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Loan Market Commentary 03/17/2010

The loan market was firm today. For the most part, names were unchanged but some of the flow names were better bid by a quarter. Ford’s term loan was firm after getting a rating upgrade and was last seen up a half point to 96 5/8 – 97 3/8. Metro-Goldwyn-Mayer’s term loan was down over two points after news broke that Liberty Media pulled their bid for the company stating that their assessment of the company was below the value that the studio’s executives feel is fair. Blockbuster looks to have one foot in the grave according to their 10-K, but this was largely expected. Most of the trading today was event driven and, volumes were pretty robust. The LCDX 13 was out the door this morning up a quarter, but eased back to 103 ¾ - 104 for most of the day. The Index closed at 103 7/8 – 104 1/8. The focus continues to be on the primary market, but the secondary is getting some action too. Supply out there is limited so technical have helped prop up loan prices. Much of the trading has been news driven so keep you eyes open. Happy St. Pats!
 
News
  • Custom Building Products' new $295 million term loan B broke for trading this afternoon in a 100.5-100.75 market. The loan was sold at 99. The facility cleared at LIB+400 with a 1.75% Libor floor. The loan also benefits from 101 soft-call protection. Bank of America Merrill Lynch leads the five-year loan which, along with a $25 million revolver, refinances existing debt.
  • YRC Worldwide Inc's term loan rose more than two points after the company reported improving first quarter shipment trends. The loan is currently quoted in the 75-77 range. This morning, the company said shipment growth in March is at levels which exceed normal seasonal patterns, with "total shipment per work day for both YRC National and YRC Regional increas(ing) 10% compared to the same period in February."
  • Blockbuster Inc's bonds lost a couple of points this week on news the company's debt burden is becoming untenable. The company yesterday said in an SEC filing it is pursuing an exchange of all or part of its senior subordinated notes for Class A common stock, which could require it to file for bankruptcy protection. "Our level of indebtedness may make it more difficult for us to pay our debts as they become due and more necessary for us to divert our cash flow from operations to debt service payments," Blockbuster said in its filing. Their notes fell as a result but term loans were flat in response to the news.
Earnings
  • Travelport Ltd, parent company of the Travelport group of companies, announced its financial results for the fourth quarter and full year ended December 31, 2009. Net revenue in 4Q09 was $533 million, up from $524 million in the year earlier period. Adjusted EBITDA was $138 million, down from $149 in the 4Q08. For full year 2009, the company reported net revenue of $2.25 billion and an operating loss of $499 million. The company’s term loan was flat on the day. Sabre Holdings, a close competitor, got a boost on this news as it is now the favored credit.
Ratings
  • Ford Motor Co's TLB-1 and TLB-2 gained about half a point today after Moody's Investors Service upgraded the company. Both tranches are bid today at 96-97. Moody's boosted the ratings of Ford Motor Company and Ford Motor Credit Company, and is reviewing the ratings for further possible upgrade, it said today in a statement. Ratings raised include Ford's Corporate Family Rating (NYSE:CFR) and Probability of Default Rating (PDR) to B2 from B3, secured credit facility to Ba2 from Ba3, senior unsecured debt to B3 from Caa1, trust preferred to Caa1 from Caa2, and Speculative Grade Liquidity rating to SGL-2 from SGL-3. Ford Credit's senior debt rating was also raised to B1 from B2. The upgrade of Ford's long-term ratings anticipates that the company's restructured business model will generate significantly improved operating and financial performance, Moody's said.
  • Standard & Poor's today said it lowered its corporate credit rating on communications systems, applications, and services supplier Avaya Inc to 'B-' from 'B'. S&P also assigned a 'B' rating with a '2' recovery rating to the company's newly issued term loan B-2, proceeds of which were used to finance the acquisition of Nortel Networks Corp's Enterprise Solutions businesses (OTC:NES). The outlook is negative. "The action reflects Avaya's increasing leverage and the challenges the company is likely to face integrating the recently acquired NES business," the rating agency said in a statement.
