US CORP BOND WRAP-China stocks unlock door for US bond deals

By Davide Scigliuzzo and Joy Wiltermuth

NEW YORK, July 9 (IFR) - Charter Communications (NasdaqGS: CHTR - news) led the way in an almost US$20bn session Thursday as the US high-grade primary market sprung back to life, thanks to a bounce-back in Chinese stocks that soothed nerves in the broader markets.

Hours after the Shanghai Composite Index rebounded to post its biggest daily percentage gain in six years, Charter and five other borrowers pulled the trigger on new bond deals.

Charter's split-rated six-part US$15.5bn deal - with maturities ranging from five to 40 years - will help fund its US$56bn acquisition of larger telecoms rival Time Warner Cable (Xetra: T3W1.DE - news) .

The surge of deals broke an uneasy lull over the past week, when a rout in Chinese stocks combined with jitters over Greece to keep would-be borrowers on the sidelines.

The overnight U-turn in Chinese equities was enough to unbolt the gates for Charter, John Deere, American Honda Finance, Commonwealth Bank of Australia (Other OTC: CBAUF - news) , AES Gener and Ventas Realty.

Charter's offering was flooded with orders very early. Books totaled US$48.5bn in the end, with the 10- and 30-year tenors seeing the heaviest demand.

The strength of the order book helped the company tighten spread levels throughout the bookbuilding process.

At final pricing, Charter was seen paying about 5bp-35bp in new issue concessions compared with Time Warner (Xetra: AOL1.DE - news) outstandings - still an impressive result given the recent volatility.

Many market-watchers were however cautious about reading too much into the deal, especially as so much of the headline risk that has flummoxed the market of late is yet to be resolved.

"You price a good quality deal at attractive levels and it's going to find buyers," Darren Hughes, a senior portfolio manager in fixed income at Invesco (NYSE: IVZ - news) , told IFR.

"This is not a big statement on the market's health overall."

Charter's senior secured notes are part of what is expected to be a US$31bn M&A funding package that will also include high-yield bonds and bank debt.

Goldman Sachs (NYSE: GS-PB - news) acted as a global coordinator while Bank of America Merrill Lynch and Credit Suisse (NYSE: CS - news) were active books, and Deutsche Bank (Xetra: 514000 - news) and UBS (NYSEArca: FBGX - news) passive books on the deal.

The deal - rated Ba1/BBB-/BBB- by Moody's, S&P and Fitch - will help fund the merger of the fourth- and second-largest cable companies in the United States.

It would be the largest cable M&A deal on record, according to Thomson Reuters (Dusseldorf: TOC.DU - news) data, valuing TWC at US$78.7bn including debt and US$56bn without.

Meanwhile A2/A-rated John Deere Capital priced a US$1bn two-part trade of three-year and five-year bonds that tightened about 12bp through the bookbuild on orders of US$3.65bn.

Ventas Realty also found solid interest for its 10.5-year bond offering, which was increased to US$500m from US$350m and priced at Treasuries plus 192bp - or 18bp tighter than IPTs.

Order books totaled US$1.6bn.

Chilean utility AES Gener raised US$425m in 10-year bonds that priced at 275bp, or 25bp inside IPTs, while American Honda Finance was able to take out US$1.25bn in three-year fixed and floating-rate notes that priced about 10bp tighter than IPTs.

With investors focused on Charter's deal, high-yield issuers again steered clear of the primary space, with no deals announced or priced.

(Reporting by the IFR team; Writing by Marc Carnegie; Editing by Shankar Ramakrishnan)