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Loan Market Commentary 04/08/2010

|Includes: AAL, CBF, CVS, JWN, KHC, LAMR, M, MXB, NMG, PALM, PVH, RMG, RTSX, SIX, Skilled Healthcare Group, Inc. (SKH), TOH, UAUA, WOR, YRCW
The loan market continues to beat higher and is ignoring all signs that could potentially have an adverse impact on the market.  The secondary still lacks consistent two way trading volumes, its mostly one off situations. The Airlines were active today on noise that United Airlines and US Air are in talks again for a possible M&A deal. US Air’s term loan was up close to 2-points on the news to 83/84. United’s term loan firmed to 87 ½ - 88 7/8 (+3/4). Lyondell’s term loans were all down today after more drama emerged in the deal. Earlier this week an article came out talking about how they have a string of unresolved pollution sites. Then late yesterday it was announced that the company may be face a US bribery probe. However, this all was mentioned in their Bankruptcy filings so they may not come as a surprise to some of you. Retail names were firm on the back of strong retail sales numbers; Neiman Marcus, Sally Beauty, Mike’s Stores, Sears, Dollar General, Rite Aid, and Burlington Coat Factory were all up around a quarter. Apollo announced that they plan to offer as much as $211mm in Metals USA shares, at a price between $18-$22. This follows the IPO announced by HCA yesterday. Could this open the door for Travelport’s IPO? Affinion’s new term loan broke for trading atop its OID today and was last quoted at 99 7/8 – 100 1/8 after being issued at 99. Six Flags announced they are seeking an amendment to replace their old Exit TL since the pick up in activity in the primary has brought borrowing costs down. The LCDX 14 was on fire today and rose ¾ of a point to 98 ½ - 98 ¾ on strong buying. The LCDX 13 was active as well and firmed to 105 1/8 – 105 3/8 (+3/8). Bank loan mutual funds saw $290.1 million in inflows the week ended April 7, according to Lipper FMI. High yield funds saw inflows of $417.1 million. Last week, $212.1 million flowed into bank loan mutual funds, while $296.7 million flowed into high yield bond funds.
**See the Attached Slides from Today’s TR/LPC Webinar**
  • Neiman Marcus' TLB is currently quoted 95.25-95.75, up from 95-95.50 yesterday, after the company reported a rise in March revenues. Today, the company said total revenues in the five weeks ended April 3 were $341 million, up 11% from the year-earlier period. Comparable revenues in the period were $337 million, up 9.6% from the year-earlier period.
  • Shares of UAL Corp and US Airways Group rose on Thursday in the wake of news that the two airlines were in merger talks, according to Reuters, though neither airline confirmed the talks on Wednesday. UAL shares were up 7.55 percent to $20.38 and US Airways shares rose 13.78 percent to $7.76. A tie-up would create the second-largest U.S. airline.
  • Top U.S. retailers beat Wall Street's sales expectations in March, helped by an early Easter holiday. Overall, March same-store sales rose 9.1%, beating forecasts for a 6.3% increase, according to Thomson Reuters data. Macy's Inc said sales at stores open at least one year rose 10.8% in March from a year earlier, ahead of the 7.9% increase analysts expected, but it forecast flat results for April. Upscale department store Nordstrom Inc reported a rise of 16.8%, compared with estimates of 10.6%
  • Shares of Palm Inc jumped 20 percent on Wednesday as investors covered short positions on renewed speculation that the smartphone maker may be an acquisition target. Their term loan was unchanged. The stock, which has tumbled some 60 percent this year on concerns about flagging sales
  • Private equity firm Apollo Management is the alternative bidder for CKE Restaurants Inc, rivaling an existing bid by Thomas H. Lee Partners. CKE, owner of the Hardee's and Carl's Jr. hamburger chains, said earlier on Wednesday that an unnamed bidder had made an alternative offer to its deal to be taken private by THL, but it did not identify the bidder.
  • YRC Worldwide Inc's term loan and revolver moved up today after the company reported higher shipments in March. The TL moved up about 50bp. It is currently quoted in the 76-76.5 context. The RC moved up about 25bp to 76 bid. In addition to improving shipping trends, the company also said it should be able to generate positive EBITDA in the coming quarter. The company held a conference call with lenders to discuss the improving shipping trends.
  • Bank of America Merrill Lynch is arranging a financing to back the acquisition of baseball team Texas Rangers from sports tycoon Tom Hicks. The financing could be roughly $150 million and will be launched to syndication imminently. The buyer is a group led by Pittsburg sports attorney Chuck Greenberg. Hicks-owned Hicks Sports Group, which also houses the Dallas Stars hockey team, had defaulted on interest payments on its $525 million, three-tranche deal sealed in December 2006.
