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Syndiacted Loan Market Commentary 08/26/2010

The markets started the day off on the right foot with the initial jobless claims number falling 31k to 473k, 17k less than expected. There wasn’t a major theme behind the drop, but as with any positive macro number, the market took off. However we were unable to hold on and the market sold off after news broke that a Spanish court ruled that some of their government’s tax-collection methods are illegal which put fear back into investor’s minds that Spain will have difficulty cutting its deficit. Also, the Kansas City Fed said that manufacturing has slowed in the region, signaling slower growth and overshadowing the jobs number reported earlier. Despite the brief rally this morning the Dow closed below 10,000 today, finishing at 9,985.81 (-0.74%). The S&P 500 closed at 1,047.22 (-0.77%).
The loan market was pretty uneventful again today and the market seemed rather directionless. However, after looking at the days movers, there was a clear positive bias in the market. Buyers are still out there and much of the trading was situational. Sensata’s term loan was up around half a point after its rating upgrade and Oriental Trading’s term loan was active post is bankruptcy filing.
The Lipper numbers came out this afternoon and confirmed that the great hunt for yield continues. Loan mutual funds had a net inflow of $142.218 million this week, up from $64.648 million last week. High Yield funds also had an inflow $315.491 million, up from $49.556 million. I expect to see this trend continue, especially with all the media attention the credit markets are getting lately.
Tomorrow should be a snooze fest, but be careful in the morning, at 8:30 we get the Q2 GDP number which is expected to come in at 1.4%. Have a good night.
  • Rite Aid Corp's T-2 and T-3 loans are relatively unchanged after the attorney general of Connecticut said it was investigating the company for changes is made to its pricing program. The T-2 loan is currently quoted 89.5-90.5 and the T-3 loan is currently 96.75-97.75.
  • Sensata Technologies' TLB is up 50-75bp to 94.75-95.75 after its corporate family rating was raised one notch today. Moody's Investors Service raised the issuer's CFR to B2, citing a "recent strong year over year and sequential improvement in Sensata's operating and financial performance." The issuer's B1 senior secured debt rating was affirmed. Sensata entered into a $950 million term loan in 2006. The loan is priced at LIB+175.
  • Former Walt Disney CEO Michael Eisner is in discussions with Tribune Co creditors that could lead him to succeed Sam Zell as chairman after the company exits bankruptcy, the Los Angeles Times reported, citing unidentified people familiar with the matter. Discussions about new management at Tribune are still exploratory, people close to one of the creditors told the LA Times. Eisner's spokesman did not immediately return a call seeking comment. Tribune owns the Los Angeles Times, the Chicago Tribune, KTLA-TV Channel 5 and 22 other TV stations and other newspapers.
  • U.S. auto parts supplier Visteon Corp has asked a federal bankruptcy court to approve $700 million in financing so it can exit its 15-month bankruptcy, court documents filed on Wednesday show. A hearing before the U.S. Bankruptcy Court in Delaware is to be held next Tuesday to confirm the plan. Visteon plans to emerge from bankruptcy in late September or early October based on a confirmation of the plan on Tuesday and meeting other requirements, Visteon spokeswoman Julie Fream said.
  • Barr Pharmaceuticals is planning to pay off its Bank of America Merrill Lynch-led crefit facility on Aug. 31. According to Thomson Reuters LPC data, the BAML-led facility includes a $300 million revolving credit facility and a $2 billion term loan due July 2011. The revolver had an outstanding balance of $292 million while the loan had $1.65 billion when the company was acquired by Israeli firm Teva Pharmaceuticals Industries Inc in December 2008.
New Issues
  • Hyundai Capital America Inc is in market with a $175 million, three-year term loan. Sumitomo Mitsui Banking Corp is lead arranger. The facility is offering a margin of LIB+155. Parent firm Hyundai Motor Co is providing a guarantee. Proceeds are for working capital. Closing is slated for early September. Meanwhile, Hyundai Motor Co is also seeking a $125 million, 364-day revolving credit facility for Hyundai Motor Manufacturing Alabama.
Price Talk
  • FirstCal Industrial II LLC is amending its $200 million term loan due August 2012 to reduce its pricing to LIB+275 from LIB+325, sources said. In addition, the 2% Libor floor is being eliminated. The amendment came after major shareholder California State Teachers' Retirement System (CALSTRS) acquired a stake from FirstCal's management. There is no amendment fee and a 100 percent consent is needed. According to sources, the company will likely get the consent needed. Sumitomo Mitsui Banking Corp is lead arranger. CalSTRS provides retirement related benefits and services to teachers in public schools and community colleges.
  • Oriental Trading Co, owned primarily by private equity firms Carlyle Group and Brentwood Associates, filed for bankruptcy on Wednesday, citing a heavy debt load and declining sales. The retailer of party and hobby supplies has reached a prearranged plan with some lenders which would help it cut debt by 70 percent. Oriental Trading has agreed to give first lien lenders 100 percent of the reorganized company and a new term loan of $200 million, in exchange for the $404 million in claims that they hold. Some lenders have also agreed to provide $40 million in debtor-in-possession financing, to help fund operations while the company reorganizes. The deals are subject to bankruptcy court approval. Oriental Trading listed assets in the range of $100 million to $500 million. It said it had liabilities of $500 million to $1 billion. The case is In re OTC Holdings Corp, U.S. Bankruptcy Court, District of Delaware, No: 10-12636.
  • Moody's Investors Service has upgraded Sensata Technologies B.V.'s ("Sensata") Corporate Family and Probability of Default ratings to B2 from B3. In a related action, the company's senior secured credit facility was affirmed B1, senior unsecured notes affirmed Caa1, and senior subordinated notes upgraded to Caa1 from Caa2. Moody's also upgraded the company's Speculative Grade Liquidity ("SGL") rating to SGL-2 from SGL-3. The rating outlook is positive.
What to Watch Tomorrow
  • GDP, Q2 second estimate (Bureau of Economic Analysis) 8:30 a.m. ET
  • Corporate profits, Q2 preliminary (Bureau of Economic Analysis) 8:30 a.m. ET
  • Maxim Crane Works Holdings, Inc. Q2 earnings, conference call 10 a.m. ET
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.