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Loan Market Commentary 03/31/2010

|Includes: AN, BBI, CVC, DG, First Data Corp. (FDC-OLD), HCA, LYO, MGM, OSI, RAD, TXU
The loan market was quiet today and flow names like FDC, TXU, and HCA fell a quarter, following equities lower, after the ADP employment estimates and Chicago PMI numbers pointed to slowing growth. The ADP report showed that the US shed 23k jobs in March and the Chicago PMI was less than expected, but was not all that bad when you consider the seasonal adjustments. But, for the most part things were unchanged in the secondary market however we did see a lot of off the run names firm around a quarter.  Manufacturing, Oil & Gas, and Chemical sectors all performed well today. We got earnings from Rite Aid, Dollar General, and OSI Restaurants today and results were mostly positive. The LCDX 13 was down a quarter on the day to 104 ½ - 104 ½ on decent volume.
  • Lyondell Chemical Co will pay $162 million in bankruptcy to settle environmental liabilities, according to a statement from the Department of Justice. Under the Settlement Agreement filed late yesterday in Manhattan bankruptcy court, Lyondell will pay approximately $162 million in cash for the cleanup of 15 properties and sites in various states contaminated with hazardous waste.
  • Billionaire investor Carl Icahn has cut his stake in Blockbuster Inc, selling more than 13 million shares of the video rental chain, Reuters reported. Over the past week, Icahn, who was Blockbuster's largest shareholder according to Thomson One Financial, reduced his ownership of the Class A shares to 5.1% as of March 29 from 16.9%, according to a federal filing.
  • Metro-Goldwyn-Mayer's lenders have extended the company's forbearance period to May 14, the company announced today. As a result, the movie studio's lenders will not seek remedies in connection with the nonpayment of interest and principal due on the company's bank debt, including its revolving credit facility, MGM said in a statement.
  • Dollar General's loans are up about 75bp this morning after the company posted at rise in quarterly sales and forecast a further rise in sales this fiscal year. The TLB-1 is currently quoted 98.75-99.25 and the B-2 loan is 98-98.5. The discount retailer said sales rose 11.9% to $3.19 billion, while same-store sales rose 7.4% and adjusted EBITDA rose 41% from last year.
  • Rite Aid Corp's T-2 is a touch weaker this morning after the company reported a decline in 4Q09 adjusted EBITDA sales. The T-2 loan declined 25-50bp to 90.5-91. Meanwhile, the T-3 and T-4 loans are unchanged to slightly weaker at 97.75-98.75 and 104.75-105.75, respectively. This morning, the company said revenues for the 13-week fourth quarter were $6.5 billion, down from $6.7 billion a year earlier. Same-store sales decreased 2.4% over the prior year 13-week period. Adjusted EBITDA in the quarter was $205.1 million, down from $270.5 in the year-earlier period. Full-year adjusted EBITDA was $925 million, down from $991.1 million a year ago.
  • OSI Restaurant's TLB was up about a point to 93.25-93.5 after reporting 4Q09 results that showed that adjusted EBITDA increased by 3% from 4Q08.
  • Moody's Investors Service has today upgraded the Corporate Family and Probability of Default Ratings of Brenntag Holding GmbH to Ba2 from B2. The ratings on the senior secured and senior subordinated loans and notes were upgraded to Ba2 and B1 from B1 and Caa1 respectively. This concludes the review for possible upgrade process initiated by Moody's on 26th February 2010. The upgrade to Ba2 follows the successful placement of 10.5 million of new shares from a capital increase resulting in gross cash proceeds of EUR525 million (before transaction costs) used to repay EUR429 million of mezzanine debt. In addition the existing shareholder of the Brenntag group has accepted to convert EUR702 million of shareholder loans into common equity of the Brenntag group thereby further strengthening the capital structure of the group notwithstanding that Moody's has never included the shareholder loan in the computation of its debt metrics. The credit metrics of Brenntag following the successful Initial Public Offering of the group are commensurate with a Ba2 rating with Net debt / EBITDA estimated at 3.2x and RCF / Net Debt at 18.8%. The credit profile of Brenntag will further benefit from EUR227 million of cash sweep (50% of EUR 454million excess cash flow generated in fiscal year 2009) to be contractually applied to senior debt reduction during the course of fiscal year 2010.
New Issue
  • Bank of America Merrill Lynch is launching next Thursday a $2 billion term loan for American General Finance Corp (AGFC), the residential mortgage unit of AIG. In the meantime, BAML is said to be inviting top ticket levels prior to the launch. The term loan is secured by the company's mortgages. Unlike other mortgage companies like Countrywide, AGFC holds its mortgages. One source said price talk could be at LIB+500, with a 2% Libor floor and a 98 OID. In an SEC filing today, AGFC said it anticipates that the borrower under the facility will be a newly formed, wholly-owned special purpose subsidiary of AGFC, and that the facility would be guaranteed by AGFC and certain of its operating subsidiaries, and secured to the extent permitted under AGFC's existing debt agreements. AGFC intends to use the proceeds to repay existing debt and fund its lending activities.
