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  • Syndicated Loan Market Commentary 08/11/2010 0 comments
    Aug 11, 2010 6:20 PM
    Today was messy. With both the Fed and Bank of England cutting growth forecasts, fear is back in vogue. Globally, equities were down around 2.7% as the thought of taking on more risk made people nervous. The big worry in the market has shifted and it is no longer the sovereign debt woes that have plagued the PIIGS. We now have something new called the fear of “Japanisation”, which is the concern that the US and UK economies may emulate the low growth and deflationary economic environment seen in Japan in the 1990’s. This is a topic that has been discussed and debated in academia but now we have journalists reporting on it, so we now run the risk of this causing widespread panic. People are attracted to bad news, so, be careful and don’t by into the hype just yet but remain skeptical.
     
    There is no question that the loan market was heavy today. The secondary was quiet with most people distracted by the happenings in both the loan and high yield primary, but, there was a good mix of buyers and sellers in the market. The theme was that people are more risk adverse than they were on Monday but buyers of credit are out there. The market weakness provides is a great opportunity to find paper for sale at a good price. However, most people are going to be sidelined watching prices trickle lower as they will adopt the mentality of “why buy today when it will be cheaper tomorrow.”
     
    But, there are billions of dollars worth of loans expected to be refinanced and taken out in the coming weeks, so the market technical’s will help turn this down trend around rather quickly. Investors are cautious right now and this does not bode well for the equity markets, but investors need to put capital to work and are hell bent on finding yield, so money will continue flocking our way. The headlines and economic data coming out are scary and in long-term things could get worse, but at least in the near-term you have an opportunity to squeeze out some decent returns. Keep your eyes focused on the Economic calendar as the next likely catalyst that could shift the markets sentiment back to positive will be either the initial jobless claims out tomorrow morning or July retail sales on Friday. Have a good night.
     
     
    Headlines
    • Fed outlook weighs on European shares; banks fall
    • BarCap cuts jobs, slowdown set to squeeze banks  
    • Slowdown but no meltdown for China economy in July
    • BoE forecasts leaves scope for further easing 
    • UK jobless down less than expected, employment up    
    • U.S. trade gap widens sharply in June
    • U.S. job openings flat at 2.9 million in June                  
    • Wall St tumbles at open after Fed, data    
    • Credit spreads widen on recovery woes
    • Cisco revenue misses Wall Street view
    • GM could file IPO as soon as Friday
    • Wall Street giving its money to Republicans now                     
     