New Issue
  • Worthington Industries Inc announced today plans to offer, subject to market and other conditions, $150 million in senior notes due 2020. The notes will be general senior unsecured obligations of the company. Proceeds from the offering to repay a portion of the outstanding borrowings under its revolving credit facility and amounts outstanding under its revolving trade accounts receivable securitization facility. Credit Suisse and Wells Fargo will serve as joint bookrunners, according to a company statement.
  • Phillips Van Heusen is launching April 14 in New York and April 16 in London retail syndication of the $2.45 billion loan backing its acquisition of Tommy Hilfiger. As reported earlier, the deal has been undergoing a trans-Atlantic syndication at the senior managing agent level. The deal includes a $450 million, five-year revolving credit facility, a $500 million, five-year term loan A and a $1.5 billion, six-year term loan B. The corporate family rating is Ba3/BB+, while the facility rating is Ba2/BBB. PVH is also raising $600 million of notes to back the acquisition from Apax Partners. PVH is acquiring Tommy Hilfiger for 2.2 billion euros or eight times of EBITDA. The senior secured leverage ratio is at 2.9 times and total leverage ratio is at 3.6 times. Barclays Capital and Deutsche Bank are global debt coordinators, alongside Bank of America Merrill Lynch, Credit Suisse and RBC Capital Markets.
  • Morgan Stanley is launching Monday the $1.375 billion bank loan backing investment analysis and market index provider MSCI Inc's acquisition of risk advisory firm RiskMetrics Group Inc. The financing consists of a $100 million revolving credit facility and a $1.275 billion term loan B. The corporate family and facility ratings are both Ba2. According to an investor presentation filed in March, the term loan B, $642 million in existing cash and $384 million in equity will be used to fund the acquisition.
Price Talk
  • Initial price guidance on Integra Telecom's $210 million first-lien term loan is LIB+725-750 with an OID of around 98 and a 2% Libor floor, sources said. JP Morgan leads the deal. The corporate credit rating is CCC+. The term loan and the $500 million in first-lien secured bonds are also rated CCC+. The company is also raising a $60 million revolving credit facility with a first-out provision. The RC is rated B+. Proceeds are to refinance debt. As per the agreement, Integra's senior secured second-lien operating company debt and unsecured parent company debt was to be converted into common equity. As a result, the company's overall debt was reduced from almost $1.3 billion to roughly $600 million. This new debt level translates to 2.7 times Integra's 2008 operating EBITDA of $225 million. Additionally, Goldman Sachs, Tennenbaum Capital Partners, and funds managed by Farallon Capital Management LLC became major new shareholders in Integra, along with existing shareholder Warburg Pincus.
  • Hawaiian Electric Industries Inc and Hawaiian Electric Co Inc have surfaced for a $300 million, three-year revolving credit facility led by JP Morgan Chicago, sources said. Holdco Hawaiian Electric Industries is borrowing $125 million, while opco Hawaiian Electric Co is borrowing the remaining $175 million. Pricing, based on a ratings grid, opens at LIB+225 with a 40bp undrawn fee for the holdco, and LIB+200 with a 30bp undrawn fee for the opco. The holdco is rated BBB/Baa2 and the opco is rated BBB/Baa1. Proceeds are to refinance an existing facility from March 2006. Commitments are due April 23 and closing is slated for May 4. A bank meeting was held in Hawaii on April 6. Pricing opens at LIB+195 with a 30bp facility fee, equating to an all-in of 225bp based on current BBB+/Baa2 ratings.
  • CVS Caremark Corp is seeking a $750 million, three-year revolving credit facility, sources said. Bank of New York Mellon, Bank of America Merrill Lynch and Wells Fargo are lead arrangers. Proceeds refinance an existing facility maturing this June.
  • HJ Heinz Co is rolling over its $600 million, 364-day revolving credit facility with a reduced $500 million, three-year revolver, sources said. JP Morgan and Bank of America Merrill Lynch are lead arrangers. Pricing, based on the company's three-year CDS, is at a floor of 150bp and a cap of 350bp. The undrawn fee is 37.5bp. Commitments are due April 15.
  • Pershing LLC has increased its 364-day revolving credit facility to $935 million from an original target of $800 million after oversusbcription, sources said. Parent firm Bank of New York Mellon is the lead. Proceeds are to refinance its $755 million, 364-day revolving credit facility maturing this month. Last year's deal paid a 25bp commitment fee.
