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  • Loan Market Commentary 08/17/2010 0 comments
    Aug 17, 2010 6:10 PM
    It is amazing how quickly the market is able to forgive; a couple decent earnings reports, a large buyout offer, and a strong macro data point and the market breaks a 4-day slump. Equities were out of the gate strong today advancing on the earnings numbers from Home Depot and Wal-Mart. Both companies cited larger profits than expected but both missed sales estimates; so the lesson here is to be lean and mean which is the model that many American businesses have been adapting too (which is also evident in the jobs numbers). The economic numbers that came out today were mostly in-line with expectations; however, the July U.S. Industrial production number was double estimates and helped ease concerns over the economic slowdown. The equity markets closed higher with the S&P closing and 1,92.54 (+1.22%) and the Dow at 10,405.85 (+1.01%).
     
    The loan market felt much better today as sentiment in the market reversed course. Trading volumes continued to be very thin, but bids felt much better. Flow names and new issue loans were firmer an eighth to a quarter point. Off-the-run paper was also better bid by around a quarter point. The LCDX 14 opened up today a quarter higher at 96-96 ¼ and moved higher through out the day to finish at 96 ¼ - 96 ½. Toys-Deleware’s new term loan broke for trading and was last seen at 99 ½ - 100. Reynolds, GM, Fairpoint, Nielsen, and Landry’s were all active on the back of news. Tomorrow we get numbers from Symbion, PetSmart and Altegrity. On the macro front we have initial jobless claims and July leading indicators whose results will likely dictate the direction of trade. Have a good night.
     
    Headlines
    • Stock futures rise after Wal-Mart, Home Depot profits
    • Wal-Mart profit up but U.S. sales weak
    • Home Depot profit beats but sales miss estimates
    • No quick fix for Fannie and Freddie seen from meeting
    • Potash Corp rejects BHP Billiton's $39 billion offer
    • GM IPO filing expected Tuesday
    • Reynolds to buy Pactiv for about $6 billion
    • Nielsen plans to raise $2 billion in IPO: filing
    • Obama wants new model for Fannie, Freddie        
    • German investor morale drops; slowdown looms     
    • Ireland, Spain debt auctions ease euro zone nerves
     
    News
    • Reynolds Group Holdings has received committed financing from Credit Suisse, HSBC and Australia New Zealand Bank to back its $6 billion purchase of Pactiv Corporation, according to a press release. Today, Pactiv said it entered in a definitive agreement to be acquired by Reynolds Group. Reynolds is a wholly owned subsidiary of New Zealand-based Rank Group Limited, which is owned by Graeme Hart. Under the terms of the agreement, Pactiv shareholders will receive $33.25 for each share of Pactiv common stock held, representing a premium of approximately 39 percent over Pactiv's closing price of $23.97 on May 14, 2010, the last trading day prior to published reports regarding a potential transaction, the company said.
    • General Motors Co's IPO filing is expected to be today, Reuters reported, citing sources with knowledge of the preparations. The IPO is expected to raise between $15 billion and $20 billion.
    • Saks Inc posted better-than-expected quarterly results, helped by an uptick in luxury spending and the ability to sell more items at full price. Saks said sales at stores open at least a year, or same-store sales, rose 4.6% in Q2. Saks reported a net loss of $32.2 million, or 21 cents per share, for its second quarter, compared with a loss of $54.5 million, or 39 cents a share, a year earlier.
    • Fairpoint Communications Inc has filed a motion seeking U.S. bankruptcy court approval of Paul Sunu as new chief executive officer. Sunu will replace David Hauser as CEO. Hauser will remain a consultant to the company until its emergence from Chapter 11.
    • Landry's Holdings Inc $100 million senior secured offering via Jefferies is being talked expected to carry an 11.50% cash coupon, 90 issue price, with an approximate YTM of 15%. Books close 4pm today. Proceeds are to partially finance the acquisition of Landry's by Tillman J. Fertita, and for GCP.
     
    Earnings
    • Spectrum Brands' term loan is unchanged at 100.75-101 today after the company reported an 11% rise in 3Q10 revenue. The company said revenue was $653.5 million in the quarter, helped by its acquisition of Russell Hobbs Inc. Consolidated adjusted EBITDA was $124.1 million in the quarter, up from $122.8 million in the year-earlier period.
     
    On the Break
    • Toys-Delaware's new $700 million term loan broke for trading this afternoon in the 99-99.5 range and moved higher to 99.5-100. The loan was upsized for the second time to $700 million. Yesterday, the loan was increased by $150 million to $650 million after the issuers downsized its bonds by the same amount to $350 million. pricing on the covenant-lite facility firmed at LIB+450 with a 1.5% Libor floor and a 98.5 OID. Earlier, the OID was talked in the 98-98.5 range. There is also 101 soft call protection. The company's bonds priced at 7.375% on Monday. Bank of America Merrill Lynch, JP Morgan and Goldman Sachs lead the refinancing for Toys-Delaware, a subsidiary of Toys R Us.
     
