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  • Loan Market Commentary 05/17/2010 0 comments
    May 17, 2010 6:09 PM | about stocks: UHS, NEFF, CTLUF, ACHN, GMA, SIX, MDP, ETE, ETP, CPN, CPLA
    The lack of confidence in Europe continues to weight on the markets; equities opened lower and corporate bond spreads widened. Loans opened the day up mixed and were very quiet. The LCDX 14 opened up down an eighth at 96 ¾ - 97. As the morning progressed we saw bids drift lower as dealers were seen adjusting paper down in an attempt to spark some interest; but no one came to the table. Flow names were down by about a quarter to half a point by half time and the LCDX was down another quarter to 96 ½ -96 3/4. Decliners outpaced advancers by 3 to 1 as we continue to see a negative bias in the market. The feeling is that things will be weak leading up to the Memorial Day weekend as people look to de-risk before the summer laziness hits and liquidity really dries up. The market has been long, and some layers were shed at the height of the Greek Crisis, but many feel that there is still more to go. On the news front, today was pretty positive. GM posted a profit for 1Q10 and revenue rose to $31.48 billion from $22.43 billion and their term was flat on the news at 99 -100 ½. Psychiatric Solutions term loan rose to 98 5/8 – 99 5/8 on the Universal Healthcare buy-out news.
     
    Despite all the doom and gloom that has been blasted all over the headlines and TV, there is theme developing that is worth watching. We all know that contagion fears are pushing the loan market lower, but step back and look at the situation from a different point of view. The EU is a mess and a lot of people have been pulling money out of that region. So, the money that is being pulled from overseas needs to be redeployed somewhere. Today’s Net Long Term TIC data showed that foreign buying increased from $140.5bn in March from $47.1bn in February. So, as the Greek fears began to heat up we saw a sizable increase in demand for US denominated assets. Money is coming back to the US and for good reason; we have shown signs of sustained economic recovery, corporate earnings have improved, and asset prices have rebounded. Being that they are looking to the US for less volatile products that offers a reasonable return, I think that we could see some foreign buyers flock to the US leveraged loan market.
     
    News
    • JP Morgan and Deutsche Bank have committed to provide $4.15 billion in debt financing to back Universal Health Services' $3.1 billion acquisition of Psychiatric Solutions Inc, according to a UHS company presentation. Of the financing, $2 billion will go towards purchasing PSI equity, $1.4 billion towards refinancing UHS and PSI debt and $200 million towards transaction fees. Pro forma for the transaction, total debt-to-EBITDA will be 3.8 times. UHS will acquire PSI for a price of $33.75 per share in cash, or approximately $2 billion. Including the assumption of approximately $1.1 billion in PSI net debt, the total transaction consideration is approximately $3.1 billion. The 2009 combined revenue and EBITDA of UHS and PSI was more than $7 billion and approximately $1.1 billion, respectively. On a combined basis, in 2009 the company had approximately 6.2 million patient days in 221 heath care facilities across 37 states and territories. As a result of this combination, UHS' revenue from the behavioral health care business will represent approximately 45% of combined 2009 revenue and approximately 54% of combined 2009 EBITDA, before the allocation of UHS' corporate overhead costs.(NYSE:UHS)
    • Jefferies has provided committed financing to back the $242 million acquisition of Double-Take Software by Vision Solutions, a Thoma Bravo portfolio company. Vision Solutions, Inc. is a provider of high availability, disaster recovery and system management solutions for IBM Power Systems. (TGIS)
    • U.S. equipment rental company Neff Rental Inc filed for a prearranged Chapter 11 bankruptcy protection late Sunday, supported by its largest first lien term loan lenders. (NYSE:NEFF)
    • Catalyst Paper Corp announced Friday it sold $110 million in Class B 11% senior secured notes due December 15, 2016, in a private placement transaction, at an offering price of 86. (OTC:CTLUF)
    • Barclays Capital is expected to make changes to Hillman Cos' loan, including a potential downward price flex, but is waiting till the company's note issue is completed. The company's $290 million, six-year term loan B is talked at LIB+375 with a 1.75% Libor floor and a 99 OID.
