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  • Syndicated Loan Market Commentary 08/16/2010 0 comments
    Aug 16, 2010 6:19 PM
    The markets today were quiet. The big news in Asia was that Japan’s 2Q GDP dropped below China’s. However that was before seasonal adjustments but I tend to give put more emphasis on the unadjusted numbers. Europe was tame and in the US volume was the lowest it has been all year, with the S&P and the Dow closing flat.
     
    The loan market was quiet and bids remained heavy with flow names lower by an eighth to a quarter point. New issues continue to perform well and are holding their value. Overall advancers and decliners were equally matched, but I would say that the market does have a negative bias, despite positive technicals. Multiplan and Chemtura’s new term loan broke for trading today and both traded atop their OID’s as accounts who got poor allocations fought for paper in the secondary. Elsewhere, Lyondell and Citadel Broadcasting’s term loans rose after announcing strong 2Q earnings.
     
    In the coming weeks, the biggest issue we are going to face is a lack of liquidity which will put pressure on the market. Between now and labor day the market is going to be quiet with a lot of the street taking time off to enjoy the final weeks of summer. After Labor Day, the primary market should pick up from where we left off on Friday with another wave of deals coming to market. Have a good night.
     
    Headlines
     
    Must Read Articles
     
    News
    • Fitch Ratings placed its ratings for Dynegy Inc on Rating Watch Evolving following news that a Blackstone subsidiary would acquire the company.
    • Fitch said it affirmed its ratings on NRG Energy Inc following NRG's announcement that it has signed a definitive agreement to purchase $1.36 billion of Dynegy Inc's assets from Blackstone. Their term loan firmed by an eighth to 97 3/8 – 98 1/8.
    • Toys R Us Delaware Inc announced $350 million in six-year senior secured notes. Proceeds, along with $500+ million in senior secured term loans are to repay senior debt.
    • Ameristar Casinos today announced it has declared a quarterly cash dividend of $0.105 per share.
    • The U.S. building materials sector recovery is beginning to gain momentum in terms of price increases and volume trends, Fitch said today in a report. Building materials directed to public infrastructure spending are likely to see continued moderately higher shipments due in part to stimulus-funded projects, Fitch said, while 2Qmomentum of building products in residential construction may stall somewhat in 3Q.
    • Frontier Communications Corp said today it has extended the deadline of its exchange offer to 5:00 p.m. on August 20, according to a filing with the SEC. The company is offering to exchange up to $500 million of its issued and outstanding 7.875% senior notes due 2015, $1.1 billion of its 8.250% senior notes due 2017, $1.1 billion of its 8.500% senior notes due 2020 and $500 million of its 8.75% senior notes due 2022 for a like principal amount of its registered 7.875% senior notes due 2015, 8.25% senior notes due 2017, 8.5% senior notes due 2020 and 8.75% senior notes due 2022.
    • Education Management Corp's term loan C is down about 50bp to 92.25-92.75 today as its stock price declined more than 17%. The stocks of for-profit education companies are under pressure today after the U.S. Department of Education released data late Friday that said a lower percentage of students at for-profit colleges repaid federal loans than those at public universities. The U.S. Department of Education recently proposed regulation to limit the ability of for-profit schools to graduate students with high debt-to-income ratios. Education Management, a for-profit provider of educational services, operates 72 campuses across the U.S. and Canada, training 72,000 enrolled students in fields such as fashion, psychology and web site design.
    • Cinram International's term loan has continued to decline since the company announced a drop in 2Q10 revenue almost a week ago. The loan is quoted 71-73 today, down from 73.5-75.5 Friday and around 80 before the company posted results on Aug. 10. Last week, the company reported revenue of $255.9 million in the quarter, down from $298.4 million in the year-earlier period. The decline in revenues focused lender attention the company's upcoming maturities. As of May, the company's bank loan became current, leaving the issuer with about nine months left to refinance. In February, the company said Warner Home Video will end its agreement to use Cinram as its exclusive provider of DVD products and distribution services on July 31. At that time, Warner accounted for about 28% of Cinram's revenue.
     
    Earnings
    • Plastics and chemical company LyondellBasell Industries NV, which just emerged from Chapter 11 bankruptcy, posted a second-quarter profit on Monday, sending its stock up nearly 5 percent. But the Rotterdam, Netherlands-based company said the long-term fundamentals for the industry had not changed appreciably, despite strong U.S. ethylene margins and improved results in European olefins and polyolefins. "The rates at which the world economy recovers and new capacity comes online in the Middle East and Asia will significantly influence operating rates and margins," said Chief Executive Officer Jim Gallogly. In over-the-counter trading, LyondellBasell shares were up 4.7 percent at $18.87. Excluding an $8.64 billion after-tax gain related to emergence from Chapter 11 and fresh-start accounting adjustments, second-quarter income was $203 million. The company posted a loss of $353 million for the year-earlier period. Excluding reorganization items and a $333 million noncash inventory charge, second-quarter earnings before interest, income taxes, depreciation and amortization, and restructuring costs more than doubled to $1.40 billion.
    • Citadel Broadcasting's exit TLB rose about 50bp to 105.25-106.25 this morning after the issuer reported a 3.3% rise in 2Q10 revenue. The company said net revenue rose to $194.4 million from $188.1 million a year ago. EBITDA in the quarter rose to $72.5 million from $58.4 million in the same period a year ago. Citadel exited bankruptcy protection on June 3. The $762.5 million exit loan is priced at LIB+800 with a 3% Libor floor.
     
