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Loan Market Commentary 03/25/2010

Initial jobless claims came out early this morning and were fewer than anticipated, which sent equities higher for the first half of the day. But, in the afternoon the game changed; the 7-year treasury auction did not go well and Sarkozy sided with Germany, calling for the IMF to bailout Greece. Fear reentered the market and equities closed flat for the day.
 
In the loan market volumes were better, but not by much. Three news deals were discussed today, and Infor Global launched an amendment, which drew some attention away from the secondary. The tone remains positive and most names firmed about an eighth. Lyondell’s CAM firmed a couple of points today on the back of news that their note auction was well received. Blockbuster and Movie Gallery were two of the biggest losers today, each losing over a quarter point as they struggle to stay in business. Flow names and high dollar names were relatively. RedPrairie and Wyle Services new term loans broke for trading today and topped their OID’s. The LCDX 13 was active today and firmed a quarter to 104 3/8 – 104 5/8.
 
News
  • Station Casinos Inc and its subsidiaries have filed a joint plan of reorganization. The plan, outlined in an 8-K filing, calls for the company to conduct a sale of the remaining assets under supervision of the bankruptcy court. The company anticipates the plan will be confirmed in bankruptcy court later this summer, with the debtors likely to emerge from bankruptcy before the end of the year.
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Earnings
  • Toys R Us Inc yesterday reported higher fourth quarter earnings as strong sales of toys offset weak demand for video games in the holiday shopping season. Net earnings rose to $387 million, up from $345 million in the year-earlier period. Net sales rose 7.3% to $5.86 billion, driven by same-store sales rise of 3.3% in its domestic business.
On the break
  • RedPrairie Corp's new $240 million term loan broke for trading in the 100-100.5 range this morning. The loan was issued at 99.5.
  • Wyle Services' new $90 million TLB broke for trading this afternoon and is currently bid in the 99.5 context. The loan was sold at 99.
  • ITC DeltaCom sold $325 million in 10.5% six-year senior secured notes due 2016 at 97.857 to yield 11. Proceeds will be used to retire its credit facilities.
New Issue
  • PR Wireless is seeking a $175 million, two-tranche deal. The deal consists of a $160 million term loan and a $15 million revolving credit facility. Morgan Stanley is lead and a bank meeting is scheduled for Monday.
  • Bank of America Merrill Lynch is leading a $1 billion loan to refinance debt at customer engagement solutions company Affinion Group. The deal includes a $125 million revolving credit facility and an $875 million term loan B. Price talk is LIB+350, with 98.5-99 OID and a 1.5-1.75% Libor floor.
  • SG and GE Capital are holding a bank meeting in New York on Wednesday to launch a $172.5 million, six-year senior secured term loan for Christie/AIX. The company is a wholly-owned subsidiary of Cinedigm Digital Cinema Corp. Proceeds are to refinance existing debt. The deal will be publicly rated.
  • Lyondell Chemical is cutting pricing on its $500 million, covenant-lite term loan to LIB+400 from LIB+425 and is reducing the Libor floor from 2% to 1.5%. The 99 OID remains unchanged. Recommitments to the deal are due tomorrow at 4 p.m.
  • ITC DeltaCom sold $325 million in 10.5% six-year senior secured notes due 2016 at 97.857 to yield 11%, according to IFR, a Thomson Reuters service. Proceeds will be used to retire its credit facilities.
  • Coffeyville Resources has priced its $500 million senior secured note offering. The now upsized $275 million (from $250 million) first-lien notes due 2015 were priced at a discount to yield 9.125%. The now downsized $225 million (from $250 million) second-lien notes due 2017 were priced at a discount to yield 11.125%. Proceeds are to repay the company's first-lien term loan and for general corporate purposes. The loan included a $150 million revolving credit facility, a $150 million LC facility and a $775 million term loan.
  • The OID on Sheridan Production Partners' $700 million term loan is 98.5. UBS leads the deal, which will be used to refinance debt. Price talk is LIB+450, with a 2% Libor floor.
  • The OID on Hoffmaster's first-lien term loan is 98.5, while the OID on its second-lien loan is 98. The deal includes a $30 million revolver, a $160 million first-lien term loan and a $90 million second-lien loan. Price talk on the first-lien loan is LIB+425 with a 2% Libor floor and price talk on the second-lien loan is LIB+825 with a 2% Libor floor. Senior leverage is a little over three times, while total leverage is 4.9 times. Hoffmaster produces a line of specialty disposable tabletop products
Amendments
  • Software provider Infor Global has launched an amendment via JP Morgan to extend its four-tranche first-lien term loan to July 2015 from September 2012. The company is looking to increase the spread by 175bp on all four tranches of its first-lien term loan. Commitments are due Monday. Infor Global's corporate credit rating is B-. Infor Global has a $1.15 billion term loan B (LIB+325), a 290 million euro TLB (E+300), a $600 million delayed-draw TLB (LIB+325) and a 72.5 million euro TLB (LIB+325).
  • Frontier Drilling is in the middle of covenant negotiations with lenders. Both existing deals are led by Morgan Stanley. Covenants include excess cash flow sweep of 75% and indicated excess cash flow will decrease to 50% when company's debt to EBITDA ratio is less than two times.
  • Gray Television Inc yesterday sent out its amendment request for covenant flexibility and to raise sub-debt to reduce its term loan. The company 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 seven times. Gray TV, headquartered in Atlanta, Ga., is a television broadcaster that operates in 30 U.S. markets.
    • The current facility consists of a $50 million revolving credit facility due March 2014 and an $810 million term loan B due December 2014. The revolver will be reduced by $10 million under the amendment.
    • A "springing event" clause is added and is defined as the date on which Gray TV has paid down $200 million or more of TLB with proceeds from issuance of sub-debt. Under the springing event and until 1Q2011, margin and facility fees will be reduced based on TLB paydown.
Paydown      Fac. fee   LIB+($ Mils.)    (bp)       (bp) 200          125        475250          100        450300          75         425
    • Pricing and facility fee will be based on a leverage grid thereafter.
1st lien lev.  Fac. fee    LIB+(times)        (bp)        (bp)6 or more      100         4505.5-6          75          4255-5.5          50          4004.5-5          25          375Below 4.5      0           350
    • Without the springing event, there will be a 200bp incentive fee from 2Q2010 which will be eliminated when a springing event occurs. Therefore, under a non-springing event case, the all-in rate is LIB+850 inclusive of the existing LIB+350 margin, the existing 300bp facility fee and the 200bp incentive fee.
    • The revolver pays an existing 50bp commitment fee, which remains the same under the amendment.