    Must Read Articles
     
    News
    • Las Vegas Sands' proposed amendment was put to a vote yesterday as planned, but this morning creditors were still waiting to hear the final result. The amendment is reportedly just shy of attaining the required 51% creditor approval. the outcome of the proposed amendment was still too close to call ahead of Tuesday's 5:00 p.m. deadline, with rumors of a blocking group, a counter-proposal and disagreement over how many votes are already in the book muddying the proceedings. Several investor sources said that as of 9 a.m. this morning Credit Suisse was still reaching out to lenders, having attained roughly 47% of the required vote. This morning, the blocking group was said to believe the amendment was close to netting the 51% approval.
    • Toys R Us extended the maturity of its revolver to Aug 10 2015 and increased the borrowing capacity from $1.63 billion to $1.85 billion, according to a statement by the company. The transaction was led by Banc of America Securities LLC, Wells Fargo Retail Finance LLC, and JPMorgan Securities, Inc as joint lead arrangers and joint book-running managers. Deutsche Bank Securities, Inc. and Citigroup Global Markets, Inc. also served as joint book-running managers on the transaction, the company said. Drawn pricing will initially be set at LIB+275 until January 30, 2011. Thereafter, it will vary from LIB+250 to LIB+300 based on utilization. The credit facility is available for general corporate purposes and the issuances of letters of credit. It is secured by a first lien on certain company inventory and accounts receivable, as well as certain Canadian real estate.
    • American General Finance Corp's (AGFC) new term loan eased about 50bp to 99-99.5 today after AIG Group said it will sell 80% of the company to Fortress Investment Group. Moody's Investors Service lowered the company's corporate family rating and bank loan to B3 and B2, respectively, citing its view that the pending sale of the firm "results in a lower expectation of support from AIG." American General entered into a $3 billion term loan priced at LIB+550 with a 1.75% Libor floor. The loan benefits from 101 call protection. AGFC is the residential mortgage unit of AIG.
    • Bankrupt U.S. auto parts supplier Visteon Corp has been in talks with at least three banking groups on exit financing worth about $700 million. Morgan Stanley and Barclays Capital are each leading competing groups to provide the financing for the major supplier of Ford Motor Co to emerge from bankruptcy more than a year after it filed for Chapter 11. A consortium composed of Goldman Sachs, Deutsche Bank, and Wells Fargo is also in talks with Visteon to provide financing. The $700 million exit financing for Visteon would comprise of a $200 million asset-backed loan and another $500 million term loan. Visteon, the former parts unit of Ford which was spun off from the automaker in 2000, filed for Chapter 11 in May last year, one of the casualties of the global auto industry crisis that also sent General Motors and Chrysler intro bankruptcy.
    • Jarden's loans are better on news the company is seeking to extend the tenor of its T-1, T-2, and T-3 loans by three years to match the maturity of its T-4 loan. The T-3 rose to 99-100, while the T-1 and T-2 rose to 98.75-99.75. The company is looking to extend the maturities to 2015 to match that of the T-4. In addition, pricing on all three tranches will be bumped up to LIB+325, the same as that of the T-4. The company is also seeking permission to issue bonds to repay bank debt.
    • Bank of America Merrill Lynch, JP Morgan and Goldman Sachs are launching tomorrow a refinancing for Toys-Delaware, a subsidiary of Toys R Us. Toys R Us announced today that Toys-Delaware will raise $1 billion in senior secured term loans and senior secured notes. Toys-Delaware intends to use the cash proceeds to repay its existing $800 million secured term loan facility and its existing $181 million senior unsecured credit facility, the company said in a statement. The loans and notes will not be guaranteed by Toys R Us. Toys R Us also announced today that it extended the maturity of its revolver to Aug. 10 2015 and increased the borrowing capacity to $1.85 billion from $1.63 billion.
     
    On the Break
    • Pinnacle Foods Corp's new $442 million term loan D is quoted 100.25-101 after breaking for trading this afternoon. The loan is priced at LIB+425 with a 1.75% Libor floor. The facility was talked at LIB+425-450. Senior secured and total leverage are 3.4 times and 5.9 times, respectively. The loan refinances the company's term loan C. The facility rating is Ba3/B, while the corporate family rating is B2/B. Barclays, Bank of America Merrill Lynch and Credit Suisse are the leads.
    •  
    New Issue
    • Bayonne Energy Center has tapped the market for a $421.2 million, eight-year term loan for a 512-megawatt gas-fired electric power plant in New Jersey, sources said. WestLB and Credit Agricole are lead arrangers and were joined by around eight other banks. The project loan was 1.1 times oversubscribed. Pricing is LIB+325 with a 75bp commitment fee. Amortization is scheduled to begin after the construction period which is around two years. Closing is slated for end of the month. The plant will provide electricity to New York City and is sponsored by ArcLight and Hess Corp.
    • Price talk on Chemtura Corp's $300 million, six-year term loan is LIB+400 with a 1.5% Libor floor and a 98.5-99 OID. Moody's Investors Service today assigned a (NYSE:P)Ba1 rating to the term loan and a (P)Ba3 corporate family rating. Bank of America Merrill Lynch, Citi, Wells Fargo, Barclays and Goldman Sachs launched yesterday the $575 million exit loan for Chemtura Corp. The deal also includes a $275 million, five-year asset-based revolving credit facility. Senior secured leverage is 0.9 times, while total leverage is 2.3 times. Chemtura announced it will raise $450 million in senior notes due 2018 as part of the exit financing package. Chemtura's U.S. operations filed for Chapter 11 bankruptcy protection in March 2009. The company is aiming to exit bankruptcy protection by the end of September.
    • Nutritional supplements maker NBTY Inc has begun approaching a handful of large institutional shops for its $1.7 billion LBO loan. No firm launch date or price talk has been set yet but a retail launch is expected post Labor Day. Pricing would likely be in the LIB+400 area, along with a 1.75% Libor floor. Senior secured leverage is said to be three times, while total leverage is believed to be 4.8 times. Barclays leads the loan. The company will also raise $900 million senior unsecured notes. Carlyle Group will contribute $1.6 billion in equity. Under the terms of the merger agreement, Carlyle will acquire all of the outstanding common shares of NBTY for $55 per share in cash, representing a premium of approximately 57% over NBTY's average closing share price during the 30 trading days ended July 14.
     
