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Loan Market Commentary 04/01/2010

The loan market felt better out the gate today after global manufacturing numbers topped estimates and the jobs number came in at its lowest point since 2008. Sentiment quickly shifted back to positive and we saw some better buyers in the market. Flow names and new issues were mixed to unchanged. TXU’s downgrade influenced some of the larger LBO deals down an eighth. Automotive names were hot today after March sales figures showed a significant increase. Auto names were up around a quarter. We continue to see bids improve by anywhere from a half to a full point in a lot of off the run names; but that is most attributed to updates for month/quarter-end. The LCDX was firm through out the day and finished up a quarter to 104 ½ -104 ¾.  In all it was a solid day for the loan market and a nice end to the week. Tomorrow is going to be dead, so it will be a great day to do some spring cleaning around the office. Have a great night.
  • Automakers posted sharp jumps in U.S. sales in March helped by incentives as General Motors and Ford Motor Co both reported 43 percent increases from a year earlier in their key brands. Ford, which plans to sell its Swedish brand Volvo to China's Geely, trailed GM in overall sales in March after leading the U.S. in sales in February. Ford said it gained U.S. retail market share for the 17th time in the past 18 months. Chrysler, now under the management control of Italy's Fiat SpA , posted an 8.3 percent drop in sales in March. It is the only large automaker expected to post a U.S. sales decline in March from a year earlier. GM said March U.S. sales jumped across all of its core four brands, including 40.6 percent for Chevrolet. Including its discontinuing brands, GM sales rose 20.6 percent. Newer GM models like the Chevrolet Equinox, GMC Terrain and Buick Lacrosse continued to see strong sales, GM said.
  • Some of Tribune Co's biggest lenders complained that the newspaper publisher was not offering them enough time to object to its fifth request for an extension to file a bankruptcy reorganization plan without interference. In a late Wednesday filing with the U.S. bankruptcy court in Wilmington, Delaware, holders of $4.6 billion of debt under a Tribune credit agreement, said it was unfair to be given just three business days, until April 6, to object to the request to extend Tribune's exclusivity period by one month, to April 30. Citing "serious concerns" about the extension, the lenders said Tribune was trying to force them to "shoot in the dark" by not explaining the status of the alleged ongoing "substantial negotiations" it cited as a need for requesting the extension. The lenders said they do not object to the proposed April 13 hearing on the extension. But they said they should have three business days after Tribune makes proposed "supplemental filings" with the court before they lodge objections -- even if this means they could object at any time prior to the hearing.
  • Hawker Beechcraft is electing to pay cash for the interest due on its 8.875%/9.625% senior PIK election notes due 2015, the company said in an SEC filing. The company has the option to pay interest either entirely in PIK or a combination of PIK and cash until April 1. Today, the issuer's TLB-1 is quoted in the 86 context and the new term loan is 99 bid.
  • Claire's Stores' TLB is a touch better today after the company released its 4Q09 results that were in-line with the preliminary results the company released in early February. The loan is currently quoted 88.5-89.5, up about 50bp from yesterday's levels. The company said net sales in the quarter were $410.7 million, up 4.5% from the year-earlier period. Same-store sales increased by $8 million from the year-earlier period, an increase of 2.1%. SG&A expense increased $5.1 million from 4Q08. Adjusted EBITDA in the quarter was $93.4 million, compared to $76.4 million a year ago. Claire's loan has risen more than 10 points since February when the company posted preliminary unaudited 4Q09 and full-year financial results.
  • Bombardier Inc reported a fourth-quarter profit that missed Wall Street expectations by a cent, hurt by lower selling prices for business jets. The company earned $179 million, or 10 cents per share, compared with $312 million, or 17 cents, a year ago. Revenue fell to $5.35 billion from $5.43 billion. Analysts on average expected earnings of 11 cents per share on revenue of $5.35 billion.
