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Leveraged Loan Market Commentary 07/26/2010

Over the weekend there were lots of commentators bashing the stress tests and the European markets opened on the weaker side. But, Goldman’s rock star analyst, Thomas Stolper, revised his outlook for the euro higher citing weaker U.S. growth, solid Euroland marco numbers and a decline in political-fiscal disruptions. European markets rallied in response. In the U.S. the day’s tone was set by housing data that showed signs of improvement and FedEx raised its outlook. Equities jumped half a percent following the housing data and chopped higher to close up around a percent; the S&P closed at 1,115.01 (+1.12%) and the Dow closed at 10,525.43 (+0.97%).
 
The loan market continues to firm on little volume. Most names were up a quarter point today on no news, just on positive sentiment and strong market technical’s. Last week, more pay downs were announced which helped lift secondary prices and has also forced deals coming down the pipeline to tighten spreads and OID’s. The high yield market is heating up as five news deals were talked today. So, more bond for loan take-outs are expected to come. We are in a ripe environment to attract some fast money here, so we will some volatility in the weeks to come, as investors might be inclined to take some profits home at any sign of economic instability. Hold your course and keep your eyes on the horizon, should be clean sailing the rest of the week.
 
Headlines
  • BP set to replace CEO; spill cleanup resumes
  • Bank test transparency gets cautious thumbs-up    àlot of bashing over the weekend
  • U.S. home sales surge, inventory at 42-yr low  à This is a bloated headline, we are 16.7 % below the June 2009 estimate of 396,000.
  • FedEx raises outlook, shares jump àGood indication for global growth
  • Leaked U.S. archive fuels doubts on Afghan war
 
News
  • The court-appointed examiner investigating whether Sam Zell's 2007 LBO of Tribune Co left the company insolvent said he will file a redacted version of his report on Monday with the U.S. bankruptcy court in Delaware.
 
New Issue
  • Pricing on inVentiv Health's $525 million, six-year term loan has been cut to LIB+475 from LIB+500, while the OID has been tightened to 98.5 from 98. The deal netted an oversubscription. A 1.75% Libor floor remains unchanged. The company is also raising $275 million in senior unsecured notes. Citi leads the loan, which backs the company's $1.1 billion LBO by THL Partners. The financing also includes a $75 million, five-year revolving credit. The corporate family rating is B2, while the credit facility rating is Ba3.
  • Pricing on Vertafore's $550 million term loan B has been cut to LIB+500 from LIB+525. The OID has been firmed at 98 from talk in the 97-98 range. A 1.75% Libor floor remains unchanged. Recommitments are due today at 5:00 p.m. Credit Suisse, Bank of America Merrill Lynch and Barclays Capital lead the $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 the $550 million, six-year term loan. The acquisition is expected to close in the third quarter, subject to customary regulatory approvals. Vertafore makes software for the property and casualty insurance industry.
  • Jefferies, Macquarie and SG are launching Thursday morning the $330 million term loan for Airvana, sources said. Proceeds are to pay a dividend to the company's sponsors. SAC Capital and GSO Capital Partners and ZelnickMedia are the sponsors. The company was bought out in December 2009 for about $530 million. Airvana is a provider of mobile-broadband-network infrastructure products.
 
Amendment
  • AbitibiBowater Inc has amended its senior secured superpriority DIP credit agreement effective July 15, 2010, the company said in an SEC filing today. The company entered into the amendment in light of improving market conditions and operational performance, it said in the filing. Abitibi repaid $166 million of the outstanding principal amount on July 21, 2010. Roughly $40 million in aggregate principal amount remains outstanding. The amendment also extends the maturity date to the earliest of December 31, 2010 or the effective date of the company's and its affiliates' plans of reorganization. The company can maintain the facility through the expected emergence date from creditor protection without resorting to the existing extension and consent provisions. The amendment also reduces the Libor floor and the applicable interest margins on advances, as well as modifies certain covenants, including granting the company the ability to retain the proceeds from certain asset sales without triggering a mandatory prepayment.
 
