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Loan Market Commentary 03/15/2010

The equity markets were dead today. Overnight futures pointed to a lower open as news that China and India will restrict economic growth as they address their inflation issues. In the US, the big news that had most equity trader’s attention was Google and Bidu. Google announced that they will not expand into China which helped send their shares lower, and Bidu firmed; probably the only interesting trades for the day. Financials were active today. Berkowitz’s commented about AIG being a good investment; nice way to attract some buyers with a couple bucks and an e-trade account to back your trade. In Dodd’s revised draft legislation to regulate the swaps market, he was sure to use language that makes it easier to exclude trades from being processed via clearinghouses, therefore making those transactions less taxing on bank’s balance sheets. Equities got a late day rally to bring that back into positive territory to finish out the day.
 
The loan market was also dead today. I a lot of people were out after the severe storms that hit New York left many without power and there were also reports of flooding; so lets just blame it on the rain. Healthcare and Retail names remain better bid in the market. We saw paper in those sectors firm a quarter on little volume though. Casino names continue to underperform for the most part, but a select few names remain attractive, like Harrah’s and MGM. Index names were mostly unchanged, but for those that did move the direction was positive. The LCDX 13 was unchanged at 103 ½ - 103 ¾. In all, today was a great day to fill out brackets.
 
News
  • Fresenius Medical's new C1/C2 institutional term loan broke for trading this afternoon in the 100.375-100.875. Proceeds from the roughly $996 million and 165 million euro term loan Cs refinances the company's term loan B due 2014. Deutsche Bank leads the loan.
  • Aurelius Capital has organized a conference call for 1 p.m. today to discuss an opposition to Charter Communications Inc's amend and extend. In a memo obtained by Thomson Reuters LPC, Aurelius says that based on responses from existing Charter lenders, holders of 43% of the entire credit facility (both term loan and revolver) oppose the amendment. We feel that the terms of the proposed amendment are ridiculously inadequate from the lenders' standpoint," Aurelius says in the memo. "In addition to the obvious issues, we are writing to make sure holders of Term Loan B-1 understand how much they would be giving up by dismissing the banks' pending appeal of the reinstatement issue." Charter is proposing to extend $2 billion of its existing JP Morgan-led term loan at a spread of LIB+325. The company will also offer a 10bp amendment fee. Charter is looking to extend the maturity on the term loan by 2.5 years to September 2016.
 
New Issue
  • Price talk on Lyondell Chemical Co's $1 billion, six-year term loan B is in the LIB+425 area with a 2% Libor floor, according to a lenders call today. An OID on the term loan, which amortizes at 1% per year, is to be determined. Moody's has assigned a B1 corporate family rating, while the $1 billion term loan is rated Ba3. First-lien and total leverage is 1.6 times and 3.2 times, respectively. The company will have over $3 billion in liquidity upon emergence from bankruptcy.
  • RadNet is selling $210 million in eight-year senior notes as part of a $585 million refinancing. The notes run alongside a concurrent $275 million first-lien loan and a $100 million revolver. Deutsche Bank, Barclays, RBS and Jefferies are joint arrangers on the bonds. Barclays, GECC, Deutsche Bank, RBC and Jefferies are leading the bank loan. A bank meeting is scheduled for tomorrow. Roadshows for the bonds will take place the week of March 22.
  • Verizon Communications will be out for a refinancing tomorrow, sources said. According to sources, the company notified lenders that the deal will be launched on Intralinks tomorrow. Proceeds are believed to refinance the company's existing $5.3 billion, 364-day revolving credit facility maturing this April. The revolver was led by JP Morgan and Citi. Pricing on the existing deal, based on the company's one-year CDS, is capped at a floor of 75bp and a ceiling of 200bp. The commitment fee is 20bp.
  • NEW Customer Service's $700 million, first-lien term loan is being marketed with a 99 OID, while the $400 million unsecured loan is being marketed with a 98-98.5 OID. The six-year term loan is talked at LIB+425 with a 1.75% Libor floor. The seven-year unsecured term loan is talked at LIB+750 with a 2% Libor floor and will be non-call for two years, and then at 103, 101 and par. Books close tomorrow. Bank of America Merrill Lynch, Barclays and Deutsche Bank launched the $1.1 billion loan for NEW Customer Service last week. The deal also includes a $700 million, covenant-lite first-lien term loan. Proceeds are to refinance existing debt and to pay a dividend.
  • Bombardier Inc today announced a $1 billion senior offering to fund its cash tender offer for up to $550 million of its 6.75% notes due 2012, its 6.30% notes due 2014 and its EUR floating rate senior notes due 2013. The two-part offering includes eight-year and 10-year notes, both are non-call for life. The tender offer is being undertaken to take advantage of current conditions in the debt capital markets and to extend Bombardier's debt maturity profile by refinancing a portion of its debt maturities due in 2012, 2013 and 2014 with longer maturity financing. The tender offer will expire on April 12, 2010, unless extended or earlier terminated, and the tender cap may be increased up to $1 billion.
  • Borg Warner Inc is seeking a $500 million, three-year revolving credit facility to replace its existing $250 million revolver due January 2011, sources said. Bank of America Merrill Lynch, Deutsch Bank, Citi and Keybank are lead arrangers. The facility is offering a margin of LIB+275 and a 50bp undrawn fee. Commitments are due March 23.
  • Kingston, Jamaica-based wireless communications operator Digicel Group will raise $775 million in senior notes due 2018. A U.S. investor call has been set for 11 a.m. EST tomorrow. Proceeds, along with cash on hand, will be used to fund the purchase of Digicel Pacific Limited, a sister company (72% owned by Denis O'Brien). Credit Suisse leads the deal, which is targeted mostly at U.S. high yield accounts.
 
Amendment News
  • Gray Television Inc said it does not expect to be in compliance with its leverage covenant at the end of the month when the ratio declines from 8.75 times to 7 times, the company said in a statement. "The continuing general economic recession, including the significant decline in advertising by the automotive industry, has adversely impacted our ability to generate cash from operations during 2009 and continuing into the first quarter of 2010," the company said. The company is currently in discussion with lenders under its senior credit to seek an amendment to loosen covenants. Today, the company announced preliminary quarterly and full-year results. For the three-month period ending Dec. 31, revenues will be $77.5 million, down from $94.8 million the year before, the company said. For the year, revenues will be $270.4 million, down from $327.2 million the year before.
 
    • BL InfoXchange is available to all buy-side institutions to discuss amendments and credit updates as well as to identify fellow co-lenders of your portfolio companies.  Visit www.bankloanupdate.com for further information and to gain complimentary access to the platform.