    Ratings
    • Moody's Investors Service downgraded the corporate family and senior unsecured ratings of American General Finance Corp. (AGFC) to B3 from B2, after American International Group, Inc. announced that it will sell 80% of AGFC and its immediate parent, American General Finance Inc. (NYSEARCA:AGF), to certain funds and affiliates of Fortress Investment Group LLC. AGFC's rating outlook is developing. The downgrade of AGFC's ratings reflects Moody's view that the pending sale of the firm results in a lower expectation of support from AIG. Previous to today's rating action, AGFC's long-term ratings incorporated one notch of uplift for implicit AIG support. Moody's assumes no support associated with AIG's post-sale 20% minority interest in AGF.
    • Moody's Investors Service assigned a B1 rating to First Data Corporation's proposed $500 million Senior Secured First Lien Notes and affirmed the company's existing ratings with a stable outlook. First Data's B3 corporate family rating (NYSE:CFR) reflects our view that the capital structure will not materially change with the proposed issuance of $500 million of secured notes, which will effectively extend a small portion of the $12.4 billion senior secured term loan due September 2014. However, we view the amendment to have favorable long-term credit implications as it provides the company with the flexibility to improve its capital structure. By allowing the company to extend a portion or all of its term loan while issuing up to $3.5 billion of junior debt, which we expect would be used to term out the existing term loan and/or junior debt, the amendment serves as the first step in proactively refinancing the term loan due September 2014, which represents the company's nearest maturity.
    • Moody's Investors Service assigned a provisional (P)Ba1 rating to a proposed $300 million, six-year, senior secured term loan credit facility for Chemtura Corporation (Chemtura). Moody's also assigned a provisional (P)B1 rating to proposed $450 million senior unsecured notes due 2018, a provisional (P)Ba3 Corporate Family Rating (CFR) and Probability of Default Rating, and a SGL-3 Speculative Grade Liquidity Rating. The outlook for the ratings is stable. Moody's understands that the proposed debt offerings will primarily be used to repay the DIP loans of $300 million, financing fees, and distributions under Chemtura's plan of reorganization when the company exits from bankruptcy. The provisional ratings are assigned pending the emergence from bankruptcy and the closing of the proposed exit financing. The company is expected to emerge from bankruptcy in early October 2010.
     
    High Yield
    Announced
    • American Tower Corp "AMT" Baa3/BB+/BBB- (s/s/s) USDtbd (USD500m initially but may have modest growth) 10y via joint books Citi/CS/JPM/RBS. CoC put at 101. UOP: to (i) finance acquisition of ETIPL and other recent and potential acquisitions, including the refinancing of a portion of borrowings under the Revolving Credit Facility and (ii) for general corporate purposes. Pricing today.
    • First Data Corp "FDC" USD500m 144A/Reg S sr sec first lien notes due 2020 (10y). NC5. Expected ratings B1/B+. Via Citi/CS/BAML/DB/GS/HSBC joint books. No reg rights. Investor call today at 11am. Pricing today. UOP: Repay $487.5 of FDCs senior secured term loans. Biz: provides electronic commerce and payment solutions for businesses, including credit and debit card transaction processing. HQ: Atlanta, GA.
    • Tower Automotive Holdings USA LLC/TA Holdings Finance Inc USD450m 144A sr sec 1st lien notes due 2017 (7y). NC4. Via JPM/Citi/GS joint books. Repay debt.
    • QEP Resources Inc (NYSE:QEP) USD500m notes due March 2021 (10.5y). MWC. Expected ratings BA1/BB+ (stable/stable). Via DB/BAML/BMO/JPM/WFS joint books, STI, USB, MUS, BBVA, RBS, TD, SocGen, GS as co-managers. UOP: repay debt. Biz: natural gas and oil E&P with operations focused in the Rocky Mt and Midcontinent regions. Also gathers, processes and stores natural gas. HQ: Denver, Co.
    • Toys "R" Us - Delaware Inc announced that it intends to raise approximately USD1bn in sr sec term loans and 144A sr sec notes. UOP: repay its USD800m sr sec term loan and USD181m sr unsec credit facility. Biz: toy retailer. HQ: Wayne, NJ.
     
