MGM debt jumps on investment reports; Frontier new issue steady; GM holding tight; Qwest, Ventas bring split deals

By Paul A. Harris and Stephanie N. Rotondo

Portland, Ore., April 7 - MGM Mirage's bonds continued to trade better following reports of an impending investment by Colony Capital LLC.

With the bonds gaining as much as 5 points on the day, one trader speculated that the amount of the investment - a $750 million secured term loan - was more than had been expected.

Frontier Communications Inc.'s recent new issue continued to trade actively, though the debt ended the day unchanged.

In the autosphere, General Motors Corp.'s bonds were trading actively, but remained unchanged. Rival Ford Motor Co. saw its bonds moving higher after a rating upgrade.

Also improving were Hertz Global Holdings Inc.'s notes. The car rental company's debt has steadily been climbing higher, leading some to believe that the company might soon be climbing further up into junk territory

Despite equities trading lower for the second consecutive day cash high-yield bonds ended the Tuesday session largely unchanged, according to a high-yield syndicate official.

Meanwhile there was activity in the primary market as two crossover deals priced, both of which were transacted off the high-yield syndicate desks.

Qwest massively upsized

In an a.m.-to-p.m. Tuesday drive-by Qwest Corp. priced a massively upsized $810.5 million split-rated issue of 8 3/8% seven-year senior notes (Ba1/BBB-/BBB-) at 92.498 to yield 9 7/8%.

The yield came in the middle of the 9¾% to 10% price talk.

The issue, which was introduced at an amount of $300 million, was slightly less than two-times oversubscribed at the upsized amount, according to an informed source.

Approximately 85% of the participation came from high-yield accounts, including crossover accounts, with the remainder of the participation coming from high-grade investors.

"The company was definitely rate-sensitive," the source commented.

"Once the deal came together at these levels they were keen to upsize it."

JP Morgan, Banc of America Securities LLC, Morgan Stanley and Wachovia Securities were joint bookrunners.

"We're pleased with the strong demand and success of this offer," stated Joseph J. Euteneuer, Qwest executive vice president and chief financial officer, in a late-Tuesday press release.

The sale generated $749.696 million of proceeds which will be used for general corporate purposes, including repayment of Qwest Corp.'s debt, and funding and refinancing investments in the company's telecommunications assets.

A bid for telecoms

The Qwest deal had been the subject of reverse inquiry among bond investors since early in 2009, according to an informed source, who added that the name is a familiar one to high-yield and crossover accounts.

Also the telecom sector is perceived to be a defensive one, the source added.

There is evidence that this perception is shared in the high-grade market, according to an asset manager whose portfolio includes high-grade bonds, high-yield bonds and stocks.

The bonds of AT&T and Verizon have both tightened by 35 basis points over the past week, the investor said.

Ventas brings $200 million

Also pricing a quickly shopped split-rated deal on Tuesday, were Ventas Realty, LP and Ventas Capital Corp.

Ventas priced a $200 million issue of notes mirroring their 6½% senior unsecured notes due June 1, 2016 (Ba1/BBB-/BBB-) at 84.25 to yield 9.597% on Tuesday.

There was no official price talk.

The deal was well oversubscribed, according to an informed source, who added that 90% of the participation came from high-yield accounts, with high-grade and equity accounts playing the remaining 10% of the deal.

Banc of America Securities LLC was the lead bookrunner. Citigroup Global Markets Inc. and UBS Investment Bank were joint bookrunners.

The mirror notes will be non-fungible with the existing 6½% notes.

The sale generated $168.5 million of proceeds which, along with proceeds from a concurrent common stock offering, are expected to be used to fund Ventas' cash tender offers for its outstanding senior notes due 2010, 2012, 2014 and 2015, with any remaining proceeds to be used to repay debt and for general corporate purposes.

The original $125 million issue priced at 99.50 to yield 6.566% on Dec. 6, 2005, and a $75 million add-on priced at 99.50 to yield 6.567% on Dec. 9, 2005.

Quiet ahead

With only one full session on Wednesday and one abbreviated session on Thursday the junk market will likely be relatively quiet for the remainder of the pre-Easter week, according to a high-yield syndicate source.

Still, there could be a drive-by deal on Wednesday, the source added.

However the market's ranks are expected to begin thinning as the Wednesday session wears on, ahead of the Thursday Passover celebration.

Market indicators mixed

Back among existing issues, a market source said the CDX Series 12 High Yield index was "pretty much unchanged" at 73.5 bid, 74 offered. The KDP High Yield index was meanwhile better at 53.96, with a yield of 13.15%. That compared to 53.91 on Monday, with a yield of 13.16%.

Overall, traders called the day a "mixed bag."

One trader noted that many of the names trading were "kind of off-the-run," adding that the day's most active traders were "not the usual suspects."

"Brokers were all complaining that is was not very busy," he added.