High Yield
  • Marina District Finance Company Inc USD725m equivalent 144A w/rr sr sec 2-part notes due 2015 (5y) NC3 and 2018 (8y) NC4. Expected ratings TBD. Via BofAML/WELLS/JPM/BARC/RBS/UBS joint books. Daiwa/Cap One co-managers. Roadshow begins 7/27, pricing expected 8/5.
  • Trilogy International Partners LLC/Trilogy International Finance Inc announced a $370 million senior secured offering due 2016, according to IFR, a Thomson Reuters service. Proceeds are primarily to refinance its existing $250 million term loan and to fund growth opportunities for its New Zealand subsidiary.
  • Advanced Micro Devices Inc USD500m 144A RegS sr sec notes due 2020 (10). NC5. Rated Ba3/B-. Via JPM/CITI joint books. Price talk 7.75%-8%. Books close 1.30pm for pricing this afternoon.
  • Air Canada USD900m equiv 2-part CAD/USD sr sec 1st lien notes due 2015 (5y). NC2. B2/B+ expected. USD Tranche 9.5%-9.75%. CAD Tranche +7/8 behind USD Tranche. Books close 2pm 7/27 for pricing Tuesday afternoon. Tranche sizes TBD. Via JPM/TD joint books.
  • Advanced Micro Devices Inc USD500m 144A/Reg S Sr Notes due 8/1/2020 (10y). NC5 (MWC T+50bp). Rated Ba3/B-. JPM/Citi joint leads. 7.75% at 100.00. Yield 7.75%. +475bp vs 3.5% due 5/15/2020.
 
What to watch Tomorrow July 27
• Consumer confidence index (Conference Board) 10 a.m. ET
• Treasury to auction $25 billion 52-week bills
• Treasury to auction $38 billion two-year notes
• Treasury to auction four-week bills
• CIT Group Inc. Q2 earnings before market open, conference call 8 a.m. ET
• Centene Corp. Q2 earnings 6 a.m. ET, conference call 8:30 a.m. ET
• Kansas City Southern Q2 earnings before market open, conference call 8:30 a.m. ET
• Kinetic Concepts, Inc. Q2 earnings 6 a.m. ET, conference call 8:30 a.m. ET
• American Dental Partners, Inc. Q2 earnings, conference call 9 a.m. ET
• B/E Aerospace Q2 earnings before market open, conference call 9 a.m. ET
• Euronet Worldwide, Inc. Q2 earnings before market open, conference call 9 a.m. ET
• Rock-Tenn Co. conference call 9 a.m. ET
• Universal Health Services, Inc. conference call 9 a.m. ET
• Insituform Technologies, Inc. conference call 9:30 a.m. ET
• Asbury Automotive Group, Inc. Q2 earnings before market open, conference call 10 a.m. ET
• Ferro Corp. Q2 earnings, conference call 10 a.m. ET
• Iconix Brand Group, Inc. Q2 earnings before market open, conference call 10 a.m. ET
• Level 3 Communications, Inc. Q2 earnings, conference call 10 a.m. ET
• L-3 Communications Q2 earnings before market open, conference call 10 a.m. ET
• Solutia Inc. conference call 10 a.m. ET
• Supervalu Inc. Q1 earnings, conference call 10 a.m. ET
• Wabtec Corp. Q2 earnings before market open, conference call 10 a.m. ET
• Health Management Associates, Inc. conference call 10:30 a.m. ET
• Rent-A-Center, Inc. conference call 10:45 a.m. ET
• A. M. Castle. Q2 earnings, conference call 11 a.m. ET
• CBIZ, Inc. Q2 earnings before market open, conference call 11 a.m. ET
• Group 1 Automotive, Inc. Q2 earnings before market open, conference call 11 a.m. ET
• Domino’s Pizza, Inc. Q2 earnings, conference call 11 a.m. ET
• PrivateBancorp, Inc. Q2 earnings before market open, conference call 11 a.m. ET
• Rockwood Holdings, Inc. Q2 earnings, conference call 11 a.m. ET
• Spectrum Brands Holdings, Inc. analyst day 12:30 p.m. ET
• Unitil Corp. Q2 earnings before market open, conference call 2 p.m. ET
• B&G Foods, Inc. Q2 earnings, conference call 4:30 p.m. ET
• Global Payments Inc. Q4 earnings after market close, conference call 4:30 p.m. ET
• Trimble Q2 earnings, conference call 4:30 p.m. ET
• JDA Software Group, Inc. Q2 earnings after market close, conference call 4:45 p.m. ET • Entercom Communications Q2 earnings after market close, conference call 5 p.m. ET
• Websense, Inc. Q2 earnings after market close, conference call 5 p.m. ET
• American Campus Communities Inc. Q2 earnings after market close
• Basic Energy Services, Inc. Q2 earnings after market close
• CB Richard Ellis Group, Inc. Q2 earnings after market close
• Compass Minerals Q2 earnings after market close
• Crown Castle International Corp. Q2 earnings after market close
• Hanger Orthopedic Group, Inc. Q2 earnings after market close
• Manitowoc Co., Inc. Q2 earnings after market close
• Massey Energy Co. Q2 earnings after market close
• Nalco Co. Q2 earnings after market close
• Ramco-Gershenson Properties Trust Q2 earnings after market close
• Usana Health Sciences, Inc. Q2 earnings after market close