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Syndicated Loan Market Commentary 08/18/2010

With M&A speculation increasing, so is investor confidence. With the feeling that equities got over sold last week, the view is now that the market is set up for a bit of a rally, albeit in light volume; but positive gains are positive gain, if the does end up coming to fruition. Equities erased early losses on the renewed faith to close slightly above unchanged. The S&P ended at 1,094.16 (+0.15%) and the Dow finished at 10,415.54 (+0.09%).
The loan market was quiet again today but firm. Most names were bid up an eighth as buyers were active today selectively adding to portfolios. With the primary market in both loans and high yield being quiet the focus has returned to the secondary. High yield and loans are very attractive at the moment with fund manager on a desperate search for yield, so the money flows into the credit markets should remain positive for the near to medium term. Warner Chilcott’s new term loan traded well on its break and quickly moved up into the par context after being issued at 99. Tomorrow should be a relatively quiet day, but we do get earnings out of AFC Entertainment, Sbarro, Drummond Co., Gamestop, Knowledge Learning, and Marvell Technology. Have a good night.
  • DynCorp International's $565 million TLB slipped to 99-100 in trade today after yesterday's ban of private security companies from Afghanistan.
  • DirecTV Holdings LLC is scheduled to pay off its $500 million term loan A due 2011 and possibly, its $1.5 billion term loan B due 2013 as well. According to existing lenders, the company is planning to pay off TLA on August 20th. The company is issuing $3 billion of notes for general corporate purposes which may include the repayment of all outstanding borrowings under the TLA and TLB. Citi, JP Morgan, Credit Suisse and Goldman Sachs are leads on the three-part senior note offering
On the Break
  • Warner Chilcott's new B3/B4 loans broke for trading this afternoon in the 99.75-100.25 range and has since moved up to 100. The OID on the $1.02 billion, 5.5-year loan was previously tightened to 99 from 98.5 amid solid demand. The loan is priced at LIB+425 with a 2.25% Libor floor. There is 101 soft call protection. Senior and total leverage are 2.9 times and 3.4 times, respectively. The company priced its $750 million in unsecured notes on Aug. 13 at 7.75%. The financing also includes a $500 million term loan A. The bank loan is rated (NYSE:P)Ba3. The corporate family rating is B1. JP Morgan leads the financing, which backs a $2.15 billion dividend to Warner Chilcott's shareholders.
New Issue
  • Anadarko Petroleum Corp is seeking top-tier lenders on its $5 billion, five-year senior secured revolving credit facility, sources said. Several banks are being invited to join with $250 million tickets. Banks in Anadarko's existing $1.3 billion debt facility due 2012 are said to be invited. Among them are: Bank of New York Mellon, Bank of Nova Scotia, Bank of Tokyo-Mitsubishi UFJ, BBVA, BMO Capital Markets, BNP Paribas, Credit Agricole and Standard Chartered Bank. Besides lead arranger JP Morgan, the revolver is said to have in place a dozen other banks from the oil and gas firm's $2 billion bond deal. Among them are: Bank of America Merrill Lynch, Barclays Capital, Citi, Credit Suisse, Deutsche Bank, DnB NOR Bank, Goldman Sachs, Morgan Stanley, RBS, SG, UBS and Wells Fargo. Pricing on the revolver opens at LIB+275 based on a ratings grid and goes up to LIB+375. The commitment fee is 50bp. The company has to maintain a leverage ratio of 4.5 times.
Price Flex
  • Pricing on Clopay Ames True Temper's $500 million term loan has been lifted to LIB+600 from LIB+450-500. The $150 million asset-based facility has been reduced to $100 million. Also, the commitment deadline has been extended to Friday. There is also a 1.75% Libor floor and a 98 OID on the term loan. Goldman Sachs leads the loan. It backs Griffon Corp's $542 million acquisition of Ames True Temper (NYSE:ATT) from Castle Harlan Partners. Clopay Ames True Temper is a newly formed wholly-owned subsidiary of Griffon Corp. Griffon will provide $75 million in cash. The corporate family and term loan rating is B2. The ABL facility is rated Ba2. 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 and Clopay Plastic Products Company.
