Primary surge subsides in pre-holiday calm; AMD holds gains; Clear Channel up on deal rumor

By Paul Deckelman and Paul A. Harris

New York, Nov. 25 - As predictable as Thursday's Thanksgiving dinner menu in millions of homes across the United States, the high yield market spent a sleepy, quasi-abbreviated pre-holiday session on Wednesday in which not very much of anything went on.

As traders and other participants watched the clock, waiting for an opportune time to make an early exit, the recently red-hot junk primary market sputtered to a halt, with no issues heard having priced and just one prospective deal appearing on the horizon, for Momentive Performance Materials Inc., expected to roll out a secured notes offering sometime during the coming week.

There were, however, some rumors floating about that Clear Channel Communications Inc. might soon float a new bond issue, in hopes of using the proceeds to clean up some of its shorter debt maturities. That helped to propel the San Antonio, Tex.-based broadcasting and outdoor advertising company's existing bonds up by several points, in very active dealings.

Elsewhere, the recently priced Advanced Micro Devices Inc. eight-year bond deal was seen continuing to show strength, holding well above the deeply discounted level at which the issue priced on Monday.

Another Monday deal, for Salem Communications Corp., was also seen more than holding its own in the secondary market.

But Tuesday's big new offering from Clearwire Communications LLC had trouble getting back up to its issue price, and also trailed the upsized $1.6 billion tranche which the telecommunications company had priced the previous week.

Market indicators head higher

Among statistical measures of market performance, a trader saw the CDX Series 13 index up ¼ point on Wednesday at 93½ bid, 94 offered, after having been down ¼ point on Tuesday.

The KDP High Yield Daily Index was meantime up 4 basis points on Wednesday to 69.74, after having risen by 8 bps on Tuesday. Its yield widened 1 bp to 8.54%, after having tightened 3 bps the previous session.

In the broader market, advancing issues led decliners for a 10th consecutive session on Wednesday, increasing their advantage to about a 6-to-5 ratio from Tuesday's slight edge of just a handful of issues out of the more than 1,600 tracked.

Overall market activity, as measured by dollar volume, plunged some 67% from Tuesday's already restrained pace.

"Things are starting to get quiet now," one trader said, shortly after midday. "There's not much going on. A bunch of guys are out, and there wasn't a lot of news.

"You might as well just take [Tuesday's] levels and call them unchanged."

Apart from a little bit of activity in scattered names, like Clear Channel and the new Clearwire deal, "we were kind of just sitting around, looking at each other."

"There was nothing real" going on during the session, a second trader said. Away from, say, the new Clearwire bonds, "we didn't really see any significant flows. It was just a little bit softer in general, and quiet."

While there were "buyers and sellers" in some names, he predicted: "I think everybody's going to wait till after the holidays" to see how things shake out - particularly the ominous news coming out of the Middle East, with the government of the Persian Gulf emirate of Dubai saying that Dubai World, its giant development and investment company plans to delay repayment on billions of dollars of debt, causing Standard & Poor's and Moody's Investors Service to deeply downgrade several government-related entities, some to junk status.

He speculated that with "everyone somewhat bearish on the market heading into year-end, given the run that we've had," the previously high-flying conglomerate's efforts to delay scheduled payments "could be the thing that sets [a market pullback] off, like an Asian flu," - or even, possibly, he agreed, an Asian Lehman Brothers.

Clearwire 'continues to struggle'

A trader said that "the only thing really trading was the new Clearwire deal," and that, he said "continues to struggle a little bit." He said the $920 million issue of 12% senior secured notes due 2015 "had a few bids, it seemed bonds were for sale, but it was just really too quiet to tell."

He quoted the bonds at 98¼ bid, 98¾ offered, which he said was "trading just above their new-issue level" at 97.945, at which they had priced to yield 12½%.