    Price Talk
    • Intl Lease Finance Corp 144A 4s/6s/8s 3-part sr sec first lien notes. With contingent reg rights. All NCL. BofAML/Citi/JPM active books. CS/UBS passive books on 4y, Barc/BNP passive books on 6y, and DB/WFS passive on 8y. Expected ratings Ba3/BBB-/BBB-. First priority lien on a segregated collateral pool, consisting of 122 aircraft and related equipment and leases. UOP: refi portion of the AIG loans. Total now USD3.9bn, upsized from original USD2.5bn total. Pricing today.
      • USD1.35bn 4y, price guidance 6.625% area. Up from $900m.
      • USD1.275bn 6y, guidance 6.875% area. Up from 800m.
      • USD1.275bn 8y, guidance 7.25% area. Up from $800m.
    • Price talk of 6.375%-6.50% (T+375bp) is out on Peabody Energy Corp (BTU) USD650m SEC registered sr notes due 2010 (10y). NCL. Ba1/BB+ (stable/stable). Via BAML/MS/HSBC/Citi/RBS joint books. Books close at 1.30pm. Pricing today.
    • OPTI Canada Inc USD400m sr sec 1st lien notes two-part. Via CS. No reg rights. Books close at 2pm today. Pricing this afternoon.
      • USD100m add-on to its 9% 1B "second out" notes due 12/15/12. NC4mos (MWC T+50bp) (12/15/10) then at 102, 06/15/12 at 100. Fungible with the USD425m issue priced 11/16/09. Price talk 99.50 (plus AI from 06/15).
      • USD300m 1C "third out" due 08/15/13. NC1 (08/15/11), then at 102, 02/15/13 at 100. Special change of control at 105. Price talk 9.75% coupon at 97 to 98 (approx 10.50%-11% yield).
    • Price talk of 9%-9.25% yield (with modest OID) is out on First Data Corp (NYSE:FDC) USD500m 144A/Reg S sr sec first lien notes due 2020 (10y). NC5. B1/B+ (stable/stable). Via Citi/CS/BAML/DB/GS/HSBC joint books. No reg rights. Books close at 2:30pm today. Pricing this afternoon.
    • Price talk of 7%-7.125% all-in-yield (with approximately 1 point OID) is out on QEP Resources Inc (QEP) USD600m (upsized from USD500m) SEC registered sr notes due March 2021 (10.5y). BA1/BB+ (stable/stable). Via DB/BAML/BMO/JPM/WFS joint books. Books close at 2pm for pricing shortly thereafter.
     
    Priced
    • Pinnacle Foods Finance LLC/Corp USD400m 144A sr notes due 9/1/2017 (7y). NC3 (1st call at par plus 3/4 coupon). B3/CCC+. Via Barc/BAML/CS joint books. With reg rights. 8.25% at 100.00. +613bp vs 2.375% 7/31/2017. Del 8/17 (T+5). 144A CUSIP: 72347QAF0.
    • First Data Corp "FDC" USD510m 144A/Reg S sr sec first lien notes due 08/15/20 (10y). NC5 (MWC T+50bp). B1/B+ (stable/stable). Via Citi/CS/BAML/DB/GS/HSBC joint books, WFS,, BNPP, KKR, Mizuho, Scotia as co- managers.. No reg rights. 8.875% at 98.387, yield 9.125%. +644bp vs 3.50% 05/20. Del 08/20 (T+7). 144A
    • PRELIM PRICING:USD700m 5.05% 9/1/20. At 99.88, yld 5.065%. T+237.5bp. 3/1/11 first pay. Settle 8/16 (T+3). MWC T+37.5bp. See . American Tower Corp "AMT" Baa3/BB+/BBB- (s/s/s) USDtbd (USD500m initially but may have modest growth) 10y via joint books Citi/CS/JPM/RBS. CoC put at 101.
    • OPTI Canada Inc USD400m 144A sr sec 1st lien notes two-part. Via CS. No reg rights. Del 08/20.
      • USD100m face add-on to its 9% 1B "second out" notes due 12/15/12. NC4mos (MWC T+50bp) (12/15/10) then at 102, 06/15/12 at 100. B2/B (negative/stable). Fungible with the USD425m issue priced 11/16/09. Priced at 99.51, yield 9.228%. +869bp vs 3.625% 12/31/12. Settles with AI from 06/15). 144A CUSIP: 68358BAA5.
      • USD289.5m proceeds (USD300m face) 1C "third out" due 08/15/13. NC1 (08/15/11), then at 102, 02/15/13 at 100. B3/B (negative/stable). Special change of control at 105. 9.75% at 96.50, yield 11.162%. +1,039bp vs 4.25% 08/15/13.
    • Intl Lease Finance Corp (NYSE:AIG) B1/BB+/BB (stable/negative/evolving) USD500m SEC registered 7y sr unsec notes due 9/1/17 (7y). NC life. Via Citi/BAML/JPM (active)/BNP/CS/GS/UBS (passive) joint books. Co-mgrs: Barc, DB, WFS. 8.875% at 99.353, yield 9%. Del 08/20.
    • Peabody Energy Corp (BTU) USD650m SEC registered sr notes due 09/15/2020 (10y). NCL (MW+50). Ba1/BB+ (stable/stable). Via BAML/MS/HSBC/Citi/RBS joint books. Sr cos: BNP, CA-CIB, PNC, SocGen, WFS. Co-mgrs: Barc, BBVA, BMO, MUS, Sant, StanChart, Daiwa, USB. 6.75% at 100.00. Del 8/25.
     