  • Fitch Ratings downgraded the Issuer Default Ratings (IDRs)  for Energy Future Holdings Corp. (EFH), Energy Future Intermediate Holding Company LLC (EFIH), Texas Competitive Electric Holdings Company LLC (TCEH), and Energy Future Competitive Holdings Company (EFCH) to 'B-' from 'B'. Fitch's diminished expectations of the cash flow generation capability of the competitive segment issuers (all issuers in the EFH group except Oncor) in the face of very high debt leverage are the reason for the one-notch downgrades of their IDRs. Forward natural gas prices and expected electricity demand growth in the Electric Reliability Council of Texas (ERCOT) are both lower now than at the time the LBO debt was originally rated in October 2007, reducing the projected level of recurring cash flow when the current natural gas hedges run off. The expected loss given default on the TCEH senior secured debt and junior TCEH debt issues has increased as a result of the weaker fundamentals. It may be challenging to refinance the substantial amounts of maturing credit facilities and loans in 2013 and 2014 given the over-leveraged capital structure. Fitch expects EFH to produce adequate cash flow and maintain adequate liquidity to cover business needs through 2012, assuming the baseload units operate without prolonged outages and the economy continues to recover. TCEH's substantial portfolio of forward natural gas hedges promotes cash flow stability from power sales through 2012, and Fitch forecasts that cash interest coverage will remain above 1 times (x). Gas price exposure for the balance of 2010 was fully hedged, and 92% and 85% of gas price exposure was hedged for 2011 and 2012, respectively as of Dec. 31, 2009. While EFH hedges a much greater proportion of expected output than other gencos, EFH's leverage is also the highest among the energy merchants.
  • Moody's Investors Service upgraded the Speculative Grade Liquidity Rating of CHS/Community Health Systems, Inc. (Community Health) to SGL-1 from SGL-2. Concurrently, Moody's affirmed the company's current ratings, including the B1 Corporate Family and Probability of Default Ratings. The ratings outlook is stable. The upgrade of the Speculative Grade Liquidity Rating reflects our expectation of very good liquidity over the next four quarters characterized by robust cash flow generation, even with the anticipated increase in cash tax payments, and an increase in cash reserves to $345 million at December 31, 2009 as the company has retained proceeds from its $300 million delayed draw term loan. Additionally, although we expect modest debt repayment, we believe solid EBITDA growth will provide ample headroom under the financial covenants despite step-downs.
On the Break
  • Aramark's new extended $1.5 billion term loan B is trading 100-100.5 this morning after freeing to trade. The non-extended strip is 97.75-98.25. The company amended and extended $1 billion of its term loan B to 2016. The amendment was completed after the issuer agreed to a 5bp consent fee and upped pricing to LIB+325 from LIB+187.5. A $250 million synthetic RC and a $600 million revolver filled out the rest of the credit.
  • RadNet's new $285 million term loan B broke for trading today in the 99.25-99.75 range. the issuer upsized the six-year facility by $10 million and tightened the OID from 98 to 99. Pricing firmed at LIB+375, the tighter end of LIB+375-400 talk, with a 2% Libor floor. A 101 call protection was also 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. The facility ratings are Ba3/B+, while the corporate family ratings are B2/B. Barclays, GE Capital, Deutsche Bank and RBC lead the deal. Proceeds are to refinance debt and to fund acquisitions under the company's letter of intent.  
New Issue
  • NES Rentals Holdings Inc USD150m (decreased from USD250m) 144A sr sec 2nd lien notes due 04/15/15 (5y). NC3, then 106.125.
  • Reynolds & Reynolds is seeking a $1.895 billion refinancing. A bank meeting is scheduled for April 6 at 9 a.m. The deal is split into a $1.82 billion, seven-year term loan and a $75 million, five-year revolving credit facility. Proceeds are to refinance the company's existing first, second and third lien term loans. Deutsche Bank, Bank of America Merrill Lynch and Credit Suisse are lead arrangers.
