New issuance was high last week, with a lot of smaller deals and a handful of large offerings in the market.
New issuance was high last week, with a lot of smaller deals and a handful of large offerings in the market. Demand was healthy and the cable sector was heavily represented as issuers sought to lock in funding ahead of the widely anticipated jobs report.
Entertainment concern Warner Music Group sold a two-part offering that was downsized prior to pricing after the company was able to increase a bank loan financing. One investor said the deal was noteworthy because underwriters Deutsche Bank, Banc of America Securities, Lehman Brothers and Merrill Lynch misjudged demand and marketed the $465 million tranche with a 8.5% coupon. But the class was eventually priced more than 100 basis points tighter, at 7 3/8%. This indicated the underwriters didn't realize the demand for it, according to the investor, who said it is unusual for them to be that far off in a steady market. The sale also included £100 million in sterling-denominated, 8 1/8% 10-year paper. Proceeds will go toward the Edgar Bronfman-led leveraged buyout of Warner Music from Time Warner Inc.
Cablevision Systems and CSC Holdings were part of a slew of cable deals that came to market. Cablevision sold a $2 billion, three-part, offering, including $1 billion in 8% senior notes of '12 (B3/B-) through a syndicate of bulge bracket banks. Meanwhile, Citigroup Global Markets, Banc of America Securities, Bear Stearns, Merrill Lynch and Wachovia Securities distributed CSC's $500 million in 6.75% senior notes (B1/BB-) of '12. One investor said the large deals appeal to accounts that are benchmarked to the various indices. Because these deals will constitute a decent part of the index, there is natural demand from big players who will need to purchase the debt to keep in line with their benchmark. He said the cable sector is also seen as being stable and predictable, with very large fixed-asset investments that bode well for bondholders.