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Loan Market Commentary 04/06/2010

|Includes:CF, F, FII, FUN, GRM, GTN, ISLE, LAMR, LYO, REY, Radio One, Inc. (ROIA), ROSE, STAR, SVU, WTW
The path of least resistance continues to be firmer in the secondary. The sustained rally in equities is helping keep loan prices stable and on their path upward. Volumes are light with the forward calendar filling up in both the loan and high yield worlds. Investors are hungry, money is cheap but higher rate are coming; the Fed minutes may have said differently, however keeping rates low for too long is not a good thing, the free money will end. So, strike while the kettle is hot and as long as demand remains strong in the primary, there will be a ton of new issue getting done. In March alone we saw a four-fold increase in Loan new issue; volumes were up from $8 billion to $32 billion. The story was about the same for high yield with new issue volume jumping to $40 billion from $15 billion.
Back to the secondary; off the run names that could be candidates for a refinance are being targeted and have been active. That part of the market is the sweet spot right now and it’s a pretty safe place to stash some capital. If a name does getting taken out, you will get some decent price appreciation; many names coming due in 2011/2012 are trading in the high 80’s/low 90’s. If a name doesn’t get taken out you still are getting pretty decent yield.
Retail names were strong today after the ICSC index reported chain store sales were up +2.1% v. +0.6% last week and on a y/y basis they were up +4.7%, the highest level since April 2007. Oil and Gas, Chemical, and Industrials continue to firm as well. Lyondell’s paper was off about a half after an $80 million BWIC in the name came out. Cedar Fair’s term loan was down a quarter point after news that the deal with Apollo fell apart. But in all, it was pretty solid day for the loan market and of the names that moved, they moved up around a quarter. The LCDX 13 and 14 were quiet for most of the day, but both ended slightly positive at 104 1/16 – 104 15/16 and 97 ½ - 97 11/16, respectively.
  • Cedar Fair Entertainment Company said it terminated its merger agreement with Apollo Management. Cedar Fair will pay Apollo a $6.5 million termination fee. "The Board has heard from Cedar Fair unitholders and it is apparent that the merger transaction does not have the required level of investor support," said Cedar Fair CEO Dick Kinzel in a statement. Cedar Fair entered into a $250 million RC and $1.2 billion TLB in February to back the buyout.
  • Isle of Capri Casinos Inc announced late yesterday it has entered into a definitive purchase agreement with Bally Technologies Inc to purchase its Rainbow Casino in Vicksburg, Miss. pending regulatory approval. Isle of Capri Casinos will pay Bally Technologies $80 million in an all-cash transaction, assuming the transaction closes by approximately June 30, 2010, the company said.
  • Graham Packaging Company Inc yesterday announced that its subsidiary, Graham Packaging Company LP, expects to acquire China Roots Packaging PTE Ltd, a plastic container manufacturing company located in Guangzhou, China. Graham Packaging has signed a Share Purchase Agreement to acquire from PCCS Group Berhad, a Malaysian company, 100% of the shares of Roots Investment Holding Private Limited. The transaction is expected to close during the second quarter of 2010. Terms were not disclosed.
  • Lyondell's pre-petition CAM facility has been active today, with about 100 million of the paper changing hands already and another 80 million on offer. Lyondell recently issued a $500 million covenant-lite exit loan priced at LIB+400 with a 1.5% Libor floor. Lyondell earlier downsized the TLB from $1 billion and increased a concurrent senior secured first-lien note sale to $2.75 billion from $2.25 billion.
  • Commercial real estate lender iStar Financial is scheduled to hold a conference call for lenders on April 8 following the resignation of its chief financial officer James Burns, sources said. The company announced that the CFO's resignation will be effective April 16.
  • Gray Television Inc's TLB is up about a point to 96.75-97.75 today after the company reported operating results for 4Q09. The company said net revenue decreased 18% from the year-earlier period to $77.5 million. Net cash from operating activities for full-year 2009 were $18.9 million, the company said. The company sealed an amendment for covenant flexibility and to raise second-lien, unsecured or junior debt to reduce its term loan B about a week ago.
  • Moody's Investors Service assigned an initial Ba3 Corporate Family Rating (NYSE:CFR) to CF Industries Holdings, Inc. (CFH). Moody's assigned a Ba1 rating to the $2,300 million of guaranteed senior secured credit facilities of CF Industries, Inc. (NYSE:CFI). The senior credit facilities consist of a $1,200 million five-year term loan B-1, an $800 million five-year term loan B-2, and a $300 million five-year revolving facility. Additionally, Moody's assigned a B1 rating to $1,600 million in proposed senior unsecured notes expected to be issued by the end of April 2010. Moody's assigned a Speculative Grade Liquidity (NYSE:SGL) rating of SGL-1. The outlook is stable.
New Issue
  • Price talk on Reynolds & Reynolds' $1.82 billion, seven-year term loan B is LIB+350-375 with a 1.75% Libor floor. Sources also said that they expect corporate family ratings would remain at B1/B+. As of yesterday, there was $400 million in orders in the TLB book. The $1.895 billion deal is split into the $1.82 billion term loan and a $75 million, five-year revolving credit facility. Proceeds are to refinance the company's existing first-, second- and third-lien term loans. Deutsche Bank, Bank of America Merrill Lynch and Credit Suisse are lead arrangers.
  • Federated Investors Inc's $325 million, five-year term loan has been increased to $425 million from an original target of $325 million. The deal was heavily oversubscribed and commitments were scaled back. Proceeds are for stock repurchase and to pay dividend. Pricing is LIB+200 and base rate pricing is LIB+100. Financial covenants include a maximum leverage ratio of 2.5 times and a minimum interest coverage ratio of four times.
