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Loan Market Commentary 02/09/2010

This morning headlines and rumors helped spark a nice little rally in US Equities, pushing the DOW back up above 10k and the S&P up 1.5%. Rumors began circulating early today that Germany was preparing an aid package for Greece, however that statement was not confirmed by their Government. Elsewhere, an article on Bloomberg, citing the Bank of America Merrill Lynch index data, stated that the number of distressed bonds fell to $117 bn from $250 bn 6 months ago. Also, it was noted that JPMorgan & Co. said the market is pricing in a default rate of 0.3% for a year from now, down from 10.2% in December. Which makes sense, the primary market is on fire in both the loan and high yield markets. Borrowers that seek to extend or amended their current facilities are able to do so easily. The consensus has been that loan and HY markets will continue to prosper because they offer attractive yields and are senior secured. In the secondary loan market, things felt a little better this morning, but loans were out the door today down another eighth to a quarter, so it was just some opportunistic buying which was helped by the speculation that Greece will receive help from the EU. The market has been trading heavy, leading many to believe that most investors are long credit and have been a little worried. But, with concerns over Greece waning, things will flatten out again. The LCDX 13 was charging today on the back of equities and firmed three quarters of a point to 100 ½ - 100 ¾.
 
  • Spectrum Brands announced that the have added Russell Hobbs to ite portfolio, creating a $3 billion global consumer products company. The new company has an improved capital structure, stronger balance sheet and significant synergies that will enhance growth opportunities.
  • Banks are getting more comfortable lending for buyouts, and at higher multiples, said private equity group Apollo Management's founder Leon Black, but a return to the mega-deals of the boom is unlikely. Banks are certainly not lending "with all the bells and whistles... that we saw in 2007 and before", Black said, at one of the private equity industry's largest conferences, Super Return International. He was referring to the little or no covenant features seen in past deals.
  • Penton Media reached an agreement with lenders on terms of a restructuring that will eliminate $270 million in debt, the issuer said in a statement. The restructuring provides for an extension of the maturity of its existing senior secured credit through 2014.
  • Hawker Beechcraft's "old" term loan came back after the company posted better-than-expected full-year results, sources said. The loan rose about 4 points to 74-76. The company reported $3.2 billion in sales for the 12 months ended Dec. 31, 2009, compared to $3.5 billion in the year-earlier period. Cash flow from operations was $177.1 million for the full-year 2009. Earlier today, the loan fell to 72-73 after an article in the WSJ talked about the companies weak sales.
  • Price talk on Stallion Oilfield Holdings Inc's $225 million of five-year first-lien senior secured notes has been upped to 10.75% with one point of OID, according to IFR, a Thomson Reuters service. The notes were previously talked in the 10.25-10.5% range.
  • A 6.392 million block of Metro-Goldwyn-Mayer's revolving credit facility was auctioned earlier today, sources said. The facility is quoted 58.75-59.75 on the follow.