    What to Watch Tomorrow
    • Initial claims (Department of Labor) 8:30 a.m. ET
    • Treasury to auction $16 billion 30-year bonds
    • Grupe Aeroplan Inc. Q2 earnings, conference call 8 a.m. ET
    • EnerSys Q1 earnings, conference call 9 a.m. ET
    • Cinedigm Digital Cinema Corp. Q1 earnings, conference call 9 a.m. ET
    • Kaiser Aluminum Corp. at Jefferies industrial and a&d conference 9 a.m. ET
    • Kratos Defense & Security Solutions, Inc. at Jefferies industrial and A&D conference 9 a.m. ET
    • Advance Auto Parts, Inc. conference call 10 a.m. ET
    • Brinker International, Inc Q4 earnings, conference call 10 a.m. ET
    • Quantum Corp. at Morgan Keegan technology conference 10:15 a.m. ET
    • OSI Systems, Inc. at Jefferies industrial and a&d conference 10:30 a.m. ET
    • CommScope, Inc. at Morgan Keegan technology conference 10:45 a.m. ET
    • AGCO at Jefferies industrial and a&d conference 11 a.m. ET
    • Barrington Broadcasting Group Q2 earnings, conference call 11 a.m. ET
    • Boise Cascade Q2 earnings, conference call 11 a.m. ET
    • Crown Media Holdings, Inc. Q2 earnings before market open, conference call 11 a.m. ET
    • Elizabeth Arden, Inc. Q4 earnings, conference call 11 a.m. ET
    • Gray Television, Inc. Q2 earnings, conference call 11 a.m. ET
    • Invista BV Q2 earnings, conference call 11 a.m. ET
    • Nuveen Investments Q2 earnings, conference call 11 a.m. ET
    • O’Charley’s Inc. Q2 earnings before market open, conference call 11 a.m. ET
    • Yankee Candle Co., Inc. Q2 earnings, conference call 11 a.m. ET
    • Aircastle Ltd. at Jefferies industrial and a&d conference 11:30 a.m. ET
    • Navarre Corp. Q1 earnings before market open, conference call 12 p.m. ET
    • Royal Gold, Inc. Q4 earnings before market open, conference call 12 p.m. ET
    • Wendy’s/Arby’s Group, Inc. Q2 earnings before market open, conference call 12 p.m. ET
    • Activant Solutions Inc. Q3 earnings, conference call 1 p.m. ET
    • Cambium Learning Group, Inc. Q2 earnings, conference call 4 p.m. ET
    • Bally Technologies, Inc. fiscal earnings after market close, conference call 4:30 p.m. ET
    • Blockbuster Inc. Q2 earnings after market close, conference call 4:30 p.m. ET
    • Education Management Corp. Q4 earnings after market close, conference call 5 p.m. ET
    • Red Robin Gourmet Burgers, Inc., Q2 earnings 4 p.m. ET, conference call 5 p.m. ET
    • Darling International Inc. Q2 earnings after market close
    • GEO Group Q2 earnings after market close
     
    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.
     
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