New Issue
  • Price talk is LIB+350-375 with a 1.75% Libor floor and a 99 OID on Skilled Healthcare's $300 million term loan which was launched today. The Credit Suisse-led deal also includes a $100 million revolving credit facility. Proceeds are to refinance debt.
  • Verizon Communications is refinancing its existing $5.3 billion, 364-day revolving credit facility with a $5 billion, three-year revolver. The facility can be upsized to $5.5 billion if oversubscribed, and there is an accordion to go up to $7 billion. Pricing is based on the company's CDS and is at a floor of 50bp and a cap of 175bp for an A rating. If rating drops below A, the floor is 100bp and the cap is 275bp. The commitment fee is 20bp. The facility was launched yesterday and commitments are due March 30.
  • Ball Corp is selling $450 million in 10.5-year senior notes due 2020 in a drive-by offering today. The issuer will use proceeds, together with borrowings under its revolver or A/R securitization facility, to retire its 6.875% senior notes due 2012. Deutsche Bank, Bank of America Merrill Lynch, JP Morgan, Goldman Sachs and Barclays lead the sale.
  • Price talk is out on QVC Inc's $500 million senior secured first-lien notes. The $250 million, seven-year tranche is talked at 7.125-7.25%, while the $250 million, 10.5-year tranche is talked at 7.375-7.50%. The seven-year tranche is non-callable for three years, while the 10.5-year tranche is non-callable for non-callable for five years. JP Morgan, Barclays, Wells Fargo, Bank of America Merrill Lynch, Citi, Credit Agricole, Morgan Stanley, RBS, Scotia are joint bookrunners.
Amendments
  • HD Supply has gathered 80% of commitments on its $977.5 million term loan B to be extended to June 2014 from August 2012. The facility is offering a 35bp amendment fee to lenders who consent to the amendment and extend their commitments. Bank of America Merrill Lynch is lead. Pricing on the extended loan will be increased to LIB+275 from LIB+125.
  • Lear is seeking commitments from certain lenders to add revolving credit facility of $100- $125 million. The company says the proposed amendment of lien agreement to facilitate issuances, sales of debt securities of not less than $350 million. The also said that commitments under revolving credit facility would expire three years after the date of such amendment and restatement.
  • HCA's TLB rose today on news the company is seeking to amend and extend $1 billion of its term debt, sources said. The TLB is currently 97.75-98.25, up from 96.875-97.375 this morning. The company is seeking to extend the maturity to March of 2017 in exchange for a price bump to LIB+325. However, after further review, some market players calling the proposal relatively unattractive. It was pointed out that the company is not offering call protection or a Libor floor on the extension, which seeks to push out the maturity of the loan from November 2013 to March 2017 at a 100bp increase in spread to LIB+325. Lenders in the deal are also concerned that though HCA has been steadily paying down its bank debt, it has been doing so by replacing its senior secured loan with senior secured bonds. Bank of America Merrill Lynch, Citi and JP Morgan are leading the amendment. Commitments are due March 31.  
  • Charter Communications Inc's amendment has passed despite opposition from a group of lenders led by Aurelius Capital. The company will extend $2 billion of its existing term loan by 2.5 years to September 2016 at a spread of LIB+325, along with a 10bp amendment fee. Aurelius, which was a substantial holder of Charter's TLB-1, said earlier in a memo that it had the backing of holders of 43% of the entire credit facility. We feel that the terms of the proposed amendment are ridiculously inadequate from the lenders' standpoint," Aurelius said in the memo.
  • SuperValu Inc is offering a 20bp amendment fee and a 50bp extension fee on its term loan. The company is offering a 20bp amendment fee on its revolving credit facility. Upfront fees on the revolver will be based on commitments extended: 100bp on $100 million or more, 75bp on $75 million to $100 million, 62.5bp on $50 million to $75 million and 37.5bp on less than $50 million. SuperValu launched its amendment today via RBS. The company seeks to extend $500 million of its term loan B to October 2015 from June 2012 at a boosted spread of LIB+275. SuperValu is also looking to extend $1.5 billion of its $2 billion revolving credit facility to April 2015 from June 2011 at LIB+225.