  • Las Vegas Sands Corp today said it will extend $1.415 billion of its term loan B, in addition to reducing the size of its revolving credit facility to $750 million under the terms of the amendment secured last week, according to a regulatory filing. Term loan B lenders holding $1.415 billion agreed to extend by 2.5 years to November 2016 in exchange for an increase in spread to LIB+275. In addition, lenders agreed to extend $284.5 million in delayed draw I term loans to 2016 and $207.9 million in delayed draw II term loans to 2015. In aggregate, about 75% of the company's outstanding $3.9 billion in term loans were extended. Las Vegas Sands will also make a more than $1 billion paydown on the extended portion. The payment in cash is expected to occur this week, it said in the filing.
  • HealthSouth will seek to extend the maturity of its $400 million revolving credit facility and refinance its term loans in an effort to increase its financial flexibility, the company said in an SEC filing. The company's priorities for its capital structure include the extension of its revolver to 2014 or beyond, the refinancing of its $450 million term loan due 2013 and the retirement of its term loan due 2015 and 10.75% notes due 2016. The company provided no specific timing for the expected transactions.
  • Futures exchange group IntercontinentalExchange Inc has increased its new $220 million, three-year senior unsecured term loan to $400 million after heavy oversubscription. Lead arrangers Wells Fargo, Bank of America Merrill Lynch and Bank of Montreal hold $32 million each. ), pricing opens at LIB+200. Banks were invited to join at an upfront fee of 30bp for commitments of $25 million or more, and 25bp for less than $25. The loan amortizes in quarterly equal installments of 7.5% through year 2, followed by 10% installments through the last year. The facility can be increased by up to $180 million. Financial covenants include a maximum total leverage ratio of 2.5 times and a minimum interest coverage ratio of five times. Closing is slated for August.
  • SoftLayer Technologies has downsized its $190 million term loan to $150 million and has also eliminated its $20 million revolving credit facility and $20 million delayed-draw term loan. Pricing on the term loan is now LIB+550 with a 99 OID and a 1.75% Libor floor. Earlier, price talk was LIB+525-550. In addition, GI Partners, which is buying the company, has boosted its equity check to $250 million from $195 million. Deutsche Bank and SunTrust lead the deal. SoftLayer provides global, on-demand data center and hosting services from facilities across the U.S.
  • Standard & Poor's Ratings Services today raised its corporate credit rating on the Las Vegas Sands Corp. (LVSC) family of companies to 'B' from 'B-'. The rating outlook is positive. Aside from Las Vegas Sands Corp., the LVSC family of companies includes Las Vegas Sands LLC, its Venetian Casino Resort LLC subsidiary, and affiliate VML U.S. Finance LLC. All issue-level ratings were also raised by one notch in conjunction with the corporate credit rating upgrade. The ratings were removed from CreditWatch, where they were placed with positive implications July 28, 2010. At the same time, we assigned new issue-level ratings to Las Vegas Sands LLC's extended $532.5 million revolving credit facility and approximately $1.9 billion of term loans (three tranches). We rated the new facilities 'B' (at the same level as the corporate credit rating) with a recovery rating of '3', indicating our expectation of meaningful (50% to 70%) recovery for lenders in the event of a payment default. (For the recovery analysis, see Standard & Poor's recovery report on Las Vegas Sands, to be published on RatingsDirect as soon as possible following the release of this report.) "The rating upgrade reflects the substantial improvement to the company's debt maturity profile that results from the completion of the amend-and-extend transaction," explained Standard & Poor's credit analyst Ben Bubeck. "Furthermore, given the easing of the leverage covenant into 2012, the company's financial flexibility and liquidity profile also improved." We expect only gradual improvement in the performance of the Las Vegas properties over the next few years, which would likely continue the need for equity cures and/or cash balances remaining at the U.S. entity to maintain covenant compliance.
High Yield
  • Choice Hotels International Baa3/BBB (pos/s) USD250m SEC registered 10y sr notes. GS/JPM/WFS (active)/BofAML/STRH (passive) joint books. CoC put at 101. UOP: Repay outstanding borrowings under revolving credit facility. Pricing today
Price Talk
  • Price talk of 9% area is out Mueller Water Products Inc (NYSE:MWA) USD225m 144A sr notes due 2020 (10y). NC5. B1/B+ (stable/stable). Via BAML/GS joint books, JPM, STI, WFS as co-managers. Wreg rights. Books close at 5pm today for most investors. Pricing tomorrow afternoon.
  • PRICE GUIDANCE: T+312.5bp area. Choice Hotels International Baa3/BBB (pos/s) USD250m SEC registered 10y sr notes. GS/JPM/WFS (active)/BofAML/STRH (passive) joint books. CoC put at 101. Pricing today
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.