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Loan Market Commentary 04/07/2010

|Includes:BBI, FDO, Freescale Semiconductor Inc. (FSL), HCA, LAMR, REY, SKH
The trend in the loan market continues; the path of least resistance is higher. The news over night that Greek spreads are at their widest since 1998 barely caused as much as a ripple in the US Credit Markets. And why should it, the market is confident that the Fed and Congress will be there to bail us if we fail. And why is the market so confidant that they will do this? Well, because most of the toxic assets that caused the credit malaise have been nationalized and now sit on their balance sheet, so it is their best interest to do so and they will do whatever takes to manipulate narrower and  to keep “rates low for an extended period of time.” We are not blind and should hopefully realize exactly what is going on here; we are inflating a bubble which has helped us get out of the mess we were in. But, like all bubbles, they eventually burst, so keep your eyes open and stay hedged. The auction for $21 billion of 10yr notes was strong and is helping the US keep the Credit bubble inflated. This week alone we have sold $61 out of a total of $74 billion in UST’s. But, I feel that there is some nervousness brewing as we are one bad treasury auction away from a credit shock, at which point the trend could see a reversal. But, with confidence high and demand for US government debt still pretty strong, it looks like the bubble is still far from bursting.
Back in loan land the primary was active today with Integra Telecom and Lamar Media both announcing new deals. Freescales’ term loans were on fire after the company upsized their bond deal to take out their entire non-extended term loan. HCA’s term loans were firm after their IPO announcement. It is expected that the company is going to use the proceeds to prepay bank debt. So, with credit being easy expect to see the loan market remain firm as supply is reduced by bond issuance and IPO’s. The LCDX 14 is becoming more of a focus now and was last seen up an eighth at 97 5/8 – 97 7/8.
  • Blockbuster Inc late Tuesday announced new agreements with Twentieth Century Fox Home Entertainment and Sony Pictures Home Entertainment. Additionally, these studios will provide new enhanced payment terms to Blockbuster in exchange for a first lien on Blockbuster Canada Co's assets. The new payment terms help Blockbuster continue the recapitalization initiatives already underway. Additionally, Blockbuster has implemented a plan that cuts operating costs by $200 million this year to preserve cash and further improve liquidity. Blockbuster is also in discussions with advisors for its bondholders related to debt recapitalization.
  • The Rhodes Companies LLC, along with 31 affiliated entities, announced today they have emerged from bankruptcy protection. The company's former first-lien lenders will now hold 100% of the equity in the new company, according to a statement. The companies first filed for chapter 11 bankruptcy on March 31 and April 1 2009.
  • HCA Inc's loans moved higher on news of the company's planned $3 billion IPO. The extended, $2 billion TLB-2 is now 99.5-100.25 and the non-extended TLB is 98.5-99. The TLA is currently 97.75-98.25. The IPO does not carry a mandatory prepayment of the issuer's loans, sources said, but expectations are that the company will put proceeds toward near-term maturities. Earlier, the company extended $2 billion of its term debt from November 2013 to March 17 at a 100bp increase in spread to LIB+325. The TLA and non-extended TLB mature in 2012 and 2013, respectively. Earlier this month, HCA priced $1.4 billion in senior secured bonds to prepay bank debt. The notes were priced at a discount to yield 7.375%.
  • CKE Restaurants Inc, owner of the Hardee's and Carl's Jr. hamburger chains, said it received an alternative takeover offer, which could lead to a superior proposal, sending its shares up 6 percent in pre-market trade. The new offer did not include evidence of a committed financing and is subject to several conditions, CKE Restaurants said in a statement. The fast food chain had in February agreed to be bought by private equity firm Thomas H. Lee Partners for $619 million cash and had 40 days to seek superior offers. Porter Orlin, a New York-based investment manager holding almost 2.3 million shares in CKE, wrote a letter to the company, expressing strong dissatisfaction with Thomas H. Lee Partners' plan to take the company private.
  • Travelport's loans are stable to a touch higher after the company posted its 4Q09 results. The issuer's strip is currently 97-97.5 and the TLC is 100.5-101. the company said EBITDA in the quarter declined 7%, while revenue rose 2% from the year-earlier period to $533 million.
