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Leveraged Loan Market Commentary 07/01/2010

Well, the negative news flow continues. The employment, manufacturing, and home sales numbers this morning all signaled slower growth. Initial jobless claims came in at 472k, 20k more than expected. Manufacturing slowed to 56.2, down from 59.7 last month, and pending homes sales were down 30% m/m. This was not the best news for the economy as stimulus programs began to fade away. Equities sold off a little over 1% following those numbers and we came very close to seeing the “Death Cross” in the S&P as the 50-day moving average came close to crossing the 200-day moving average, signaling a bearish outlook on the market. But, luckily some bulls stepped in and bought the lows and the market came back a bit. After recovering, equities chopped around for the rest of the afternoon on low volume with the S&P finishing the day at 1027.37 (-0.32%) and the Dow closed at 9,732.53 (-0.42%).
The loan market opened weaker to unchanged this morning. Flow names started the day mixed with some names falling a quarter point, some were unchanged. The LCDX 14 opened the day down a quarter point to 93.875-94.125. Throughout the morning we saw bids continue to trickle lower by an eighth as equities sold off. But, volumes were essentially nonexistent with the holiday weekend already started for some and others busy reciting Caddy Shack quotes at a dealer golf outing. A few buyers and sellers were out and about but nothing to write home about. In the afternoon bids stabilized and little traded. The LCDX 14 gained back an eighth as equities improved to close at 94-94.25 (-.125).
So, not the best start for the month, but it could have been worse. Hopefully over the next couple weeks earnings will give the market something concrete to work off of and maybe the loan market can break this funk. For now we are going to be influenced by economic data, sovereign debt woes, and weak US leadership. But, ‘I'm going to give you a little advice. There's a force in the universe that makes things happen. And all you have to do is get in touch with it, stop thinking, let things happen, and be the ball’.
  • Ford June U.S. Vehicle sales rise 13.3%
  • U.S. June auto sales flat, Hyundai gains         
  • U.S. jobless claims rise, stoke recovery worries
  • Global manufacturing growth cools in June        
  • German banks safe in EU stress tests
  • Oil dives 4 pct on weak economic data in China, US
  • Gold slides to three-week low after U.S. data    
  • US sees new drilling moratorium in next few days  à Great way to kill more American jobs and increase dependence on foreign oil…
Price Break
  • Willbros Group Inc's $300 million, four-year term loan broke for trading at 94.5-95. Previously, the OID was widened to 94 from 97. The spread is LIB+750 with a 2% Libor floor. The spread is LIB+750 with a 2% Libor floor. Credit Agricole and UBS are leads on the term loan, while Credit Agricole is the sole lead on the revolver. Scotia and Natixis joined at the agent tiers. The deal backs the acquisition of InfrastruX Group.
New Issue
  • Gentiva Health Services' $600 million, six-year term loan B will be launched at a retail bank meeting on July 7. Senior and total leverage are 3.2 times and 4.4 times, respectively. Commitments on the issuer's pro rata facilities were due Wednesday. price talk on the pro rata facilities is LIB+400 with a 1.5% Libor floor and a 98.5 OID. Bank of America Merrill Lynch, GE Capital, Barclays Capital and SunTrust lead the deal.
  • BMO Capital Markets and SunTrust Robinson Humphrey will be launching on July 9 for Alliance Data Systems a new $200 million unsecured term loan A-2 due March 2012 at a bank meeting. Pricing is LIB+250 for senior leverage ratio of below 1.75 times, LIB+300 for 1.75-2.25 times, or LIB+350 for 2.25 times or above. The facility also comes with a $100 million increase option. Financial covenants include a maximum total leverage ratio of 3.75 times, a maximum senior leverage ratio of 2.75 times, a minimum interest coverage ratio of 3.5 times, and a delinquency ratio of 4.5%. Proceeds are for refinancing. The borrower has an existing revolving credit facility from Spetember 2006 and a term loan from May 2009.
  • JP Morgan, Barclays Capital and UBS are launching next week the $720 million loan backing Allscripts' $1.3 billion all-stock acquisition of Eclipsys. The loan includes a $150 million, five-year revolving credit facility and a $570 million, six-year term loan. The corporate family and facility rating are Ba2.
  • Dean Foods announced it has extended $492 million of its term loan B to April 2, 2016 and an additional $561 million to April 2, 2017. the 2016 and 2017 tranches offer spreads of LIB+300 and LIB+325, respectively. As a result of the two extended tranches, the company has extended a total of 60% of its TLB, which was originally set to expire in 2014. The amend/extend was led by JP Morgan.
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