    • JP Morgan and Deutsche Bank have committed to provide $4.15 billion in debt financing to back Universal Health Services' $3.1 billion acquisition of Psychiatric Solutions Inc, according to a UHS company presentation. Of the financing, $2 billion will go towards purchasing PSI equity, $1.4 billion towards refinancing UHS and PSI debt and $200 million towards transaction fees. (UHS)
    Earnings
    Beat
    • General Motors,posted a first-quarter profit on Monday. Revenue rose to $31.48 billion from $22.43 billion in the pre-bankruptcy GM a year before. Net income, after preferred stock dividends of $203 million to the U.S. and Canadian governments and GM's major union, was $865 million, compared with a loss of $5.98 billion a year before. (GMGMQ.PK)
    • Six Flags Entertainment Corp said Q1 revenue rose 12% to $57.3 million and its loss from continuing operations increased by 32% to $180.7 million. The company said annual cash interest expense will be significantly reduced to approximately $77 million. (NYSE:SIX)
    Ratings
    Assigned
    • Moody's Investors Service assigned a Ba3 Corporate Family Rating ("CFR") to AWAS Aviation Capital Limited (AWAS), as well as a Ba2 rating to the company's proposed $530M six-year Secured Term Loan issuance. The rating reflects AWAS' monoline nature, asset impairments, aggressive growth strategy and reliance on secured funding. The rating also considers the company's strong capital levels, relatively well-balanced risk exposures (geographic, aircraft and customer), and experienced management team.
    • Standard & Poor's Ratings Services said today that it assigned its 'BB' corporate credit rating to Dublin, Ireland-based AWAS Aviation Capital Ltd. The outlook is stable. At the same time, we assigned a 'BBB-' rating to the proposed $530 million secured term loan that matures in 2016. We also assigned a '1' recovery rating to the loan, indicating our expectation for very high (90% to 100%) recovery for lenders in the event of a payment default. The rating is based on proposed terms and will be reviewed upon final documentation.
    New Issue
    • Credit Suisse is holding a bank meeting at 2:00 p.m. on Wednesday to launch a $410 million, four-year exit term loan for Trident Exploration, sources said. Proceeds, along with a rights offering, will be used to repay existing loans/creditors and fees and expenses. In a filing with the U.S. Bankruptcy Court for the District of Delaware, the natural gas producer listed estimated assets in the range of $1 million to $10 million and estimated liabilities in the range of $500 million to $1 billion.
    Price Talk
    • Meredith Corp is seeking a $150 million, three-year revolving credit facility for refinancing. Price talk is at LIB+250 with a 37.5bp undrawn fee. A bank meeting is scheduled for tomorrow. (NYSE:MDP)
    • Credit Suisse has flexed down pricing on NextMedia's $135 million term loan by 75bp to LIB+625 and has tightened the OID to 99 from 98. A 2% Libor floor remains unchanged. The corporate family rating is B3/B.
    • Price talk on Calpine Corp's $1.3 billion, seven-year term loan is based on a ratings grid. Pricing is LIB+350 with a 1.5% Libor floor and a 98 OID for a four-B rating profile and LIB+375 with a 1.5% Libor floor and a 98 OID for ratings of B1/BB- or Ba3/B+. Moody's Investors Service upgraded Calpine's corporate family rating to B1 from B2. S&P's corporate credit rating on the company is B. Citi and Deutsche Bank are to the right of Credit Suisse. Today, the company announced that it priced $400 million in senior secured notes due 2019 at 8%. Calpine emerged from bankruptcy in 2008 via a $7.6 billion exit financing package that included a $6.3 billion first-lien term loan, a $1 billion revolver and a $300 million bridge.