Another trader blamed the slowness on the fact that it is a holiday week, with Thursday being an early close - one of the half days that has survived the pruning of the holiday schedule by the Securities Industry and Financial Markets Association. The market is closed on Friday.

MGM debt jumps on investment talk

MGM Mirage's bonds continued to gain ground as news came out regarding the company's investment talks with Colony Capital.

A trader quoted the 8½% notes due 2010 at 55 bid, 55.5 offered, up from levels around 55 on Monday and better than the opening price of 53. He added that the issue had been in the high 40s on Friday.

The trader also saw the 6% notes due 2009 around 69.

Another trader called the 5 7/8% notes due 2014 stronger by 2½ points at 38 bid, 40 offered.

At another desk, a trader said the 6 5/8% notes due 2015 and the 7½% notes due 2016 got as good as 43 before settling back in at 41, which he said was "still up on the day." He quoted the 6% notes at 69 bid, 70 offered, a gain of 4 to 5 points.

News out Tuesday indicated that Colony Capital was considering a $750 million secured loan to the struggling casino operator. The funds would be used to help the company refinance its existing debt, not to help finance the CityCenter project, sources said.

"I think that was more money that people thought they were working on," one trader said, giving reason for the bonds' gains.

MGM's bonds have gyrated since word first circulated that Colony was interested in investing in the company. One market source told Prospect News that it seemed odd that Colony would want to participate, given that Colony was also having its own financial struggles.

Australia's Crown Ltd. is also reportedly considering an investment, though its top executive denied that it was considering a direct investment in CityCenter.

On Monday, MGM's debt gained as much as 5 points on the day on news that the company had hired Morgan Stanley to evaluate bids on some of its properties. Many believe that funds from potential asset sales would be used to reduce debt.

Elsewhere in the sector, Wynn Las Vegas LLC's 6 5/8% notes due 2014 inched up to 77 bid, 79 offered.

Frontier new issue steady

Frontier Communications' new issue, the 8¼% notes due 2014, remained steady in the 92 level, a trader said. That compared to the original pricing of 91.805 on Friday.

Meanwhile, the 9% notes due 2031 - issued by Citizens Communications Inc., by which Frontier was formerly known - also remained unchanged at 68 bid, 70 offered.

Traders said trading in the name was relatively active.

Elsewhere in the telecommunications arena, Sprint Nextel Corp.'s 7 3/8% notes due 2015 finished unchanged at 54.5 bid, 55 offered.

GM holding tight, Ford regaining ground

In the automotive sector, General Motors' bonds traded actively, but ended mostly unchanged, while Ford Motor's debt moved higher.

A trader placed GM's benchmark 8 3/8% notes due 2033 at 11.5, while another quoted the issue at 11 bid, 13 offered. The 7 1/8% notes due 2013 slipped a point to 11 bid.

At another desk, GM's 7.20% notes due 2011 were deemed unchanged at 12 bid, 15 offered.

Meanwhile, Ford's 7.45% notes due 2031 were seen gaining 3 points to 37 bid, 39 offered. Another trader echoed that market, but called it up only 2 points on the day.

GM is reportedly fast-tracking a bankruptcy plan, though its board of directors are continuing to look for cost savings to avoid a Chapter 11 filing, according to a Bloomberg report. GM has until June to come up with a better viability plan, after president Barack Obama rejected the company's first proposal on March 30. That also resulted in the ouster of Rick Wagoner as chief executive officer, He was replaced by Fritz Henderson.

Over at rival Ford, the company's admission on Monday that it had trimmed its debt load by $9.9 billion resulted in an upgrade from Moody's Investors Service. Market players said on Monday that the decline in debt has placed the company on better footing than GM or Chrysler LLC.

GM is a Detroit-based automaker. Ford is based in Dearborn, Mich.

Hertz builds positive momentum

Hertz paper continued on its upward track, traders reported.

"It seems to be moving up half a point a day," one trader said, placing the 8 7/8% notes due 2014 at 63.5 bid, 64.5 offered.

Another trader called that issue up a deuce at 63 bid, 65 offered, while another source deemed the debt a point better at 65 bid.

Fitch Ratings said the Park Ridge, N.J.-based company's credit rating was unaffected by the company's plan to repurchase up to $500 million of its term debt. The rating agency said the amount was a small portion of the company's overall debt.

Still, investors have seemed more interested in the name, even more so after news last week that the company had purchased Advantage Rent-A-Car's assets for just over $30 million.

Additionally, Hertz announced Tuesday that its subsidiary, Hertz Equipment Rental Corp., had purchased Rent One, a provider of power to event and media companies in Spain.

With the recent acquisitions, some have wondered if the company's bonds will make their way back to high-yield desks, especially given the steady increase in the bonds.

"Right now, they are sort of on the line [between distressed and high yield]," a market source said.

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