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  • Syndicated Loan Market Commentary 08/25/2010
    The equity markets opened up weaker as the homes sales data yesterday gave another reason for the world to fear that the U.S. recovery was slowing. Overnight Ireland had its rating cut which got people thinking, who is next? This morning the durable goods numbers where less than expected and the new home sales data disappointed, giving investors even more reason to doubt a successful recovery, pushing the Dow below 10,000. However, the market corrected itself amid speculation that the market has oversold. Both the Dow and the S&P 500 ended their losing streaks today and closed higher at 10,060.06 (+0.20%) and 1,055.33 (+0.33%) respectively.
     
    The loan market was heavier today with flow names down around a quarter to half of a point and off-the-run paper was quoted about an eighth lower. Oriental Trading’s term loans fell after the company filed for bankruptcy. In all, there were very few sellers out there, but those that are have not been having problems finding buyers. Tomorrow, the jobless claims number will be in focus and will dictate the markets direction. Have a good night and try to stay positive, the great hunt for yield continues.
     
    Headlines
    • US July new home sales sag, durables orders soft
    • US shareholders get more power over boards       
    • Global outlook casts shadow over Fed retreat      
    • Technicals help Wall St make comeback            
     
    News
    • General Growth Properties Inc said in a regulatory filing on Wednesday the development company it plans to spin off when it emerges from bankruptcy will be run initially by three Brookfield executives. General Growth said the company -- which is still unnamed and called Spinco -- would be headed by David Arthur as Chief Executive Officer. He is currently Brookfield's Real Estate Opportunity Fund CEO. The commercial real estate company plans to emerge from bankruptcy this fall as two companies. General Growth will hold its prize assets, while Spinco will be the owner of other long-term development projects such as South Street Seaport in Manhattan and 7,000 acres in the master-planned community of Summerlin, Nevada.
    • Oriental Trading's loans declined after the issuer filed for Chapter 11 bankruptcy protection. The first-lien slipped to 83.5 bid, down from the 85 context, and the second-lien loan slipped to 1.5 bid. First-lien lenders will receive 100% of the reorganized company and a new $200 million loan, according to published reports. Oriental Trading entered into a $410 million first-lien term loan and $180 million second-lien loan in 2006 to back its roughly $1 billion sale to the Carlyle Group by Brentwood. Based in Omaha, Neb., Oriental Trading sells novelties, party supplies, toys, crafts and home decor products through its Web sites and catalogs including Oriental Trading, Terry's Village, Sensational Crafts and Inspirations.
     
    On the Break
    • Airvana's new $360 million term loan is trading 99-99.5 today after breaking late yesterday. The facility was previously increased by $30 million and pricing firmed at LIB+900 with a 2% Libor floor and a 98 OID. Jefferies, Macquarie and SG lead the deal. Airvana is a provider of mobile-broadband-network infrastructure products.
     
    Price Flex
    • Pricing on EVERTEC's $350 million term loan has been lifted to LIB+525 with a 1.75% Libor floor and a 97 OID. Earlier, price talk on the facility was LIB+475 with a 1.5% Libor floor and a 98 OID. The corporate family rating is B2, while the facility rating is Ba3. Bank of America Merrill Lynch and Morgan Stanley lead the $400 million loan backing Apollo Management's acquisition of a 51% stake in EVERTEC, a subsidiary of Popular Inc. The loan also includes a $50 million revolving credit facility. The company will also raise $225 million in senior unsecured notes. The equity injection will be $165.75 million, according to a previous SEC filing. The new joint venture is valued at $900 million. Popular will retain a 49% stake in EVERTEC. Popular Inc is the leading banking institution by both assets and deposits in Puerto Rico and ranks 34th by assets among U.S. banks. Popular provides processing technology services through its processing subsidiary EVERTEC, which processes approximately 1.1 billion transactions annually in the Caribbean and Latin America.
     
    Amendment
    • Lenders to Univar have formed a blocking group constituting 61% of existing loan holders ahead of Thursday's deadline to approve an amendment proposed by the company's private equity sponsor CVC Capital Partners. CVC asked lenders to extend existing debt and approve a new $300 million loan as it readies a 49 percent stake sale to an additional unidentified sponsor. The stake is expected to be sold to another private equity firm, one of Univar's institutional investors said. CVC is expected to use the new $300 million loan to pay itself a dividend, the investor said. Existing lenders are being asked to approve the amendment without knowing the identity of the new sponsor and are not able to join the new loan as it has reportedly already been offered to investors of the incoming private equity shop. That the sponsor would ask lenders to approve the amendment and new loan, which would increase the company's leverage, without communicating the identity of the potential buyer is highly unusual, the investor said. Lenders are being asked to extend the maturity of an existing $2.35 billion loan which backed CVC's buyout of the global chemicals distributor in 2007 in return for higher pricing and a Libor floor. Bank of America Merrill Lynch led the deal.
     
