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Syndicated Loan Market Commentary 08/02/2010

Overnight Asian equities rallied after strong manufacturing numbers out of China and Australia. Europe was on fire, moving up close three-percent, after HSBC and BNP posted strong earnings helping renew optimism over their debt issues. The U.S. was two percent higher at the open on sentiment from abroad and investor’s willingness to take on risk, once again.  Equities maintain their early morning gains to close up two-percent; the Dow closed at 10,674.38 (+1.99%) and the S&P finished at 1,1225.86 (+2.2%).
In the loan market, the LCDX 14 came out of the gate at 96 ¾ - 97 (+3/8) and soon moved up to 96 15/16 – 97 3/8 (+9/16), where is stayed for the rest of the day. High beta names firmed with equities by a quarter of a point, influenced by equities. Off-the-run paper was also pretty active moving up by around the same amount. Trading volumes were modest as the market was largely distracted by the growing high yield calendar, which added 8 deals today, many whose proceeds were to repay bank debt. With spreads tightening across the credit spectrum, we should see the revival of the bond-for-loan take-outs, making this a very attractive time to get involved in bank loans, as technical’s will likely move prices up a buck or two, maybe more.   
  • U.S. manufacturing slows in July for 3rd month   
  • Bernanke says economy still short of full recovery
  • China slows to cruising speed, Europe perks up   
  • Obama says U.S. economy has to grow fasterà Hmmm, Got Stimulus?
  • Output grows in U.S., Euro zone; China slows     
  • HSBC, BNP profits beat view after bad debts tumble
  • Geithner aims to calm Wall Street on finance rules
  • Oil hits near 3-month high on economic optimism  
  • Ford Motor Co today announced it has completed the sale of Volvo Car Corp and related assets to the Zhejiang Geely Holding Group Company Ltd. The total purchase price was $1.8 billion. The deal was signed in March 2010. Also, Standard & Poor's upgraded the issuer's corporate credit rating by two notched to B+ and its senior secured rating four notches to BB, citing improved business profile. The issuer's revolver is currently 92.25-93.5, the TLB-1 is 97.5-98.25 and the TLB-2 is 97-97.75
  • A group of creditors has requested that the hearing to approve Tribune Co's plan of reorganization be delayed at least three months to give it more time to digest a 1,000-page report by a court-appointed examiner, according to court documents. The creditors requested a delay of at least 90 days, which could push the bankruptcy beyond the two-year mark. The agent for a $1.6 billion loan said in a Friday filing that it was unrealistic to stick to the Aug. 30 scheduled start of hearings to confirm the reorganization of the publisher of the Chicago Tribune and Los Angeles Times. Tribune filed for bankruptcy in 2008, a year after real estate developer Sam Zell led a buyout that saddled the company with debt. The company, which also owns TV stations and other properties, has proposed turning ownership over to lenders with about $8.7 billion of claims. In return for ending potential legal fights, the company has proposed giving senior bondholders about $450 million. The examiner's report found that billions of dollars of high-priority loan claims against Tribune could potentially be voided as could approximately $4 billion in payments made to shareholders in 2007, according to the bridge agent. Voiding those claims would increase the potential recovery for the holders of the bridge loan. The case is In re: Tribune Co et al, U.S. Bankruptcy Court, District of Delaware, No. 08-13141.
  • Chemtura Corp is seeking court approval to amend its DIP loan credit agreement, secure up to $750 million in additional exit financing and pay related fees, according to papers filed Friday. In the court filing, Chemtura outlines a proposed $275 million senior secured asset-based revolving credit facility. Proceeds are to refinance the DIP loan agreement. Bank of America Merrill Lynch and Wells Fargo are joint lead arrangers on the deal. The company seeks to enter into a senior secured or unsecured term loan facility and/or the issuance of secured or unsecured notes, which together would equal, in aggregate, a principal amount of up to $750 million. Bank of America leads the term loan facility and Citi leads the notes portion of the financing, according to the filing.
New Issue
  • Goldman Sachs is launching tomorrow the financing backing Griffon Corp's $542 million acquisition of Ames True Temper (NYSE:ATT) from Castle Harlan Partners. The financing will include a $150 million asset-based facility and a $500 million term loan. In addition, Griffon will provide $75 million in cash. The combined assets of ATT and Griffon's Clopay Building Products and Performance Plastics subsidiaries will secure the borrowings under the financing commitments. Griffon expects to have cash in excess of $200 million available for general corporate purposes after the completion of the deal. Griffon currently conducts its operations through Telephonics Corporation, Clopay Building Products Company and Clopay Plastic Products Company.
  • Standard & Poor's Ratings Services today said it has raised its corporate credit rating on Ford Motor Co. and Ford Motor Credit Co. LLC to 'B+' from 'B-'. We also raised the counterparty credit rating on FCE Bank PLC, Ford Credit's European bank, to 'BB-' from 'B', maintaining the one-notch rating differential between FCE and its parent. The rating outlook on all entities is positive. At the same time, we raised the issue-level rating on Ford's senior secured debt issues to 'BB' from 'B-' and revised the recovery rating on this debt to '1' from '3', indicating our expectation that lenders would receive very high (90% to 100%) recovery in the event of a payment default. We also raised the issue-level rating on Ford's unsecured debt to 'B' from 'CCC' and revised the recovery rating on this debt to '5' from '6', indicating our expectation that lenders would receive modest (10% to 30%) recovery.