Amend and Extend
  • Six Flags Inc is seeking an amendment to incorporate the new financing backing its new plan of reorganization, according to an SEC filing. The company's new exit financing backs its court-approved plan led by Stark Investments. Lenders recommitting to the new financing will receive a 50bp ticking fee. The new debt financing includes a $120 million, five-year revolving credit facility, a $770 million, six-year first-lien term loan and a $250 million, 6.5-year second-lien term loan. In addition, there is an equity investment of $725 million. JP Morgan, Bank of America Merrill Lynch, Barclays Capital and Deutsche Bank lead the first-lien tranche, while Goldman Sachs leads the second-lien loan The first-lien term loan is priced at LIB+400, with an OID of 98.5-99 and a 2% Libor floor. The revolver is priced at LIB+425 with an OID of 98 and a 2% Libor floor and a commitment fee of 150bp. The corporate family rating is B2, the first-lien is rated B1 and the second-lien is rated Caa1. The new exit financing will replace the company's previous exit financing, which backed its exit plan led by Avenue Capital, and will pay the company's prepetition debt.
  • Commercial real estate services firm CB Richard Ellis Services Inc has gathered $115 million of its existing $115.5 million term loan A-4 maturing in December 2011 into a new TLB-1A due December 2015 and the remaining $0.5 million could be repaid. TLA-4 lenders are asked to convert to the new tranche as an alternative to being prepaid or trading out at par. Pricing on the new tranche is at LIB+450 based on a leverage ratio of 3.75 times or less, compared to TLA-4's LIB+350. The new tranche will pay LIB+550 if leverage ratio is greater than 3.75 times.
High Yield
  • Price talk of 10%-10.25% (approx 1-2 points OID) is out on Radiation Therapy Services Inc USD310m 144A sr sub notes due 2017 (7y). NC4. Caa1/CCC+ (stable/positive). Via WFS/BAML/Barc joint books, Daiwa, FITB as co-managers. W/reg rights. Books close at 4pm today (except for West Coast investors). Pricing tomorrow.
  • Price talk of 9% area is out on Nexstar Broadcasting Inc/Mission Broadcasting Inc (NASDAQ:NXST) USD325m 144A sr sec 2nd lien notes due 2017 (7y). NC4.B3/B- (stable/positive). Via BAML/UBS/DB/RBC joint books, CA as co-manager. W/reg rights. Books close at 2pm today for investors seeing the company through yesterday and 4pm today for the rest. Pricing this afternoon.
  • NFR Energy LLC and NFR Energy Finance Corp are issuing $150 million of senior unsecured notes due February 2017. The coupon is 9.75% and the notes are non-callable for four years. UBS, Bank of America Merrill Lynch, JP Morgan and BNP Paribas are joint bookrunners. Capital One, Natixis, BBVA, Comerica Bank and BOSC are co-managers. An investor call was scheduled for 2p.m. today and pricing is expected this Friday. Proceeds are to repay outstanding senior secured revolving credit facility, land acquisitions and general corporate purposes.
  • Price talk on American Residential Services' $150 million, five-year senior secured second-lien notes is in the 11.75% area. Books close tomorrow morning. UBS and Jefferies are joint bookrunners and William Blair is co-manager. The notes are non callable for 2.5 years. Proceeds are to refinance a second-lien term loan facility and repay a portion of outstanding borrowings under the company's revolving credit facility. The company provides heating, ventilation and air conditioning, plumbing and energy efficiency services for the residential and light commercial markets.
  • Price talk of 8% area is out on Lamar Media Corp (NASDAQ:LAMR) USD400m 144A sr sub notes due 2018 (8y). NC4. Current ratings B2/B+. Via JPM sole books, WFS, STI, RBS as co-managers. Books close at 2pm today. Pricing this afternoon.
  • Price talk of 10.75% area is out on Integra Telecom Holdings Inc USD500m 144A sr sec 1st lien notes due 2016 (6y). NC3. B2/CCC+ (negative/CreditWatch positive). Via JPM/DB/GS/Jefferies/MS joint books. No reg rights. Books close at noon tomorrow. Pricing tomorrow afternoon.
On the Break
  • Ozburn-Hessey Holding Co's $275 million first-lien term loan broke for trading in the 100.5-101 context, sources said. The loan was issued at 98.75, tighter than the initially proposed OID of 98. The $75 million second-lien term loan was issued at 97.75, also tighter by 75bp. The deal also includes a $35 million, four-year revolving credit facility. Bank of America Merrill Lynch and Morgan Stanley led the deal.
  • Skilled Healthcare's new strip broke for trading this afternoon in a 99.75-100.25 market. The loan was sold at 99.25. The loan consists of a $300 million term loan and a $30 million delayed-draw term loan. Pricing on the loan firmed at LIB+375 with a leveraged-based step-down to LIB+350. The loan also benefits from a 1.5% Libor floor. Credit Suisse leads the deal. The deal also includes a $100 million revolving credit facility. Proceeds are to refinance debt.
  • Moody's Investors Service said that it expects to assign a rating of B1 to American General Finance Corporation's (AGFC) privately offered $2 billion five-year secured term loan, subject to a review of final documentation. AGFC's other ratings, including its B2 corporate family and senior unsecured ratings, are not affected by the transaction. The outlook for AGFC's ratings is negative.