  • RadNet is upsizing its six-year term loan B by $10 million to $285 million and tightening the OID from 98 to 99. The coupon has firmed at LIB+375, the tighter end of LIB+375-400 talk. The 2% Libor floor remains unchanged. A 101 call protection has been added to the term loan. The deal also includes a $100 million, five-year revolving credit facility priced at LIB+375 with a 2% Libor floor and a 75bp commitment fee. Post the upsize to the term loan, senior secured leverage is 2.8 times and total leverage is 4.6 times.
  • Price talk of 10.25%-10.50% is out on RadNet Inc ("RDNT") USD210m 144A sr notes due 2018 (8y). NC4. Caa1/CCC+ (stable/stable). Via DB/Barc/RBS/Jefferies joint books. Books close at 2pm today. Pricing today
  • AutoNation Inc (NYSE:AN) USD400m SEC registered sr notes due 2018 (8y). NC life. Current ratings Ba2/BB+. Via BAML/JPM/WFS joint books, Comerica/STI co- leads, FITB, MUS, Mizuho, Santander as co-managers. Off the shelf. Investor call today at 12:30pm. Pricing this afternoon. UOP: fund the tender offer for its FRN due 2013 and 7% sr notes due 2014, repay term loan, and GCP.
  • PharmaNet Development Group Inc increased to USD185m (from USD175m) 144A sr sec notes due 04/15/17 (7y). NC4 (MWC T+50bp). B3/B+ (stable/stable). Via Jefferies/DB joint books. No reg rights. 10.875% at 100. Del 04/09 (T+6). 144A
  • Maxim Crane Works LP USD250m 144A/RegS sr sec 2nd lien notes due 04/15/15 (5y). NC2 (MWC T+50bp), then at 109.188. Caa1/B (stable/stable). Via JPM/MS/WFS joint books, UBS, PNC co-leads, STI as co-manager. No reg rights. 12.25% at 97.29, yield 13%. +1,044bp. Del 04/08 (T+5). 144A
  • NES Rentals Holdings Inc decreased to USD150m (from USD250m) 144A sr sec 2nd lien notes due 2015 (5y) (revised from 7y). NC3 (then par + 3/4 coupon). Caa2/CCC+ (stable/--). Via DB/BAML joint books. 144A for life. Books close tomorrow at 10am. Pricing tomorrow.
  • Price talk of 11.50%-11.75% is out on SquareTwo Financial Corp USD300m 144A sr sec 2nd lien notes due 2017 (7y). NC4 (MWC +50bp). Equity claw: 3y 35%. B2/B (stable/--). Via BAML/BMO joint books, FITB, USB as co-managers. W/reg rights. Books close at 2pm tomorrow. Pricing tomorrow afternoon.
  • Cablevision Systems Corp is looking to extend $1.5 billion of its term loan B-1 by three years to March 2016 and is offering a spread bump from LIB+175 to LIB+300. The company is also looking to extend its $650 million term loan A and its $1 billion revolving credit facility from 2012 to 2015. Pricing on the pro rata pieces is being boosted from LIB+75 to a leverage-based grid that ranges from LIB+200 to LIB+225. Lenders consenting to the amendment will receive a 5bp fee. Consents are due April 7. The amendment is expected to net more than 50% of votes.
  • Resolute Energy Corp today announced it has closed an amended and restated senior secured revolving credit facility with a syndicate of banks led by Wells Fargo and Bank of Montreal. Changes to the company's existing facility include extending the maturity date to March 30, 2014, increasing the maximum amount available for borrowing from $300 million to $500 million and increasing the borrowing base to $260 million from $240 million, subject to periodic redetermination, according to a company statement. Additionally, the interest rate pricing grid for Libor based loans is reduced by 25bp on the low end of the utilization grid to 50bp on the high end, the company said.
  • AutoNation Inc is seeking consents to extend all or a portion of its term loan and revolving credit facility to July 18, 2014, from July 18, 2012, according to an SEC filing. On the proposed extension of the term loan, the company is offering a spread bump to LIB+225 from LIB+87.5. The spread on the revolver will be bumped to LIB+225 from LIB+72.5. Concurrently, the company is looking to reduce the size of its term loan (and make a corresponding prepayment) from $600 million to roughly $520 million and its revolver from $700 million to $616 million. The proposed amendment also seeks to modify the capitalization ratio covenant and change the maximum leverage ratio covenant from 2.75 times to 3.25 times.
  • Privately-owned pharmaceuticals group Nycomed Holding has secured a covenant holiday on its first quarter tests after offering a work fee of 10 bps to lenders, bankers said. Nycomed, which is expected to unveil a longer-term debt structuring proposal in the second quarter, offered its bankers a 10 bps fee after a push back on an initial proposal that did not offer any fees or margin uplifts. Nycomed had faced a first quarter leverage covenant test at 3.65 times, but the company launched a request for a covenant waiver in early March via Nordea.