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Leveraged Loan Market Commentary 07/09/2010

It was a pretty quiet day out there. Overnight was tame, but still positive. Asia was flat and Europe was up around half a percent. In the US the equities chopped around in the morning getting a brief pop from the inventories numbers before moving back to unchanged. Equities got a little nervous especially after Greenspan’s comments on the financial regulation. But, with the prospects of a strong earnings season and double dip fears eased, we were able to end the week on a positive note with the Dow finishing at 10,197 (+0.58%) and the S&P 500 closing at 1,077 (+0.72).
Last night the Lipper FMI number reported that loan mutual funds had a net inflow $39 million, which was a surprise to some. High Yield saw another outflow, but one half the size of last weeks, at $166 million. With growing positive sentiment the buyer base came back into the market picking up names on the cheap in anticipation of a strong earnings season. So, most names today were seen up an eighth and advancers outpaced decliners 4.5:1. But in typical summer Friday fashion, the market was quiet in the afternoon. The LCDX 14 was well bid this morning firmed to 95 5/8 – 95 7/8 (+1/8). The new issue calendar is also heating up again with deals for MultiPlan, EVERTEC, ADS and Savvis being announced today. So, it will be interesting to see how they are received. Have a great weekend and get excited to watch the earnings roll out.
  • US wholesale sales fall in May, inventories rise
  • Inventory-to-sales ratio edges up
  • Wall Street has best week in a year; earnings eyed
  • Double dip fears sends investors to cash-EPFR
  • SEC pushes tighter market-making rules
  • Treasury bond prices fall in advance of $69 bln in debt supply – well people are full, we have been stuffing them full of this stuff
  • IMM-Currency speculators trim US dollar bets – CFTC
  • Google gets nod from China to keep search page
  • MultiPlan $3.1 bln deal to include $2 bln debt-source
  • Boeing submits bid for U.S. Air Force tankers
  • ECB could scrap bond buying if recovery lasts-Stark
  • Greece drops 1-yr T-bill auction, will sell 6-mth bills
  • Oil rises above $76, heads for weekly gain
  • Gold rises 1.5 pct, tracks other commodities
  • Real markets for LNR Property's institutional term loan are hard to come by today after the company asked lenders for another forbearance agreement and discussed alternatives to the financing package it walked away from earlier this week during a lenders call late yesterday. During a conference call yesterday, the issuer asked lenders for a one-week extension of its forbearance agreement but failed to provide concrete details as to how the company intends to recapitalize after it walked away from its $445 million bank loan. One proposal put forth during the call is for equity sponsors Cerberus, Vornado and iStar to make a pro rata paydown of the company's existing loan, while keeping a portion of it in place.
  • General Growth Properties Inc wants to replace its $400 million loan, issued last year to ensure the company could operate through bankruptcy, with one that would save it $2.7 million a month in interest payments. The new loan would be at a fixed interest rate of 5.5 percent, replacing the original debtor-in-possession (DIP) loan which carried an interest rate of LIBOR plus 12 percent and had a 1.5 percent LIBOR floor, according to documents filed late Thursday in U.S. Bankruptcy Court in Manhattan. General Growth has been able to secure less expensive financing since a group lead by Brookfield Asset Management Inc agreed to provide the No. 2 U.S. mall owner with more than $6.55 billion to bankroll the mall owner's exit from bankruptcy. The group has placed $970.5 million in escrow pending the bankruptcy court's approval of the exit plan, according to court documents. That allowed General Growth to enter into a DIP credit agreement with Barclays Plc, according to court documents. Like the first loan, the replacement DIP loan permits General Growth to repay the loan with stock, according to court papers.
New Issues – Syndicated Loans
  • BC Partners and Silver Lake are set to buy U.S. healthcare services firm MultiPlan, the private equity firms said on Friday, in the year's largest secondary buyout worth about $3.1 billion. BC Partners and Silver Lake are buying the company, which provides systems to reduce the cost of healthcare claims, from rival buyout firms Carlyle and Welsh, Carson, Anderson & Stowe. MultiPlan is the leading provider of healthcare cost management services to insurers and health plan administrators in the U.S., processing more than 100 million medical claims a year. Bank of America Merrill Lynch, Barclays and Credit Suisse are co-lead arrangers. The healthcare industry has been a hot spot for private equity deals as firms target a sector that has proved resilient during the financial crisis.
