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  • Leveraged Loan Market Commentary 06/30/2010 0 comments
    Jun 30, 2010 6:35 PM
    Overnight, Asia was tame and Europe was mildly positive as the Euro banking system may not be as stressed as previously thought, according to the results of the ECB’s latest tender of 3-month funds, helping ease liquidity fears abroad. However, the disappointing German unemployment numbers weighted on the minds of European investors and the equity market closed flat. Here in the US, things started out positive on the back of the Chicago PMI number, which showed some resilience. Equities were up a little and the LCDX 14 came out at 94.5/95 (+.25). But, the PMI number wasn’t substantial enough to get anything going and the market chopped along for the majority of the day. Loans continued to show a negative bias but for the most part were flat. FDC was down half a point to 83.75/84.25, HCA was down an eighth to 94.125/94.5 and TXU was unchanged. Many of the newly issued loans lost about an eighth and distressed issued lost around quarter point, mostly due to dealers cleaning up levels for month-end. Volumes through out the markets were very subdued today, especially in loans which were virtually dead as investors are inclined to stay sidelined being that today was quarter-end/month-end and the holiday weekend is approaching. But, at 3pm the markets got knocked after Moody’s decided to open their mouth to announce that they are going to but Spain’s credit rating up for review, prompting a flight to safety. Equities sold off around a percent on the news; the Dow finished the day at 9,774.02 (-0.98%) and the S&P closed at 1030.71 (-1.01%). The LCDX, which was in positive territory all day, followed suit finishing the day down an eight at 94.125/94.375. Cash loans didn’t really react to the news and maintained their negative bias; decliners outpaced advancers 3.5:1.
    See, anything is possible, who expected Moody’s to come out with that statement today? It might be summertime but you need to be on your toes and watch what is happening out there. Light volumes and skittish invests are going to plague the market for some time. I just hope that something snaps and the market changes its course because the funk we have been in is plaguing the primary market; most of the new issues in June had upward price flex. Pretty soon we might see deals getting pulled again, and that is something that no one is looking for. I am hoping for a better July, but that story has yet to be told.
    • Old News, but worth noting: 95% of the BWIC traded with most of the paper going for ½ to 1 point below market prices. It attracted a lot of bids.
    • Europe CDS hold tighter after ECB results
    • Moody's puts Spain Aaa rating on review for cut
    • German unemployment falls, seen hitting floor soon
    • Ireland exits recession in Q1, recovery fragile
    • Ford pays down $4 bln in debt, shares rise
    • Wall St tumbles to worst quarter since Lehman fall
    • Fed's Lockhart says now is not time to raise rates
    • Chicago PMI fell to 59.1 this month, but was above the an estimated 59.0
    • ADP National Employment numbers showed growth of only 13K jobs, down from 57K in May
    • Today's $120 million Blackstone/GSO Senior Floating Rate Term Fund Financing transaction, led by Morgan Stanley, is a financing off of a closed-end fund by the same name launched in May. The common shares of the fund have the ticker "BSL" on the New York Stock Exchange. The financing off the fund invests in levered loans, sources said, with a focus on B1 and B2 loans and some high yield bonds. The financing will function like a market-value CLO. This means that the deal can be unwound if the value of the loan portfolio drops. The transaction is rated by Fitch. If the fund issues at maximum leverage (both senior debt and preferred stock), there will be 67% subordination.
    Price Break
    • DynCorp International's $565 million, six-year term loan B broke for trading at 99-99.5, sources said. The loan was sold at 98. Pricing on the facility was cut to LIB+450 from LIB+475. There is a 1.75% Libor floor. The facility also has 101 soft call protection. The company also priced $455 million in senior unsecured notes due 2017 at par to yield 10.375%. The facility ratings are Ba1/BB, while the corporate family ratings are Ba3/BB-. Proceeds are to back a $1.5 billion buyout by Cerberus Capital, which will provide $591.6 million in equity.
    • NRG Energy's extended term loan B is quoted 97.75-98.25, while its extended LC facility is quoted 97.25-97.75. The non-extended TLB is quoted 95.25-95.75 and the extended LC is quoted 94.75-95.25.
    New Issue
    • Interactive Data Corp has extended the commitment deadline on its $1.3 billion term loan B to July 8. Senior and total leverage are 4.4 times and 6.8 times, respectively. Amendments price talk on the TLB is LIB+475 with a 1.75% Libor floor and an OID in the 98 area. There is 101 soft call protection for one year.