  • Moody's Investors Service today assigned a B2 Corporate Family Rating and Probability of Default Rating to Strategic Partners Inc. ("SPI") and a B1 rating to the company's proposed secured credit facilities. The ratings assigned are based on terms and conditions of the financing as advised to Moody's. The rating outlook is stable. SPI's B2 Corporate Family Rating reflects the company's high pro forma financial leverage, with debt/EBITDA at around 5 times following its acquisition by an investor group primarily comprised of BAML Capital Partners and SPI's management. The rating also reflects the company's limited scale and focus on a narrow product category (medical uniforms).
  • TXU Corp's reported 2Q10 adjusted operating results from competitive business improved $4 million from 2Q09. Adjusted (non-GAAP) operating results totaled a net loss of $251 million compared to a net loss of $248 million in 2Q09. The company said the consolidated net loss attributable to EFH Corp (in accordance with GAAP) was $426 million compared to a net loss of $155 million in 2Q09. The B1/B2 loans are currently 77.75-78, up from 77.375 bid Friday. The B3 loan rose about 12.5bp to 77.25-78.
  • Oshkosh Corp posted a fiscal Q3 profit of $211.2 million, or $2.31 per share, for the quarter ended on June 30, compared with a year-earlier loss of $26.6 million, or 36 cents a share. Revenue doubled to $2.44 billion.
  • NRG Energy Inc reported 2Q net income of $210 million, or 81 cents per share, compared with $432 million, or $1.56 per share, a year ago. The company raised its 2010 adjusted EBITDA outlook to a range of $2.45 billion to $2.55 billion from its earlier forecast of $2.20 billion, excluding mark-to-market.
Preliminary Results
  • EnergySolutions Inc today announced preliminary financial results for the quarter ended June 30, 2010. It estimates that quarterly revenues will be between $385 million and $405 million and that its net loss for the quarter (including a non-cash goodwill impairment charge) will be between $28 million and $30 million ($0.32 to $0.34 per share).
High Yield
  • DCP LLC/DCP Corp (Dick Clark Productions) USD150m 144A sr sec 1st lien notes due 2015 (5y). NC3. Expected single-B ratings. Via BAML books, STI as co- manager. UOP: repay bank debt, fund distribution to the parent company.
  • Foresight Energy LLC USD400m 144A sr notes due 2017 (7y). NC4. Caa1/(B- expected). Via Citi/MS/UBS/CA. Roadshow 08/02-05. Pricing 08/06. UOP: repay debt.
  • Price talk of 10.25%-10.50% is out on Trilogy International Partners LLC/Trilogy International Finance Inc USD370m 144A/Reg S sr sec notes due 2016 (6y). NC3. Rated Caa1/CCC+ (stable/stable). Via GS/DB/JPM joint books. No reg rights. Books close 11am tomorrow. Pricing tomorrow afternoon.
  • Five-B Expedia USD750m 144A/Reg S 10y Sr Unsec @T+300bp PRICED:USD750m 5.95% 8/15/20. At 99.893, yld 5.964%. T+300bp. Settle 8/5 (T+3). MWC T+50. Upsized from $500m. Expedia Inc "EXPE" Ba1/BBB-/BBB- (pos/s/s) USD500m 144A (with rr)/Reg S 10y sr unsec notes. BofAML/JPM (active)/Barc/BNP/RBS (passive) joint books. CoC put at 101. Pricing today. Settle T+3.. UOP: general corporate purposes, including, without limitation, repurchases of its common stock and future acquisitions by it or any of its subsidiaries.
  • Continental Airlines Inc (NYSE:CAL) USD750m 144A/Reg S sr sec first lien notes due 2015. NC2. Ba2/BB-. JPM/CS/MS joint books, Citi, GS, UBS joint leads, CA- CIB, DB as co-managers. No reg rights. Roadshow 08/02-05. UOP: USD350m to repay sr sec term loan, GCP. Biz: a major US air carrier. HQ: Houston, TX.
  • Newell Rubbermaid Baa3/BBB-/BBB (s/s/neg) USD550m (will not grow) SEC registered 10y sr notes. Barc/Citi/GS joint books. Co-mgrs: BNP, MUS, CS. CoC put at 101. UOP: purchase 2019 Notes pursuant to the 2019 tender offer. To purchase shares of Newell Rubbermaid common stock in anticipation of the issuance of common stock pursuant to the Proposed Exchange Offer; General corporate purposes, which may include the repayment of debt.
  • Rock Holdings Inc (Parent of Quicken Loans and Title Source) USD300m 144A sr sec notes due 2015 (5y). NC3. Via CS/JPM joint books. No reg rights. Roadshow starts tomorrow. Pricing 08/09. UOP: fund distribution to shareholders, GCP. Biz: online retail mtg lender, title insurance and closing services. HQ: Livonia, MI.
  • Price talk of 7.375% area is out on Arch Coal Inc (ACI) USD500m SEC registered sr notes due 2020 (10y). NC5 (MWC T+50bp). Equity claw: 3y 35%. B1/BB- . Via BAML/MS/JPM joint books. PNC lead manager, BMO, CA, RBS, USB sr co- managers, Barc, FBR, RJames, Simmons, Stifel, UBS as co-managers. Off the shelf. Books closed at 1pm. Pricing this afternoon.
16th Annual Thomson Reuters LPC Loan Conference
Wednesday September 22, 2010
Marriott Marquis, New York City
Now in its 16th year, the Thomson Reuters LPC Loan Conference has become one of the industry's premiere annual events. Join investors, lenders, financial sponsors and treasurers as they discuss the outlook for a continually evolving loan market.
Click Here to view our detailed agenda and to access registration information.