  • CF Industries Holdings Inc is expected to close books on its institutional term loan today at noon, well ahead of the April 14 deadline, owing to heavy oversubscription. The $800 million term loan B-2, targeted at institutional investors, is talked at LIB+350 with a 1.5% Libor floor and a 99.5 OID. Pricing will step down to LIB+300 upon a successful completion of the company's equity offering. The company is also seeking commitments to its $300 million, five-year revolving credit facility and $1.2 billion, five-year term loan B-1. These two pro rata tranches are targeted at banks. Pricing on the revolver and TLB-1 start at LIB+350. The margin will step down to LIB+300 following the equity offering. There is a 2% Libor floor and the OID is 98.5. The corporate family rating is BB+, while the rating on the pro rata tranches is BBB. The TLB-2 is unrated.
  • Lamar Media Corp announced today that they are offering their term loan B at 99.5. The company is seeking a $1.125 billion, three-tranche refinancing consisting of a $250 million, five-year revolving credit facility, a $300 million, 5.5-year term loan A and a $575 million, 6.5-year term loan B. The revolver is priced at LIB+300 with a 50bp undrawn fee. The TLA is priced at LIB+300, while the TLB is priced at LIB+325 with a 1.5% Libor floor. The TLA amortizes from the second year with 5%, 10% in years three and four, 20% in year five and 55% on maturity. The TLB amortizes at 1% per annum and the balance at maturity. The deal is secured by stocks and material assets and subsidiaries. Proceeds will be used to repay the company's existing senior secured credit facilities from 2005.
  • The coupon on real estate franchising company RE/MAX International's $215 million, six-year term loan B is expected to be flexed down to LIB+375 from LIB+400 and a 101 call protection would likely be added. JP Morgan leads the deal, which also includes a $10 million, four-year revolving credit facility. Proceeds are to refinance existing debt and to pay a $10 million dividend to the company's founders/owners.
  • SunTrust is launching in Washington D.C. on April 14 a $235 million senior financing for Mid-Atlantic Convenience Stores. Proceeds are to back the acquisition of a number of convenience stores from Exxon in the Mid-Atlantic region. The deal includes a $35 million revolving credit facility, a $150 million term loan and a $50 million delayed-draw term loan, which is available for four months from close. The maturity on the financing is five years. Pricing is LIB+425 with a 62.5bp unused fee on the revolver. Catterton Partners, the sponsor, is arranging junior debt. The syndication is expected to be targeted at banks.
  • Rosetta Resources Inc (NASDAQ:ROSE) USD200m 144A sr notes due 2018 (8y) NC4. Expected ratings Caa1/B+. Via JPM/BNPP/WFS joint books, MUS, USB, BMO, Johnson Rice, Canacord as co-managers. Roadshow 04/06-12. UOP: repay USD80m 2nd lien term loan and repay revolver. Biz: independent oil and gas company engaged in the exploration and production of natural gas properties. HQ: Houston, TX.
  • Launched USD1.75bn at 7.125%: Ford Motor Credit Co LLC SEC registered sr notes due 2015 (5y). NC life. B1/B-/B+. Via Barc/Citi/JPM/RBS joint books. Co-managers TBD. Pricing this afternoon. Merge Healthcare Inc (NASDAQ:MRGE) USD200m 144A sr sec notes due 2015. Via MS. UOP: fund the acquisition of AMICAS Inc (AMCS) for USD6.05 per share or USD248m total purchase price. MRGE will use available cash, including USD40m of pre- funded equity investments from mezzanine investors to complete the financing. Biz: offers healthcare data and diagnostic software products and services. HQ: Milwaukee, WI.
  • LIN Television Corp (TVL) USD200m 144A sr notes due 2018. Ba3/-- (stable/-- ). Hear via JPM+. UOP: repay bank debt. LIN TV owns and operates TV stations and other media. HQ: Providence, RI.
On the Break
  • SuperValu Inc completed an amend/extend on $2 billion of its credit facility. The extended TLB-2 freed to trade late yesterday in a 100-100.5 market. The non-extended TLB-1 is 99.5-100. the company was originally seeking to extend $500 million of its term loan B to October 2015 from June 2012 at a boosted spread of LIB+275 and $1.5 billion of its revolving credit facility to April 2015 from June 2011 at LIB+225. The company's non-extended tranches now include $600 million of its revolver expiring in June 2011, $366 million of its term loan A expiring in June 2011 and $502 million of its TLB expiring in June 2012. SuperValu said it has reduced total debt in the past fiscal year by roughly $850 million.
  • Weight Watchers International's extended TLC and TLD are both quoted 99-99.5 after freeing to trade this afternoon. The non-extended TLB is 98.5-99.5. The company extended a portion its TLA and TLB to June 2015 and June 2016, respectively. The extended TLA has been renamed a TLC and the extended TLB is now a TLD. The TLC and TLD are both priced at LIB+225. Lenders who consented to extending the TLA received a 50bp fee, while lenders who agreed to extend the TLB received 5bp.
  • Radio One Inc is seeking an amendment to its Wachovia Bank-led credit facility from June 2005, sources said. The company is seeking covenant relief namely on the total leverage and senior secured leverage clauses. In exchange for the amendment, lenders are offered a bump in pricing from the existing LIB+200-225. The deal, due in 2012, consists of a $500 million revolving credit facility and a $300 million term loan that had been partially paid down.