  • Ashland Inc has increased its refinancing to $850 million from $800 million. A total of 25 banks joined including leads Bank of America Merrill Lynch and Bank of Nova Scotia. The two leads hold $70 million each, while eight banks came in with $50 million each: BBVA Compass Bank, Citi, Credit Agricole, Deutsche Bank, PNC Bank, RBS Citizens, SunTrust Bank and US Bank. Fifth Third Bank, JP Morgan and Wells Fargo joined with $35 million each. Hungtington National Bank and Raymond James hold $30 million each. Bank of New York Mellon and Siemens came in with $25 million each. BB&T, Capital One Bank, HSBC and Northern Trust joined with $15 million each. Bank of East Asia, East West Bank and RZB Finance hold $10 million each, while California First National holds $5 million. The four-year senior secured deal is now split into a $550 million revolving credit facility and a $300 million term loan. As reported earlier, pricing is based on a leverage ratio grid and range between LIB+225-300 with a 35-50p commitment fee.
  • Lamar Media Corp is scheduled to have a lenders call on April 6 at 11 a.m. to launch a refinancing. JP Morgan, Wells Fargo and SunTrust Robinson Humphrey are joint lead arrangers. The company is refinancing the roughly $1.5 billion, multi-tranche facility from 2005. In April 2009, Lamar sealed a fourth amendment to its credit agreement, reducing commitments under the revolving credit facility to $200 million from $400 million. Pricing on the revolver and the $1.145 billion in term loans under the credit pact was increased to LIB+350 from original pricing of LIB+100 in September 2005.
  • Avis Budget Car Rental LLC has gathered $983 million of commitments on its extended revolving credit facility due April 2013. Nine out of the 26 revolver lenders did not extend. The remaining $191 million of the revolver matures in April 2011. The company also extended $350 million of its $787 million TLB due April 2012 to April 2014. In return for the extension, lenders will get a 100bp extension fee. The extended revolver has a margin of LIB+450 with no Libor floor, compared to the existing LIB+400. The extended TLB has a margin of LIB+425 with a 1.5% Libor floor compared to the existing LIB+375 with no floor. Financial covenants are also being amended with the leverage ratio at 6.25 times until June 2010 which will then be reduced through the deal period until it reaches 4.25 times in 2013. The interest coverage ratio will be amended to 1.3 times, reduced from the existing three times.
  • Gray Television Inc announced that it has sealed the amendment for covenant flexibility and to raise second-lien, unsecured or junior debt to reduce its term loan B. 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 is 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 fee will be reduced based on TLB paydown. Pricing and facility fee will be based on a leverage grid thereafter. The revolver pays an existing 50bp commitment fee which remains the same under the amendment. Consenting lenders get a 25bp fee.
  • Visteon Corp's unsecured creditors have filed a motion to end the bankrupt company's exclusivity period, Reuters reported. Unsecured creditors say competing plans are poised to be filed and should be parallel-tracked. The committee said it could submit a plan predicated on reinstating, partially or in full, the company's term loans. The companies term loans dropped about a point and a half on the news and their revolver was down four and a half points.
  • General Growth Properties Inc has filed a standalone bankruptcy exit plan and laid out auction rules for a two-round bidding process. The plan calls for Brookfield Asset Management, Fairholme Capital Management and William Ackman's Pershing Square Capital to invest $6.55 billion to bankroll the company's exit. First-round bids are due as soon as April 19. GGP hopes to have a final plan in place to present in bankruptcy court around July 2 with expected exit from Chapter 11 by September 30.
  • Visteon Corp's TLB and add-on TLB2 are quoted today at 109.5-110.5 after the company's unsecured creditors today filed a motion to end the company's exclusivity period in bankruptcy proceedings in order to allow for the consideration of alternative exit plans. Unsecured creditors say competing plans are poised to be filed and should be parallel-tracked. The committee also said it could submit a plan predicated on reinstating, partially or in full, the company's term loans. The current amended plan of reorganization, filed March 16, is supported by the company. The plan proposes to convert the company's $1.629 billion secured debt into 85% of the equity on the restructured company. Holders of Visteon's 12.25% senior notes would receive 6% of the company's equity with the remaining shares distributed among holders of other unsecured notes and non-trade claims.