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Loan Market Commentary 05/18/2010

|Includes: ALGT, CDL, FDC-OLD, FIS, RGC, SKS, TXU Corp. (TXU)
The loan market opened up feeling a bit better this morning and the LCDX14 went out a quarter point firmer at 97-971/2, after the European markets spent the day in positive territory and the euro climbed against the dollar to 1.244 signaling that fears over the EU have subsided a bit after Greece received their first installment of their bailout funds. Housing starts were better than expected and that helped sentiment and pushed the market higher. ICSC index reported that chain store sales fell -2.5%, but the market paid little as the drop was due to inclement weather and the underlying pace of demand continues to be healthy. However, the market caught some resistance trying to push the Euro above the 1.2444 level and the EUR/USD fell back down to 1.2365 causing equities to reversed course and fall into negative territory by halftime. Loans followed suit and flow names were quarter to half a point lower. The LCDX14 dipped back down to 96 3/4-97 (unch’d).
In the afternoon, things went from bad to worse after news broke of Germany’s temporary short selling ban on Euroland government bonds, financial institutions and insurers. The ban helped reignite contagion fears as this move implies that Germany may be concerned about something that market is not aware of. They are trying to prevent a Lehman-like run on the Sovereigns which implies that a financial meltdown in the EU is still very much a possibility. Equities were sent lower as the EUR/USD shot down to 1.2161, the lowest level in four years. It recovered slightly and is currently is chopping around 1.221. Loans continued to sink further as a result and flow names fell about half a point, FDC and TXU fell around a point. Off-the-run names were down anywhere from an eighth to a quarter point and volumes were thin. The LCDX14 was last seen at 96 – 96 ¼, (-3/4).
The primary loan market is still active and loans for NextMedia, infoGroup, and Regal Cinemas all broke for trading above their issue price, signaling strong demand for new issue paper. GENBAND’s $250mn 5 yr term loan got pulled today due to a lack of interest. We are seeing some hiccups in the primary, but nothing to get overly concerned about.
Fear can hit the market at anytime so keep your head on a swivel. Watch the overseas markets overnight as this shock is likely to infest the Asia and may go around the horn and hurt Europe as well. We will probably hear some talking heads try to calm the markets, but ignore the media spin and stay focused on the facts. Once digested, the move by Germany should calm a lot of fears of a meltdown in Europe. They are using history as a guide and taking the appropriate steps to try to prevent another run on the banks.
  • Fidelity National Information Services Inc (NYSE:FIS) confirmed that buyout talks regarding the sale of the company to a consortium have ended. The company will now pursue a leveraged recapitalization with a substantial share buyback.
  • A U.S. bankruptcy judge has approved Citadel Broadcasting Corp's (NASDAQ:CDL) bankruptcy exit plan. Senior lenders will control the company.
  • A court late yesterday approved a $1.1 billion bid to acquire the businesses of Canwest LP and its subsidiaries made by an ad hoc committee of 9.25% senior subordinated note holders. Proceeds will allow for a full repayment of the approximately $925 million debt owed by the company to its senior secured lenders.
  • Citadel Broadcasting Corp's (CDL) term loan jumped 3 points to 101.5-102.5 yesterday after the company's bankruptcy exit plan was approved. The loan could rise even more, said one distressed trader, as some believe the exit plan undervalues the reorganized company. Under the plan, senior lenders will receive 90% of the equity in the reorganized company, in exchange for cutting $1.4 billion in debt, and a share of the remaining debt, converted to a new term loan.
  • Depository Trust Co Inc has increased its 364-day secured revolving credit facility to $6.537 billion after 22 banks piled onto the facility. The 22 includes lead arrangers JP Morgan and Bank of America Merrill Lynch, and documentation agent Credit Agricole which hold $600 million each.
  • Saks Inc (NYSE:SKS) swung to a profit in 1Q10, recording net income of $18.8 million, or $.11 per diluted share, compared to a net loss of $5.1 million, or $.04 per share in 1Q09. Comparable store sales increased 6.1% in the first quarter.