  • Discount retailer Family Dollar Stores Inc reported a higher-than-expected quarterly profit, and forecast earnings that should top Wall Street estimates. The company reported second quarter net income of $112.2 million, or 81 cents per share, up 33% from $84.1 million, or 60 cents per share, a year earlier. Analysts on average were expecting earnings of 78 cents a share, according to Thomson Reuters. Sales at stores open at least one year were up by 3.6%. Its third quarter earnings forecast is between 71 cents and 76 cents per share, above analyst expectations of 70 cents per share.
Price Talk
  • Reynolds & Reynolds is offering its $1.82 billion, seven-year term loan B at an OID of 99.5 and price talk is LIB+350-375 with a 1.75% Libor floor.
  • Pricing on Skilled Healthcare's $300 million term loan has firmed at LIB+375, the wider end of LIB+350-375 talk. A leverage-based step-down to LIB+350 has also been added and the Libor floor has been reduced to 1.5% from 1.75%. In addition, the OID has been shifted to 99.25 from 99. Credit Suisse, which leads the deal, has also added a $30 million delayed-draw term loan available for nine months. Proceeds are to refinance debt.
  • RE/MAX International has cut pricing on its $215 million, six-year term loan B to LIB+375 from LIB+400. A 101 call protection has also been added. The 1.75% Libor floor and 99 OID remain unchanged. Proceeds are to refinance existing debt and to pay a $10 million dividend to the company's founders/owners.
  • Price talk of 9.25%-9.50% Freescale Semiconductor Inc USD750m 144A (no reg rights) sr sec 1st lien notes due 4/15/18 (8y). NC4. B2/B- (stable/stable). Via CS sole books. Pricing this afternoon.
  • Price talk of 8.50% area is out on LIN Television Corp (TVL) USD200m 144A sr notes due 2018 (8y). NC4. Ba3/B+ (stable/positive). Via JPM/DB joint books, BAML, WFS as co-managers. W/reg rights. Books close at 2pm today. Pricing this afternoon.
  • GE Capital is offering Scotsman Industries' $115 million term loan at LIB+450 with a 1.75% Libor floor and a 99 OID. The $145 million deal, which also includes a $30 million revolving credit facility, was launched today. Proceeds are to refinance debt at Warburg Pincus-owned Scotsman Industries. The company is a supplier of commercial ice machines.
New Issue
  • Integra Telecom announced it will raise a $270 million bank loan to refinance existing debt. The deal will include a $60 million revolving credit facility and a $210 million first-lien term loan. In addition, the company will also raise $500 million in first-lien notes. In July, Integra reached an agreement with requisite majorities in its three primary lender groups to restructure its debt. As per the agreement, Integra's senior secured second-lien operating company debt and unsecured parent company debt was to be converted into common equity. As a result, the company's overall debt was reduced from almost $1.3 billion to roughly $600 million. This new debt level translates to 2.7 times Integra's 2008 operating EBITDA of $225 million.
  • Integra Telecom Holdings Inc USD500m 144A sr sec 1st lien notes due 2016 (6y). NC3. B2/B-. Via JPM/DB/GS/Jefferies/MS joint books. No reg rights. Investor call today at 4pm. Pricing Friday (also held a non-deal roadshow last week). UOP: along with a new USD210m 1st lien term loan and USD60m 1st lien revoler, to repay sr credit facility, and for GCP. Biz: Fiber-based telecom carrier in the Western US. HQ: Portland, OR.
  • Lamar Media Corp is offering three ticket levels for pro rata commitments on its $1.125 billion, three-tranche financing. The upfront fee is 100bp for $50 million tickets, 75bp for $35 million, and 50bp for less than $35 million. Commitments on pro rata commitments are due April 13, while commitments on the term loan B are due April 9. The TLB was earlier reported to be offering an OID of 99.5. The deal consists 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 TLB. 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 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.
  • Freescale Semiconductor's loans rose after the company upped their originally planned $750 million senior secured note sale to $1.38 billion. The Proceeds will now refinance the entire non-extended TLB. The non-extended TLB rose about four points to cuff par, while the extended piece rose about 75bp to 95 bid. The company extended about $1.9 billion of its TLB $3.5 billion TLB to Dec. 2016 after the application of proceeds of a previous $750 million note sale to pay down the facility. Pricing on the extended portion of the TLB was bumped up to LIB+425.
  • Freescale Semiconductor Inc increased to USD1.38bn (from USD750m) 144A sr sec 1st lien notes due 4/15/18 (8y). NC4. B2/B- (stable/stable). Via CS sole books. No reg rights. 9.25% at 100. +569bp. Del 04/13 (T+4).UOP: refinance existing term loans.