  • Bank of America Merrill Lynch and Morgan Stanley have provided a $625 million debt financing commitment to back Apollo Management's acquisition of a 51% stake in EVERTEC, a subsidiary of Popular Inc, according to an SEC filing. Popular will retain a 49% stake in EVERTEC. The debt financing includes a $50 million revolving credit facility, a $350 million senior secured term loan and a $225 million senior unsecured bridge loan. The equity injection will be $165.75 million, according to the filing. The new joint venture is valued at $900 million. As part of the transaction, Popular has transferred its merchant acquiring and processing and technology businesses to EVERTEC. Popular provides processing technology services through its processing subsidiary EVERTEC, which processes approximately 1.1 billion transactions annually in the Caribbean and Latin America.
  • Alliance Data Systems' new $200 million unsecured term loan A-2 due March 2012 is offering upfront fees of 50bp for commitments of $80 million, 37.5bp for $25-79 million, and 25bp for less than $25 million. Commitments are due July 23. BMO capital Markets and SunTrust Robinson Humphrey are launching the facility today at a bank meeting. Pricing is LIB+250 for a 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 September 2006 and a term loan from May 2009.
  • Savvis Inc intends to enter into a new $625 million refinancing loan via Bank of America Merrill Lynch and Morgan Stanley, the company said in a statement. The loan will consist of a $75 million revolving credit facility due 2014 and a $550 million term loan due 2016. Proceeds, along with cash on hand, will be used to refinance its $345 million, 3% convertible notes due 2012 and amounts under its existing $150 million revolver. Credit Suisse and SunTrust will act as co-leads.
  • Barclays, KeyBanc, Bank of America Merrill Lynch and PNC are launching Thursday afternoon a $775 million bank loan for Fairmount Minerals. The deal includes a $75 million revolving credit facility, a $150 million term loan A and a $550 million term loan B. Proceeds are to back the company's acquisition by American Securities.
Price Flex
  • Interactive Data Corp has flexed up pricing on its $1.3 billion term loan B to LIB+500 from LIB+475. The OID has been widened to 97 from 98. The 1.75% Libor floor remains unchanged. Bank of America Merrill Lynch launched the $1.46 billion bank loan on June 23. It includes a $160 million revolving credit facility. The corporate family rating is B2/B. The facility rating is Ba3/B+. Proceeds are to back the company's $3.4 billion buyout by Silver Lake Partners and Warburg Pincus. The debt financing commitment has been provided by Bank of America Merrill Lynch, Barclays Bank, Credit Suisse and UBS Investment Bank. The company is a provider of mission-critical evaluated pricing and reference data, real-time market data and other services for the financial services industry.
New Issues- High Yield
  • Fidelity National Information Services Inc (NYSE:FIS) USD1.1bn 144A sr notes two-part. Ba2/BB- (stable/stable). Via BAML/JPM/GS/WFS joint books, BNPP, RBS, STI, USB as lead managers, CA, ING, MUS, Miz, PNC, Scotia, TD as co- managers. With reg rights. Del 07/16 (T+6).
o        USD600m due 07/15/17 (7y). NC3 (MWC T+50bP), then 100 plus 3/4 coupon 1st call price. Equity claw: 3y 35%. 7.625% at 100. +514bp vs 2.50% 06/30/17. 144A CUSIP: 31620MAA4.  o        USD500m due 07/15/20(10y). NC4 (MWC T+50bp), then 100 plus 3/4 coupon 1st call price. Equity claw: 3y 35%. 7.875% at 100. +485bp vs 3.50% 05/15/20. 144A CUSIP: 31620MAC0.


  • Moody's Investors Service yesterday lowered and concurrently placed under review for possible downgrade all of the ratings of Skilled Healthcare Group, Inc. ("Skilled Healthcare") in response to an exogenous event - namely, a $671 million verdict rendered against the company by a jury in Humboldt County, California. The corporate family and probability of default ratings were downgraded to B2 under review for possible downgrade, first lien credit facilities to B1 under review for possible downgrade, and senior subordinated notes to Caa1 under review for possible downgrade. The ratings actions reflect our concerns about any potential impairments to business fundamentals and the ability of creditors to accelerate. Moreover, the review for possible downgrade will focus on the amount of damages that will be ultimately awarded to plaintiffs and the resulting impact on the company's operations and credit profile. In addition, the review will focus on Skilled Healthcare's ability to handle a possible bonding requirement and will consider the likely level of additional liabilities that could result from the ultimate verdict.
What to watch July 12
  • Treasury to auction $30bn 13-week bills
  • Treasury to auction $30bn 26-week bills
  • Treasury to auction $35bn 3 year notes