent offering - also a rapidly appearing, quickly shopped transaction for a telecom name, Ohio-based operator Cinncinnati Bell, Inc.'s 8 3/8% notes due 2020 -- was quoted on Monday at 97½ bid, down 1½ points on the day. That deal, an add-on to the $500 million of the bonds the company had priced at par on Oct. 7, priced at 101 on Nov. 8, but could never quite get out of its own way, traders said.

"I would argue that a lot of [the new deals] are struggling," a trader declared. "Some of it is by news - specific reasons - but some of it is just that they're cranking a lot - a lot - of paper into the system right now, and it makes it a little bit tougher."

However, not all of the recent deals were necessarily behind the eight-ball.

A market source touted Frontier Oil Corp.'s new 6 7/8% notes due 2018, seeing that paper gain a point on the day to end at 103 bid. The Houston-based energy exploration and production company's $150 million deal had priced at par on Nov. 9.

Secondary indicators remain in retreat

Away from the new-deal world, a trader saw the CDX North American Series 15 HY index ending down 5/8 point on Monday to end at 100 1/8 bid, 100 5/16 offered, after having plunged some 1 3/8 point on Friday.

The KDP High Yield Daily index meantime plummeted 28 basis points on Monday to finish at 74.52, on top of its 11 bps retreat on Friday. Its yield gapped upward by 10 bps on Monday to 7.20%, after having risen by 4 bps on Friday.

And the Merrill Lynch High Yield Master II index eased by 0.172% on Monday, after having fallen by 0.338% on Friday. That pushed its year-to-date return down to 14.739% from Friday's close at 14.937% - both down from last Tuesday's reading of 15.602%, its peak level for 2010.

Advancing issues trailed decliners for a third straight session on Monday, lagging by the same better than seven-to-five margin seen on Friday

Overall activity, represented by dollar-volume levels, rose by 27% on Monday, after having slid by by 31% on Friday from the previous session's volume level.

GM gets IPO jump-start

Among specific issues, GM's bonds were busily trading at mostly higher levels on Monday, as its much-anticipated midweek IPO drew nearer, apparently given a boost by reports that the price of the shares might be increased from levels estimated last week, or the size of the stock offering increased, to meet the brisk demand interested investors have expressed.

A trader said that the bonds - technically now known as Motors Liquidation Corp., the entity formed last year to hold the debt and other unwanted assets of the "old" General Motors as the carmaker restructured through the bankruptcy court while the "new" GM, General Motors Co., consisting of the carmaker's most profitable operation, like its Cadillac, Buick and Chevrolet lines, emerged from bankruptcy - were "the paper of choice" on Monday, quoted firmer as the "new" GM's mid-week IPO approaches.

A trader quoted GM's 8 3/8% benchmark bonds due 2033 at 36½ bid, 36¾ offered, with over $35 million of the bonds changing hands on Monday, putting the benchmarks at or near the top of high yield's Most Actives list.

Another trader saw those bonds at 36 3/8 bid, 36 5/8 offered, calling them up 3 points on the day.

At another desk, a market source saw the GM's moving around in brisk trading between lows around 35 and change and highs just under 38 bid, before going out at 36½ bid, calling that up a point on the day.

The source saw other GM bonds doing even better, with its 7.20% notes due 2025 up as much as 4 points on the day, ending at 35½ bid. GM's 7.70% notes due 2016 were little changed, at just over 35 bid, but its 7 1/8% notes due 2013 were up nearly 2 points on the day at 35½ bid.

Holders of the "old" GM's legacy bonds are scheduled to exchange their paper for about 10% of the new stock when it is issued, giving them a vested interest in the company's valuation, as gauged by the IPO.

News reports on Monday indicated that the "new" GM might price those shares as much as 14% above previously reported levels, in response to solid investor demand. That could mean a level as high as $33 rather than the $26-$29 range previously reported.

There were also reports that GM and its underwriters, looking at an order book oversubscribed by as much as six times, might up the size of the IPO from $10.6 billion to as much as more than $13 billion, counting the 10% greenshoe.

The IPO is scheduled to price at the close of trading on Wednesday.

Market feeling the strain

Away from GM's bravura performance's though, a trader opined that "I think, in general, [the market is] getting dinged a little bit."

He said that the secondary side was affected by the backup in the new-deal market as "the dregs of the new issues are starting to come out in full force, and is starting to take a little bit of a toll." For instance, he noted the difficulties of the new Ally Financial deal.

He estimated that the market "is off a solid ½ point across the board, with a little less conviction.

"That's what I'm seeing all day today - people selling stuff."