    High Yield
    • Delta Air Lines, Inc. today announced that as a part of its ongoing efforts to reduce the company's debt levels it has commenced cash tender offers to purchase certain specified series of outstanding Pass Through Certificates and its 11.75% Senior Second Lien Notes due 2015.
    Launch
    • Pemex has launched an upsized USD1bn retap of its 6.625% June 15 2035 at 5.975%, at the tight end of 6% area guidance. Pricing is expected later today. At that size, the retap will bring the outstanding amount to USD2.747bn. The bond is being sold under a 144A/RegS format with reg rights. Ratings are Baa1/BBB/BBB. Proceeds are being used to finance the company's investment program, for working capital needs and for debt refinancing. Bank of America Merrill Lynch and Credit Suisse are joint bookrunners.
     
     
    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.
    Aug 25 5:56 PM | Link | Comment!
  • Syndicated Loan Market Commentary 08/24/2010
    Overnight Japan’s Nikkei Index moved into bear country, hitting a 15-month low of 8,995 and setting the pace of the day for both Europe and the US, but the housing numbers were the main focus. The market opened up about 1% lower continued to grind lower into the housing numbers release. The numbers were expected to drop by 12% m/m, but that turned out to be a conservative estimate as the numbers actually showed at 27% drop m/m. This was largely expected by the market; no jobs, no stimulus, no housing, its that simple. So, after a quick shot down, the market recovered to levels previously seen prior to the number. Equities chopped around for the rest of the day and the Dow and S&P 500 closed at 10,040.45 (-1.32%) and 1,051.87 (-1.45%) respectively. Now, the question is, will the Dow dip below 10,000 tomorrow? Let’s see what happens with the July durable goods orders tomorrow as that will be what dictates the markets direction.
     
    The loan market was heavier today, influenced by equities. Volumes continue to be light and most of the trading was situational, with buyers outweighing sellers. iStar’s 2nd liens were quoted higher today on the news that the company is seeking to extend the loans and bump pricing. Tomorrow, we get the durable goods orders number at 8:30 and the new homes sales number and 10am. Also, we get earnings from OSI Systems and Integra Telecom. It should be another quiet day with economic numbers at the helm. Have a good night.
     
    Headlines
     
    News
    • July existing home sales fall 27.2 percent to a 15-year low.
    • Wall Street is anticipating a fiscal 3Q loss of 14 cents per share when luxury homebuilder Toll Brothers reports earnings tomorrow, Reuters reported. That is narrower than last year's loss of $2.93 but still weak compared with rivals Pulte and DR Horton, which reported profits in their most recent quarters.
    • Keybanc raises Isle of Capri Casinos to buy from hold.
    • iStar Financial's second-lien loans are better today after it was reported yesterday that the company is seeking to extend the loans in exchange for a bump in spread. The second-lien loan due 2011 is up about 75bp to 89.75-90.75 and the second-lien loan due 2012 is up about a point to 86 bid. The company is seeking to extend 2011 loan to June 2014 and the 2012 loan to June 2015. In exchange, the spread on both loans will be bumped up by 150bp to LIB+300 and LIB+350, respectively. The company is also planning to make a $500 million paydown on its first lien loan due June 2012. The remaining $500 million first lien loan will maintain the same maturity and pricing of 250 bps over LIBOR. That loan is unchanged today at 96-97.
    • Fresenius Medical Care USA is scheduled to have a bank meeting in New York on Sept. 8 for an amendment and extension on its $1 billion revolving credit facility and $1.3 billion term loan A, sources said. Bank of America Merrill Lynch and Deutsche Bank are leads. The company is asking to extend both facilities to March 2013, according to sources. Another bank meeting is scehduled in Germany on Sept. 3. Fresenius AG sealed a $996 million and 165 million euro term loan C to refinance its term loan B. That loan has a spread of LIB+300 with a step down to LIB+275 if leverage falls to 3.5 times after March 2011. There is a EURIBOR/LIBOR floor of 1.5%. Fresenius provides dialysis treatment to through its network of dialysis clinics in North America, Europe, Latin America and Asia-Pacific.
     
    Earnings
    • NOVA Chemicals generated 2Q10 net income of $51 million compared to a net loss of $83 million in 2Q09. Its 50% share of the INEOS NOVA joint venture`s operating loss was $5 million in 2Q10 compared to operating income of $6 million in the year earlier period.
     