    On the Break
    • MultiPlan's $1.3 billion term loan B broke for trading this afternoon in the 98.25-98.75 range. The seven-year loan is priced at LIB+475 with a 1.75% Libor floor and a 98 OID. Price talk was originally LIB+450-475 with a 1.75% Libor floor and a 98-98.5 OID. The term loan has 101 soft call protection. Senior secured and total leverage are 3.9 times and 5.9 times. The equity check is $1.27 billion. The corporate family rating is B2/B, while the facility rating is Ba3/B. Barclays, Credit Suisse and Bank of America Merrill Lynch lead the deal. It includes a $75 million, five-year revolving credit facility. Proceeds are to back the $3.1 billion LBO of the company by BC Partners and Silver Lake from Carlyle Group and Welsh, Carson, Anderson & Stowe.
    • Chemtura Corp's $300 million exit term loan broke for trading at 100.125 and has since moved up to 100.25-100.5. The six-year term loan is priced at LIB+400 with a 1.5% Libor floor and a 99 OID. The facility is rated Ba1, while the corporate family rating is Ba3. Bank of America Merrill Lynch, Citi, Wells Fargo, Barclays and Goldman Sachs lead the loan which, along with a $275 million five-year ABL revolver, backs the company's exit from bankruptcy. Senior secured leverage is 0.9 times, while total leverage is 2.3 times. 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.   
     
    Price Flex
    • Pricing on Strategic Partners' buyout loan has been cut to LIB+550 from LIB+600. At the same time, the OID has been tightened to 99 from 98. A 1.75% Libor floor remains unchanged. Commitments are due today. Leverage through the first-lien is 3.2 times, while leverage through the mezzanine piece is 4.6 times. The corporate family rating is B2, while the facility rating is B1. There is an unrated $75 million mezzanine piece. Credit Suisse leads the $205 million bank loan backing Strategic Partners' LBO by Bank of America Merrill Lynch Partners. The deal includes a $30 million revolving credit facility and a $175 million term loan. Strategic Partners provides consulting, coaching, and training services to federal agencies and corporates.
    • Toys-Delaware has upsized its term loan B by $150 million to $650 million after downsizing its bonds by the same amount to $350 million. price talk on the TLB is LIB+450 with a 1.5% Libor floor and a 98-98.5 OID. There is also 101 soft call protection. Commitments are due today. Bank of America Merrill Lynch, JP Morgan and Goldman Sachs lead the refinancing for Toys-Delaware, a subsidiary of Toys R Us.
     
    High Yield
    Announced
    • Toys "R" Us - Delaware Inc USD350m 144A sr sec notes due 2016 (6y). NC3. B1/BB- (Review poss upgrade/CW positive). Security: 2nd lien on the assets securing the ABL revolver and 1st lien on trademarks and certain other intellectual property. Via BAML/JPM/Citi/DB joint books, CS, GS, WFS, HSBC, USB as co-managers. 144A for life. Investor call at 11am today. Pricing this afternoon. UOP: along with USD500m+ sr sec term loans to repay its USD800m sr sec term loan and USD181m sr unsec credit facility. Biz: toy retailer. HQ: Wayne, NJ.
    Update
    • Radio One, Inc. announced that it had further extended the expiration time of its previously announced exchange offer for its 8.875% Sr Sub Notes due 2011 and its 6.375% Sr Sub Notes due 2013 to 5:00 p.m., NYC time, on August 30, 2010. As of 5:00 p.m., NYC time, on August 13, 2010, approximately 89.8% of the outstanding Existing Notes had been validly tendered into the exchange offer and not withdrawn.
    Price Talk
    • Price talk of 7.375%-7.50% is out on Toys R Us- Delaware Inc USD350m 144A sr sec notes due 2016 (6y). NC3. B1/BB- (Review poss upgrade/CW positive). Security: 2nd lien on the assets securing the ABL revolver and 1st lien on trademarks and certain other intellectual property. Via BAML/JPM/Citi/DB joint books, CS, GS, WFS, HSBC, USB as co-managers. 144A for life. Books close at 2:30pm. Pricing this afternoon.
    Priced
    • Toys R Us- Delaware Inc USD350m 144A sr sec notes due 09/01/16 (6y). NC3. B1/BB- (Review poss upgrade/CW positive). Security: 2nd lien on the assets securing the ABL revolver and 1st lien on trademarks and certain other intellectual property. Via BAML/JPM/Citi/DB joint books, CS, GS, WFS, HSBC, USB as co-managers. 144A for life. 7.375% at 100. +567bp vs 3% 08/31/16. Del 08/24 (T+6).
     
    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.
     
     
    The views expressed are solely the author’s and are not associated with Reuters News nor do they reflect the opinions of Thomson Reuters.
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