  • Station Casinos Inc yesterday said it lost $53.5 million in 1Q10, compared to a loss of $33.7 million in 1Q09. Net revenue was $249.4 million, down 11.8%. The company said it has spent $19.3 million on its bankruptcy reorganization.
  • Moody's Investors Service has upgraded the ratings of Ford Motor Company (Ford) and Ford Motor Credit Company (Ford Credit). Ratings raised include Ford's Corporate Family Rating (NYSE:CFR) and Probability of Default Rating (PDR) to B1 from B2, secured credit facility to Ba1 from Ba2, senior unsecured debt to B2 from B3, and trust preferred to B3 from Caa1.
On the break
  • NextMedia's new $135 million term loan is quoted 100.25-100.75 today after breaking 100-101 yesterday. Credit Suisse earlier flexed down pricing on the loan by 75bp to LIB+625 and tightened the OID to 99 from 98. A 2% Libor applies. The corporate family rating is B3/B.
  • infoGROUP's $315 million, six-year term loan B broke for trading in a 99-99.5 market. pricing earlier firmed at LIB+450 with a 1.75% Libor floor and a 98 OID. There is also 101 soft call protection. The TLB was earlier talked at LIB+425-450 with a 1.5-1.75% Libor floor and an OID in the 98.5 area. Senior secured and total leverage is 3.4 times. CCMP Capital, which is buying the company for $635 million, will inject $353 million in equity.
  • Regal Cinemas' (NYSE:RGC) new $1.25 billion first-lien term loan broke for trading this afternoon in a 99.5-100 range. The 6.5-year loan is priced at LIB+350 and was sold at 99. Credit Suisse leads the loan. Corporate family ratings are B1/B+ and facility ratings are Ba3/BB-. Yesterday, the issuer postponed a concurrent $250 million add-on to its 8.625% senior notes due 2019.
New Issue
  • CITGO Petroleum Corp USD1.5bn two-part 144A 1st lien sr sec notes. Ratings TBD. Via RBS/UBS/BNP/CA joints books. No reg rights. Split between 7y NC4 (MWC T+50bp) and 10y NC5 (MWC T+50bp) tranches. Roadshow 05/18-05/27. UOP: repay debt, GCP.
  • Allegieant Travel Company (NASDAQ:ALGT) USD250m 144A sr notes due 2017. UOP: purchase aircraft, pay back debt principal, asset acquisitions.
  • Jack Henry & Associates Inc (NASDAQ:JKHY) has launched its $300 million, two-tranche financing backing the acquisition of Kentucky-based iPay Technologies via Wells Fargo and Bank of America Merrill Lynch, sources said. The five-year deal is priced initially at LIB+250 with a 50bp undrawn fee for the revolving credit facility.
  • GENBAND Inc's $250 million, five-year term loan B has been pulled from market after the deal failed to attract investor interest. The company, which is in the R&D business for telecom companies, had a weak business profile. The corporate family and facility rating are both B2.
  • Citi has priced Apollo Management's CLO at the talked coupon levels. The triple-A tranche priced at par to yield LIB+170. The double-A tranche priced at a discount to yield LIB+225 (coupon of LIB+300) and the single-A tranche priced at a discount to yield LIB+230 (coupon of LIB+400). In addition, the A-1 tranche, rated Aaa/AAA, was upsized to $215.4 million from $198.8 million. The A-2 tranche, rated Aa2/AA, was upsized to $11.1 million from $10.3 million. The B tranche, rated A2/A, was upsized to $24.7 million from $22.8 million. The equity tranche was upsized to $72 million from $62.63 million. Funds managed by an affiliate of Apollo will retain the equity tranche. The final maturity is 10 years and the reinvestment period is two years.