    New Issue
    • Nutritional supplements maker NBTY Inc has set a bank meeting for Sept. 7 to launch its $1.7 billion LBO loan. Earlier this month, the issuer began approaching a handful of large institutional shops. Sources who got an early look at the deal also said 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. Official price talk has not yet been released. Barclays, Bank of America Merrill Lynch and Credit Suisse lead the loan. The loan includes a $200 million revolving credit facility and a $1.5 billion senior secured term 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
    • Standard & Poor's Ratings Services today raised its ratings on Atlanta-based Consolidated Container Co. LLC, including the corporate credit rating to 'B' from 'B-'. The outlook is stable. We raised the issue-level rating on the company's $405 million first-lien senior secured term loan B ($369.6 million outstanding as of June 30, 2010) by one notch to 'B' from 'B-' (the same as the corporate credit rating). The recovery rating on this debt remains unchanged at '3', indicating our expectation for a meaningful (50%-70%) recovery in the event of a payment default. We raised the issue-level rating on the $225 million second-lien term loan ($225 million outstanding as of June 30, 2010) to 'CCC+' from 'CCC' (two notches below the corporate credit rating). The recovery rating remains unchanged at '6', indicating our expectation for a negligible (0%-10%) recovery in the event of a payment default.
     
    What to Watch tomorrow
    • Durable goods, July (Census Bureau) 8:30 a.m. ET
    • New home sales, July (Census Bureau) 10 a.m. ET
    • Treasury to auction $36 billion five-year notes
    • Treasury to auction $35 billion 21-day cash management bills
    • Treasury to auction $25 billion 56-day cash management bills
    • Integra Telecom, Inc. Q2 earnings, conference call 11 a.m. ET
    • Shiloh Industries Q3 earnings, conference call 11 a.m. ET
    • OSI Systems, Inc. Q4 earnings, conference call 12 p.m. ET
    • ATP Oil & Gas Corp. at EnerCom oil & gas conference 12:30 p.m. ET
    • Hain Celestial Group, Inc. Q4 earnings, conference call 4:30 p.m. ET
    • Precision Drilling Corp. at EnerCom oil & gas conference 4:45 p.m. ET
    • Key Energy Services, Inc. at EnerCom oil & gas conference 5:35 p.m. ET
    • Global Geophysical Services, Inc. at EnerCom oil & gas conference 6:50 p.m. ET
    • Vanguard Health Systems, Inc. Q4 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.
     
    Aug 24 5:31 PM | Link | Comment!
  • Syndicated Loan Market Commentary 08/23/2010
    The markets opened up firm this morning as M&A activity boosted optimism. However that was short lived as fears of a double dip came back into focus, prompting a flight to safety. It is hard to ignore the data and this will continue to drive the markets direction. The Dow and S&P 500 both closed lower at 10,174.41 (-0.38%) and 1,067.36 (0.40%) respectively.
     
    The loan market was very quiet but had a positive tone as buyers remain active. Flow names were mostly flat with some down an eighth, but overall loans firmed. Strategic Partners new term loan broke for trading and was accepted well by the market, quickly moving up into the par context after being issues at 99. Very few deals are expected to syndicate between now and Labor Day, so any decent paper that hits the market will be sought after. Investors are attracted to yield, and without prospects of a quick turn around in the economy equities will remain heavy, forcing money in our direction. So stay positive. Volumes will be light for the next two weeks but get ready September should be a busy one. Have a good night.
     