Another trader noted that "they were supposed to be fungible" with the Kirkland, Wash.-based wireless broadband services provider's $1.6 billion issue of identical bonds, which had priced about a week before on Nov. 18 at 97.921 to also yield 12 ½%, "but they're not trading that way." He quoted the original bond tranche - the relatively "old" bonds - having moved back up above 99 at 99 bid, 99½ offered, while this week's "new" tranche was at 98¼ bid, 98¾ offered, which another trader characterized as "just above their issue price. They continue to struggle."

The new notes were originally expected to have the same issuers - Clearwire Communications and Clearwire Finance Inc. - and be fully fungible with the existing tranche; however, the issuer was changed to another unit of the company, Clearwire Escrow Corp., to be assumed by Communications and Finance, and the issue was assigned a new Cusip number.

AMD improvement continues

Among other recently priced issues, a trader said that AMD's issue of 8 1/8% notes due 2017 "was a little bit better," building on the gains the bonds have notched since their pricing on Monday to go out at 94¾ bid, 95¼ offered.

The Sunnyvale, Calif.-based computer-chip manufacturer had priced its $500 million issue at a deeply discounted 89.796 to yield 10%, but those bonds were already moving up later Monday to levels around 94 bid, 94½ offered, and continued to move up during Tuesday's session, and Wednesday's.

However, another trader still saw them Wednesday at 94 bid, 94½ offered.

Salem still shines

Traders saw Salem Communications Corp.'s new issue continuing to more than hold its own in the secondary market.

The Camarillo, Calif.-based religious broadcaster had priced $300 million of 9 5/8% senior secured second-lien notes due 2016 on Monday at 99.365 to yield 9¾%. When the bonds were freed for secondary dealings on Tuesday, a trader saw them having "done really well," moving up to 102 bid, 102½ offered, and a trader Wednesday saw them holding to those lofty levels.

Digicel still dithers

But another one of the week's new pricings, Digicel Group Ltd., was quite a different story.

The opportunistically timed drive-by offering of 8¼% notes due 2017 from the Kingston, Jamaica-based Caribbean cellular phone service provider continued to trade below the 98.625 at which it priced on Monday yielding 8½%.

A trader saw the $500 million of bonds Wednesday at 98 bid 98½ offered - although that was up from levels as low as 96½ bid which the bonds had hit on Tuesday when, in the words of a fellow trader, Digicel "just couldn't get out of its own way."

Clear Channel climb continues on new-deal talk

A trader saw Clear Channel Communications' 10¾% notes due 2016 around 64 bid, 65 offered and its 11% notes due 2016 at 51½ bid, 52½ offered, calling both up about ½ point.

A second trader said he did not see any activity in the name - but when asked his opinion on the idea that the bonds have been rising on speculation about a possible bond deal or other refinancing, said "everybody else is [bringing a new deal], so it wouldn't surprise me," although he had no concrete knowledge of such an upcoming financing. "There's no time like now."

At another desk, a trader said the company's bonds "did have some activity," calling its 11% notes active, with a final level of 513/4-52, which he called up 1¼ points, while seeing its 6¼% notes due 2011 up 3 points on the session at a final level of 82 bid, though on "not as much volume as the bigger issues, but that was only a few trades," while "the 11s traded a lot."

He further saw Clear Channel's 6 7/8% notes due 2018 having registered "no trades."

Regarding the new bond deal talk, the trader said that he had "heard rumblings of some kind of a refinancing," but did not see anything further on that.

Momentive steady ahead of new deal

A trader saw Momentive Performance Materials' 9¾% notes due 2014 at 951/2, against the backdrop of news about the Albany, N.Y.-based producer of industrial-grade silicone being expected to do a $500 million eight-year senior secured offering, probably rolling out the bond deal next week.

The bonds had risen to those mid-90s levels from the lower 90s earlier in the week when Momentive first announced its intention of doing a new deal, pending a green light from its bank lenders.