    New Issues
    Price Flex
    • Bryant & Stratton College has downsized its term loan B from $180 million to $135 million and has firmed pricing on the facility at LIB+575 with a 1.5% Libor floor and a 98 OID. The facility also has 101 call protection. Earlier, price talk on the facility was LIB+500-525 with a 1.75% Libor floor and a 98 OID. The deal also has a $30 million term loan priced at LIB+550 with a 1.5% Libor floor. In addition, the size of the dividend was cut by $20 million. The deal is filled out by a $40 million revolving credit facility. GE Capital and Bank of America Merrill Lynch lead the deal. In July, the issuer netted corporate ratings of B1/B+. Proceeds will be used to refinance existing senior and mezzanine debt associated with the company's buyout in February 2008 by Parthenon Capital Partners and will provide a dividend to the sponsor/co-investors. Bryant & Stratton College is a for-profit provider of post-secondary education with a network of 16 campuses in New York, Ohio, Virginia and Wisconsin, as well as online. The College provides Bachelor and Associate degrees through 25 programs in a wide variety of areas including healthcare, business, information technology and legal.
    • Toys-Delaware has boosted its term loan B for a second time to $700 million after increasing it to $650 million yesterday. Yesterday, the company downsized its bonds by $150 million to $350 million. Pricing on the covenant-lite facility has firmed at LIB+450 with a 1.5% Libor floor and a 98.5 OID. Earlier, the OID was talked in the 98-98.5 range. There is also 101 soft call protection. Bank of America Merrill Lynch, JP Morgan and Goldman Sachs lead the refinancing for Toys-Delaware, a subsidiary of Toys R Us.
    Upsized
    • Airvana has upsized its term loan by $30 million to $360 million after increasing the size of the dividend it is paying to sponsors. Pricing has been flexed up to LIB+900 from LIB+700. A 2% Libor floor and 98 OID are unchanged. The deal is expected to allocate later this week. Jefferies, Macquarie and SG lead the deal. SAC Capital and GSO Capital Partners and ZelnickMedia are the sponsors. Airvana is a provider of mobile-broadband-network infrastructure products.
     
    Ratings
    • Moody's Investors Service changed the probability of default rating (PDR) for Energy Future Holdings Corp. (EFH) to Caa2/LD from Ca following the completion of a debt restructuring which Moody's views as a distressed exchange. EFH's Caa1 CFR and SGL-4 liquidity rating are affirmed. The rating outlook remains negative. In addition, Moody's assigned a Caa3 rating to the Energy Future Intermediate Holding Co. LLC (EFIH) 10% senior secured notes due 2020.
     
    High Yield
    Announced
    • NRG Energy Inc (NYSE:NRG) USD750m 144A (with reg rights)/Reg S sr unsec notes 2020 (10y). NC5 (MWC T+50). Equity claw: 3y 35%. Expected ratings B1/BB-. Equity call for up to 35% at par plus coupon for first 3 years. Contains "dual trigger" investor put at 101 and substantially similar covenants to the company"s 8.50% sr unsec notes due 2019. Citi/BAML/DB joint books. Co-mgrs: BNP, CA-CIB, ING, JPM, MS, RBS. Investor call at 10:30am today. Pricing this afternoon. Guaranteed by current and future restricted subs, excluding certain foreign, project and immaterial subs. UOP: GCP, including, working capital, investment in business initiatives and cap ex, repay debt, and fund recently announced acquisitions. NRG owns and operates power generation portfolios. HQ: Princeton, NJ.
    Price Talk
    • Price talk of 8.125%-8.25% is out on NRG Energy Inc (NRG) USD750m 144A Reg S sr unsec notes 2020 (10y). NC5 (MWC T+50). Equity claw: 3y 35%. Expected ratings B1/BB-. Via Citi/BAML/DB joint books. Books close at 2.30pm for pricing today.
    Priced
    • Landry's Holdings Inc USD99m prcds (USD110m face) 144A sr sec notes due June 01, 2014 (3y 9mos). NC1, then at par. Ratings TBD. Via Jefferies. No reg rights. Interest pays 03/01 adn 09/01 commencing 03/01/11. 11.50% cash coupon, at 90, 15.069% YTM. Del 08/31 (T+10). 144A
    • NRG Energy Inc (NRG) increased to USD1bn (from USD750m) 144A (with reg rights)/Reg S sr unsec notes 09/01/20 (10y). NC5 (MWC T+50). Equity claw: 3y 35%. B1/BB-. Equity call for up to 35% at par plus coupon for first 3 years. Contains "dual trigger" investor put at 101 and substantially similar covenants to the company"s 8.50% sr unsec notes due 2019. Citi/BAML/DB joint books. Co- mgrs: BNP, CA-CIB, ING, JPM, MS, RBS. 8.25% at 100. +561bp vs 2.625% 08/20. Del 08/20. 144A CUSIP: 629377BH4.
     
    What to Watch Tomorrow
    • Treasury to auction $25 billion 56-day cash management bills
    • CACI International Inc conference call 8:30 a.m. ET
    • Aquilex Holdings LLC Q2 earnings, conference call 9 a.m. ET
    • Cooper Standard Q2 earnings 8:30 a.m. ET, conference call 9 a.m. ET
    • Nortek, Inc. conference call 9:30 a.m. ET
    • Bob Evans Farms, Inc. conference call 10 a.m. ET
    • Polymer Group, Inc. conference call 10 a.m. ET
    • Altegrity, Inc. Q3 earnings, conference call 11 a.m. ET
    • Symbion, Inc. Q2 earnings, conference call 11 a.m. ET
    • PetSmart, Inc. Q2 earnings after market close, conference call 4:30 p.m. ET
    • Open Text Corp. Q4 earnings 4 p.m. ET, conference call 5 p.m. ET
    • Brocade Q3 earnings after market close, conference call 5:30 p.m. ET
    • AFC Enterprises, Inc. 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.
     
     
    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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