    Amendment
    High Yield
    • Calpine Corp today said it has priced $400 million in 8% first-lien senior secured notes due 2019 in a private placement transaction. (NYSE:CPN)
    • Capella Healthcare Inc USD500m 144A sr notes du 2017 (7y). NC3. Ratings TBD. Via BAML/Citi/BC joint books, CA, DB, HFG Healthco Securities, MS as co- managers. W/reg rights. Road show 05/17-20. UOP: repay credit facility. Equity sponsor: GTCR. Biz provider of general and specialized acute care, outpatient and other medically necessary services in primarily non-urban communities. (NASDAQ:CPLA)
    • American Tire Distributors Inc USD250m 144A 2nd lien sr sec notes due 2017 (7y). NC3 (MWC T+50bp) (1st call par + 3/4 coupon). Equity claw: 3y 35%. Ratings TBD. Via BAML/Barc/RBS/UBS joint books. W/reg rights. Roadshow starts today. Pricing mid this week. UOP: fund the acquisition of ATD by TPG from Investcorp, Berkshire Prtnrs, Greenbriar Equity Group for USD1.3bn total transaction value (USD673m purchase price and USD578m debt repayment). ATD has commenced tender offers for its Sr FRN due 2012 (USD1,004 total consideration), 10.75% sr notes due 2013 (USD1,034), 13% sr disc notes due 2013 (USD1,019). The acquistion consideration and debt repayment will be funded with approximately USD635m in new debt issued by ATD Inc and USD713.6m of equity by TPG. The debt financing will consist of a draw of USD185m by ATD Inc under a USD450m asset-based credit facility; the concurrent private placement of USD200m sr sub notes due 2018, and the USD250m 2nd lien sr sec notes. Biz: distributes replacement tires to local, regional and national tire retailers. HQ: Charlotte, NC.
    Postponed
    • Postponed due to market conditions: Regal Cinemas Corp USD250m SEC registered add-on to its 8.625% sr notes due 7/15/19. Via CS+.
     
    What to Watch
    ·          8:30 a.m. ET: Housing starts, April (Census Bureau)
    ·          8:30 a.m. ET: Producer price index, April (Bureau of Labor Statistics)
    ·          Treasury to auction four-week bills
    ·          8:40 a.m. ET: Valassis Communications Inc. at JPMorgan technology, media and telecom conference
    ·          9 a.m. ET: Rehabcare Group Inc. investor day
    ·          9 a.m. ET: Nalco Co. analyst day
    ·          9:20 a.m. ET: American Tower Corp. at JPMorgan technology, media and telecom conference
    ·          9:20 a.m. ET: Health Management Associates Inc. at Robert W. Baird growth stock conference
    ·          10 a.m. ET: Discovery Communications at JPMorgan technology, media and telecom conference
    ·          10 a.m. ET: tw telecom Inc. at JPMorgan technology, media and telecom conference
    ·          10:40 a.m. ET: MetroPCS Communications Inc. at JPMorgan technology media and telecom conference
    ·          10:55 a.m. ET: Omnova Solutions Inc. at Houlihan Lokey industrials conference
    ·          11 a.m. ET: Abraxas Petroleum Corp. conference call
    ·          7 a.m. ET: Local Insight Regatta Holdings, Inc. Q1 earnings, conference call 11 a.m. ET
    ·          11:40 a.m. ET: AMN Healthcare Services, Inc. at Robert W. Baird growth stock conference
    ·          12:50 p.m. ET: Sally Beauty Holdings Inc. at Robert W. Baird growth stock conference
    ·          River Rock Entertainment Authority Q1 earnings, conference call 1 p.m. ET
    ·          3:10 p.m. ET: Alliance Data Systems Corp. at JPMorgan technology, media and telecom conference
    ·          3:10 p.m. ET: United Online, Inc. at JPMorgan technology, media and telecom conference
    ·          3:10 p.m. ET: Windstream Corp. at JPMorgan technology, media and telecom conference
    ·          3:30 p.m. ET: School Specialty, Inc. at Robert W. Baird growth stock conference
    ·         Cequel Communications Holdings I, LLC Q1 earnings, conference call 12 p.m. ET
    Stocks: UHS, NEFF, CTLUF, ACHN, GMA, SIX, MDP, ETE, ETP, CPN, CPLA
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