The trader said the bonds saw "some trades today, but that was pretty much unchanged" on the session. "There was not a lot of activity."

Busy week ahead

The high-yield market remained extremely quiet on Wednesday, with numerous players out of the office and others leaving early ahead of the Thanksgiving holiday weekend in the United States.

However the week ahead is expected to be a busy one, a buy-side source said.

JP Morgan alone is expected to bring an even half dozen of deals during the post-Thanksgiving week, according to an asset manager based in the Midwest.

One of those will be Momentive Performance Materials's $500 million offering of eight-year first-lien senior secured notes, a debt refinancing and general corporate purposes deal.

Momentive's existing paper is yielding between 10% and 14%, said the Midwestern buy-sider, adding that lately the presence of "yield hogs" on the high-yield buy-side is conspicuous, so interest in the deal is likely to be intense.

Size and yield

People also like size, added the investor, nodding toward Tuesday's massively upsized Clearwire Communications $920 million add-on to its 12% senior secured notes due Dec. 1, 2015 (Caa1/B-/) - a deal which features both size and yield.

The add-on, which came less than a week after the $1.6 billion original issue, priced at 97.945 to yield 12½%, and took the overall issue size to $2.52 billion.

The add-on was upsized from $540 million, an amount that was spoken for by dint of reverse inquiry, the investor said.

"You would think that when they upsized it by that amount [$380 million] people would get some bonds," the source remarked.

"But we put in for $10 million, and we got $2 million."

Light active calendar

The week ahead will get underway with just one issue on the active calendar, and that one from a non-U.S. issuer.

Singapore-based First Ship Lease Trust is marketing a $200 million offering of seven-year senior notes (/B+/BB-), via joint bookrunners JPMorgan and Jefferies & Co.

Proceeds will be used to repay bank debt and fund vessel acquisitions.

High-yield sources in the United States have also discussed Croatia's Agrokor DD, which is expected to price a €400 million offering of seven-year senior notes (B2/B) on Monday.

BNP Paribas and UniCredit are running the books for the Rule 144A and Regulation S debt refinancing deal from the Zagreb-based consumer food products company.

Established secondary dealings otherwise thin

Apart from names with new-deal connections, a trader saw recently actively traded bonds of the former Lehman Brothers Holdings Inc. unchanged to perhaps up ½ point at 21 bid.

The busted New York investment banking house's 5 5/8% notes due 2013 were among the more actively traded junk issues on the day, with nearly $10 million having changed hands - but another market source quoted those bonds down about a point at 19, and saw Lehman's 5¼% notes due 2012 down a deuce at the 17 level, though on no fresh news.

Also among the financials, a trader said, CIT Financial Group Inc.'s bonds "were quoted a half [point] higher at 71½ bid, for "most of them," like the 5.20% notes due 2010.

But "there wasn't a lot of activity that I could tell."

A trader said that General Motors Corp.'s benchmark 8 3/8% bonds due 2033 were trading right around 22, which he called unchanged, "but they had some trades there."

Another trader agreed that the GM long bonds were unchanged around 22 bid, 23 offered, while seeing GM domestic arch-rival Ford Motor Co.'s 7.45% bonds due 2031 up a point at 84½ bid, 85½ offered.

A trader said that Vertis Inc.'s 8½% notes due 2012 traded up about 6 points on the day at 59 bid, 60 offered, after having closed in the mid-50s on Tuesday, on rumors the supermarket insert publisher might seek a re-financing, adding "they did have active trading," with over $12 million moving on Wednesday.

While the Vertis bonds "don't trade every day," he called them "active and up" in Wednesday's dealings.

Catalyst Paper Corp.'s 8 5/8% notes due 2011 were unchanged, after having risen Tuesday on news of the Canadian paper company's pending exchange offer, with "a small piece" having moved at 75, a trader said, and no trades seen on its 7 3/8% notes due 2014 which were quoted around 59-60.

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