    • Price talk on Kenan Advantage Group's $450 million bank loan is LIB+400 with a 1.75% Libor floor. The OID is as follows: 98.75 on the revolving credit facility, 99 on the term loan and 98 on the delayed-draw term loan. Senior and total leverage are around 2.75 times. A Ba3 facility and corporate family rating was received. Commitments are due around July 14. Kenan is a logistics and liquid bulk transportation services provider to the fuels, chemical, and food end-markets.
    • Credit Suisse, Bank of America Merrill Lynch and Barclays Capital are launching July 8 a $625 million loan backing Vertafore's $1.4 billion buyout by TPG Capital. The deal includes a $75 million, five-year revolving credit facility and a $550 million, six-year term loan. TPG will purchase the company from Hellman & Friedman and its co-investor JMI Equity. Additional terms of the transaction were not disclosed. Pricing on the extended facilities was increased to LIB+375 from LIB+250. The add-on term loan also was priced at LIB+375 along with a 1.5% Libor floor. Vertafore makes software for the property and casualty insurance industry.
    • BMO launched yesterday an $86 million dividend recap deal for Aspen Marketing. The deal includes a $20 million revolving credit facility and a $66 million term loan. Price talk is LIB+500 with a 1.75% Libor floor and a 98 OID. Senior and total leverage is two times and 3.5 times, respectively. Proceeds will be used to pay a $56 million dividend to sponsor DE Shaw. The company has $33 million in EBITDA.
    • Rabobank is sounding lenders to gauge appetite for Hearthside Food Solutions' acquisition loan at a spread of LIB+600, sources said. Pricing has not yet been flexed up officially but the deal has received a lukewarm reception from lenders so far. the company went out with price talk of LIB+550 with a 1.75% Libor floor and a 98 OID on its $280 million financing backing its acquisition of Consolidated Biscuit Co and the cereal division of Golden Temple. Rabobank is lead left and is joined by GE Capital as co-lead arranger, joint bookrunner and syndication agent. Bank of America Merrill Lynch has also joined as co-lead arranger and co-documentation agent, and Fifth Third Bank is co-documentation agent. The deal consists of a $245 million, six-year term loan and a $35 million, five-year revolving credit facility with a 75bp undrawn fee. Senior secured and total leverage are 3.2 and 4.2 times. The combination of the three busineses will create a premier bakery with approximately $700 million in total revenue, and 12 facilities across seven states. Hearthside is specialized in making granola bars, cereals, popcorn and snack mixes. Consolidated Biscuit makes cookies, crackers, fruit and cereal bars, ice cream cones, nuts and candies.
    • Pricing on Insight Global Inc's $121 million, six-year term loan B is being lifted to LIB+600 from revised talk of LIB+550-575. Originally, price talk was LIB+525. Sources said the issuer is in the staffing services business, which is viewed as challenging given that several deals in that industry have gone south of late. Also, leverage is deemed high at 3.25 times senior and 4.25 times total. BNP Paribas leads the $141 million loan, which also includes a $20 million, five-year revolving credit facility. There is a 1.75% Libor floor and an OID of 98. Proceeds will be used to finance Harvest Partners' acquisition of the company, refinance existing debt and pay transactions fees and expenses. Corporate family ratings of at least B2/B are expected.
    • Price talk on Fidelity National Information Services' $1.4 billion term loan B is LIB+400 with a 1.5% Libor floor and a 98.5-99 OID. The TLB was launched today by JP Morgan. It backs the company's share buyback plan.    
    • MetroPCS launched yesterday via JP Morgan an amend/extend to its term loan B. The issuer is looking to extend $800 million of its $1.5 billion term loan B outstanding from 2013 to 2016. A spread increase from LIB+225 to LIB+350 is on offer.
    What to watch July 1
    • Initial claims (Department of Labor) 8:30 a.m. ET
    • Construction spending, May (Census Bureau) 10 a.m. ET
    • Institute for Supply Management manufacturing report 10 a.m. ET
    • Pending home sales index (National Association of Realtors) 10 a.m. ET
    • Constellation Brands, Inc. Q1 earnings before market open, conference call 10:30 a.m. ET
    • MSCI Inc. Q2 earnings, conference call 11 a.m. ET
    • Smurfit-Stone Container Corp. conference call 11 a.m. ET
    • Flow International Corp. Q4 earnings after market close, conference call 5 p.m. ET
    Don't miss the loan market event of the year: The 16th Annual Thomson Reuters LPC Loan Conference. Early bird discounted rates expire today.  Register now!
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