Macroeconomic concerns were seen weighing on the market, from the jitters in Europe over Ireland's debt situation, which could cause a Greece-like bailout, to investor angst at home, as Treasuries "got crushed," a trader said, with yields gapping out for a second straight session. The 10-year Treasury's yield jumped to 2.95% from 2.77% on Friday. A week ago, the 10-years were at 2.53%.

A trader suggested that the Federal Reserve's plan for a second-round of quantitative easing - abbreviated by newspaper headline writers as QE2 - could be stoking some fears in the market, noting that before the central bank announced its plans to pump $600 billion into the market by buying that amount of Treasury bonds over a period of some months, "you could have re-financed a 30-year mortgage for 4 3/8%. Now, it will cost 4¾%. If the Fed is trying to help the consumer, it's having the opposite effect."

He quipped that "just like that crippled cruise liner [off the California coast], a lot of people in the market don't want to tow this QE2 in."

Time to lock in those gains

A trader suggested that another key driver behind the selling might be that "a lot of people have made a lot of money. It's getting near the year-end and people want to kind of clean up [their account books] a little bit."

After having made the kind of money suggested by statistical indexes - the Merrill Lynch High Yield Master II index, for instance sees the junk market's year-to-date return at nearly 15% - "nobody wants to give it back in December." Such investors would likely take the proceeds from selling their junk bonds and put it into "short, safer paper, and not worry about it.

"You certainly don't want to get caught in the one [name] where there is news - and then have to explain why you held onto it."

At this time of year, he said, "the pressure downward is always a bit greater than it should be - but it is, and therefore that's where [the bonds ] trade and you've got to mark the books. You don't wait around much longer."

Rite Aid in retreat

The trader said that the downturn - which started last Wednesday heading into the Veterans' Day holiday, after the market, according to statistical indexes, had hit new highs for the year on Tuesday - "seems pretty broad-based, even stuff that was doing well, all the things like Rite Aid, that had really ridden up nicely, are probably off 3 or 4 points in the last two or three days."

The Camp Hill, Pa.-based drugstore chain operator's 8 5/8% notes due 2015, for instance, were being quoted Monday down a deuce on the session at just over 88 bid.

Another market source pegged those bonds as low as 86½ bid, down a point on the day, and saw its 6 7/8% bonds due 2028 fall to 55½ bid from 58 previously. However, another long-dated issue, Rite Aid's 7.70% bonds due 2027, actually firmed a little to 63 bid, up a point.

Among the higher-priced Rite Aid bonds, its 6 7/8% notes due 2013 were off by ½ point at 92½ bid, while its 7½% notes due 2017 were likewise ½ point lower, at 951/2. Its 9¼% notes due 2013 held steady at 86 bid.

Dean Foods still flailing

Dean Foods' 7% notes due 2016 - which had been trading above par a week ago but then cascaded down multiple points after the company released worse-than-expected third-quarter results and also said that its respected chief financial officer, Jack Callahan, would leave the company at month's end to take a similar position with another firm - continued to struggle on Monday.

A trader said that the bonds - which had fallen as low as around a 92¾ context at the tail end of last week - had traded as high on Friday as 943/4-95, and "today, just a few million changed hands," at 93¼ bid.

The 7% notes he said, "are definitely down a solid 8 or 9 points in a week."

He said the bonds' behavior was an illustration of the market rule that "no one wants surprises." He said that even if "earnings alone aren't great," it might not be enough to push the bonds downward, "but when you get earnings plus someone resigning, that just causes guys to look for the door."

Harrah's hit again

A trader saw Harrah's Entertainment Inc.'s easier, continuing the trend seen over most of last week when the Las Vegas-based gaming giant's bonds, previously boosted by investor optimism over its upcoming IPO, gave those gains back, falling from the 90s into the upper 80s.

"I think some of that was predicated on when you bring a dividend deal, that sort of puts the thought of IPOing a little further on the back burner."

However, he said that "on the other hand, they're holding" not too far below where they finished last week. He saw its 10% notes due 2018 - which had eased to around the 89-plus level on Friday from prior levels in the low 90s over several sessions, closing out on Monday at 88½ bid, calling that down a point.

He saw the Harrah's 11¼% notes due 2017 at 111½ bid - they had recently topped 113 - but said the decline was "nothing too sinister."

Paper names quiet

Paper company paper was seen "a little quiet today," a trader said.

Another quoted Miamisburg, Ohio-based coated-paper manufacturer NewPage Corp.'s 11 3/8% notes due 2014 at 92 bid, calling that down a point on no news, while seeing Catalyst Paper Corp.'s 7 3/8% bonds due 2014 unchanged at 68 bid.

At another desk, though Richmond, B.C.-based Catalyst's '14s were being quoted up 1¼ points at 69¼ bid.

© 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.