Price Talk
  • Price talk on U.S. Gas & Electric's $125 million second-lien term loan is LIB+750-850 with a 2% Libor floor and a 98 OID. Macquarie launched the deal today. Proceeds will be to refinance debt and to provide for acquisitions.
  • Pricing on IMG Worldwide's $300 million, five-year term loan B has been lifted by 75bp to LIB+500 and the OID has been widened to 98 from 98.5. A 1.75% Libor floor remains unchanged.
  • Hillman Cos has tightened the OID on its $290 million, six-year term loan B to 99.5 from 99. The coupon remains unchanged at LIB+375 with a 1.75% Libor floor. Recommitments to the deal are due May 19 by 5 p.m. The company just priced its $150 million senior bonds at par to yield 10.875%. Net senior secured leverage is 3.2 times, while net leverage through the opco is five times. Net total leverage is 6.2 times. The deal will close and fund May 28. Barclays Capital, Morgan Stanley and GE Antares lead the $320 million loan to back Oak Hill Capital Partners' $815 million acquisition of Hillman Cos. Proceeds will be used to refinance the company's existing debt. Cincinnati, Ohio-based, Hillman manufactures nuts, bolts and other fasteners sold to Home Depot, Lowe's and other home-improvement stores
High Yield
  • L-3 Communications (NYSE:LLL) is redeeming its $400 million 6.125% senior sub notes due 2013 and $400 million 6.125% senior sub notes due 2014, with a new issue of $800 million 10-year bullet SEC registered senior notes.
Price Talk
  • Price talk of 10.75%-11% is out on Hillman Group Inc USD150m 144A sr notes due 2018 (8y).
  • Price talk of 9.75% area is out on American Tire Distributors Inc USD250m 144A 2nd lien sr sec notes due 2017 (7y). NC3 (MWC T+50bp) (1st call par + 3/4 coupon). Equity claw: 3y 35%. B2/CCC+ (stable/stable). Via BAML/Barc/RBS/UBS joint books. W/reg rights.Books close at noon tomorrow. Pricing tomorrow afternoon.
  • Price talk of 11%-11.25% is out on Dave & Buster's (NASDAQ:DANB)Inc USD200m 144A sr notes due 2018 (8y). NC4. B3/B- (negative/stable). Via JPM/Jefferies joint books. W/reg rights. Books close at noon tomorrow. Pricing tomorrow afternoon.
What to WatchTomorrow
  • 8:30 a.m. ET: Consumer price index, April (Bureau of Labor Statistics)
  • 8:30 a.m. ET: Earnings, April (Bureau of Labor Statistics)
  • Treasury to auction $25 billion 56-day cash management bills
  • 8 a.m. ET: Tyson Foods, Inc. at BMO agriculture, protein & fertilizer conference
  • Nortek, Inc. Q1 earnings, conference call 9 a.m. ET
  • 10 a.m. ET: Coinstar Inc. at JPMorgan technology, media and telecom conference
  • 10:40 a.m. ET: SBA Communications Corp. at JPMorgan technology, media and telecom conference
  • 10:40 a.m. ET: Vishay Intertechnology Inc. at JPMorgan technology, media and telecom conference
  • 11:40 a.m. ET: Syniverse Holdings Inc. at Robert W. Baird growth stock conference
  • 11:45 a.m. ET: Smithfield Foods Inc. at BMO agriculture, protein & fertilizer conference
  • 12:15 p.m. ET: Charles River Laboratories International, Inc. at Robert W. Baird growth stock conference
  • 2:20 p.m. ET: Plexus Corp. at Robert W. Baird growth stock conference
  • 2:30 p.m. ET: Pilgrim’s Pride Corp. at BMO Capital Markets agriculture, protein & fertilizer conference
  • 5:15 p.m. ET: HealthSouth Corp. at Robert W. Baird growth stock conference
  • After market close: Advance Auto Parts, Inc. Q1 earnings
  • After market close: Bristow Group Inc. Q4 earnings
  • After market close: Limited Brands Inc. Q1 earnings

Disclosure: No Positions