    Headlines
     
    Must Read Articles
     
    News
    • Potash Corp's board urged shareholders today to reject BHP Billiton's hostile $38.6 billion offer and said it was in talks with several potential suitors for a superior deal.
    • Wynn Las Vegas LLC, a wholly-owned subsidiary of Wynn Resorts Limited, completed its offer to purchase any and all of the 6.625% First Mortgage Notes due 2014 issued by WLV and Wynn Las Vegas Capital Corp. WLV has accepted for payment the approximately $987.85 million in notes validly tendered.
    • Advanced Micro Devices Inc today said it has completed its offer to purchase for cash, on a pro rata basis, up to $800 million in aggregate principal amount of its 6.00% Convertible Senior Notes due 2015. Pursuant to the offer, $1,528,656,000 aggregate principal amount of the notes were validly tendered.
    • Cenveo Inc today said it is no longer seeking to acquire assets of bankrupt NEC Holdings Corp, according to a statement, asserting that NEC and its creditors were seeking to saddle Cenveo with disproportionate risk relative to other bidders. "Despite offering the unsecured creditors what we believed to be the highest potential recovery out of all the bids at the auction, said Cenveo Senior Chairman and Chief Executive Officer Robert G. Burton of the proposed bid, "it became very clear to us that the debtors and the creditors' committee were requiring significantly more in cash and guarantees from Cenveo than from the other bidders." Cenveo expects to continue generating strong cash flow and to pay down debt or make strategic accretive acquisitions that deleverage its balance sheet and strengthen its product leadership positions, added Burton. Stamford, Connecticut-based Cenveo had offered to buy NEC for at least $140 million in cash in June. NEC chose a $134.5 million offer by the Gores Group to act as the stalking horse bid at a court-supervised auction. NEC, parent company of National Envelope, filed for bankruptcy protection in June.
    • Goldman Sachs has set a bank meeting for the morning of Sept. 8 in New York to launch the financing backing the merger of Valeant Pharmaceuticals and Biovail. Jefferies and Morgan Stanley are to the right of Goldman Sachs. As per a commitment letter filed with the SEC in June, the $3.022 billion credit includes a $250 million, 4.5-year revolving credit facility, a $500 million, five-year term loan A and a $2.272 billion, six-year term loan B, of which $300 million will be available on a delayed-draw basis. The revolver and TLA will be priced at LIB+450 and the TLB will be priced at LIB+475 with a 1.75% Libor floor, according to the commitment letter. Pricing on all three tranches will step down by 25bp if the facility ratings are at least Ba3/BB- by closing. Conversely, pricing will step up by 75bp if facility ratings are B2/B or lower. The revolver and delayed-draw tranches will have a 75bp undrawn fee. Valeant 7.625% and 8.375% senior unsecured notes will be refinanced as part of the transaction. On a trailing 12-month basis as of March 31, 2010, the combined company would have had pro forma revenues of $1.75 billion and pro forma cash flow from operations of $575 million, according to the release. The new Valeant expects to generate at least $175 million in annual cost synergies in the second year.
     
    On the Break
    • Strategic Partners' new $175 million term loan B is quoted in the 99.875-100.25 range after breaking for trading. The buyout loan was cut to LIB+550 from LIB+600. At the same time, the OID was tightened to 99 from 98. A 1.75% Libor floor remained unchanged. 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.
     
    Extension
    • Smart & Final has pulled the extension of its $386 million first-lien term loan by two years to May 2016. The issuer will extend roughly 98.5% of its $150 million second-lien loan by two years to November 2016. The first-lien term loan will now expire on its original maturity date at LIB+300. Earlier, the company was proposing a spread bump of LIB+400 and a 50bp MFN protection on the first-lien tranche that would have been extended. Smart & Final's existing second-lien piece has a PIK feature. On the extended tranche, the PIK option would be eliminated and the coupon would be LIB+875 in cash, with a step-up to LIB+900 after two years. The extended second-lien would also have 50bp MFN protection. In April 2007, Smart & Final obtained a $238 million term loan B (LIB+300) and a $140 million second-lien term loan (LIB+675) to back its $813 million LBO by Apollo Management.
     
    Amendment
    • Commercial real estate lender iStar Financial is asking to extend its second lien term loans due 2011 and 2012 and is offering higher spreads on the extended loans. The company is amending its first and second lien loans under a restructuring proposal that is advised by Lazard. The company stated in a presentation to lenders that, "notwithstanding the company's improved outlook, iStar is facing significant debt maturities and would like to work with the lenders to effect a consensual deal to extend $2.6 billion of second priority loans, consisting of the following: $1.7 billion second priority loan due June 2011 and $0.9 billion second priority loan due 2012." The 2011 loan is proposed to be extended to June 2014 with a spread of LIB+300, increased from the existing LIB+150. The 2012 loan is being extended to June 2015 with a spread of LIB+350, increased from the existing LIB+200. iStar is also asking to repurchase its second lien loans at a discount of not less than 10% of the aggregate principal amount repurchased. Meanwhile, the company is planning to make a $500 million paydown on its first lien loan due June 2012. The remaining $500 million first lien loan will maintain the same maturity and pricing of 250 bps over LIBOR. The company will need 51% of votes to get the proposed amendment passed.
     
    What to Watch Tomorrow
    • Existing home sales, July (National Association of Realtors) 10 a.m. ET
    • Treasury to auction $25 billion 52-week bills
    • Treasury to auction $37 billion two-year notes
    • Burger King Holdings Inc. Q4 earnings before market open, conference call 10 a.m. ET
    • Murray Energy Corp. Q2 earnings, conference call 11 a.m. ET
    • NOVA Chemicals Corp. Q2 earnings, conference call 11:30 a.m. ET
    • Petrohawk Energy Corp. at EnerCom oil & gas conference 1:20 p.m. ET
    • Alimentation Couche-Tard Inc. Q1 earnings, conference call 1:30 p.m. ET
    • Tuesday Morning Corp. Q4 earnings, conference call 5 p.m. ET
    • Carrizo Oil & Gas, Inc. at EnerCom oil & gas conference 5:35 p.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.
    Aug 23 5:48 PM | Link | Comment!
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